California paid inmates $1B in fraudulent unemployment benefits, prosecutors say

Inmates in California’s jails and prisons have stolen upwards of $1 billion in pandemic unemployment aid, four district attorneys and a federal prosecutor announced Tuesday.

The news: A multi-agency investigation found that 35,000 unemployment claims were filed in the name of California state prison inmates and that 20,000 have already been paid out, said Sacramento County District Attorney Anne Marie Schubert.

Schubert called the scale of the scheme “honestly staggering” and “one of the biggest fraud of taxpayer dollars in Calfornia history.”

The investigation involved district attorneys from Sacramento, El Dorado, Kern and San Mateo counties as well as McGregor Scott, the U.S. Attorney for the Eastern District of California.

Context: Tuesday’s announcement is only the latest twist in the fraud saga plaguing California’s unemployment programs, a challenge facing states nationwide. For months, fraudsters have exploited programs designed to swiftly distribute federal pandemic aid to self-employed and contract workers through a self-certification process.

Federal officials warned state workforce agencies this fall that cybercriminals in the U.S. and abroad — using troves of personal information mined from massive data breaches — may have pocketed $8 billion in pandemic aid. Police from Beverly Hills testified in Sacramento that they launched an investigation after reports of out-of-state suspects attempting to buy luxury goods from Rodeo Drive shops using cash or multiple Employment Development Department debit cards.

And last month a rapper living in the Hollywood Hills with the stage name of Nuke Bizzle was arrested on federal fraud charges after posting a music video entitled “EDD” that appeared to boast about defrauding the department. He is accused of applying for more than $1.2 million in benefits using stolen identities.

California’s unemployment system has recently adopted a more sophisticated identity verification system and has taken other measures, such as halting the automatic backdating of claims.

But lawmakers and other advocates for low-wage workers are also concerned that an emphasis on fraud prevention has needlessly added legitimate claimants — sometimes with small discrepancies in their applications — to the state’s lengthy backlog of unpaid claims, which reached 1.6 million earlier this fall.

A “strike team” appointed by Gov. Gavin Newsom this year found that nearly all of the claimants flagged for further verification were legitimate, while fraudsters sailed through the automated system.


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