California prosecutors say thousands of people, including inmates, fraudulently applied for stimulus money and may have cost the state $1 billion

Thousands of inmates throughout California — including death row inmates — may have bilked the state’s unemployment benefits system of up to a billion dollars in what prosecutors called “the largest ever taxpayer fraud to occur in this state’s history.”

Murderers, rapists, child molesters and serial killers are among thousands of prisoners implicated in a scam in which inmates — or people using their identities — filed for unemployment insurance and the $600 per week federal Covid-19 relief that accompanied it, according to Sacramento District Attorney Anne Marie Schubert, who outlined the issue at a news conference Tuesday.

Schubert described the scam as an all-encompassing effort that included every facility in California’s Department of Corrections and Rehabilitation, including local, state and federal institutions.

“That money was stolen from the coffers of the California government,” said Schubert, who was joined by district attorneys from Kern and El Dorado counties and a US attorney Tuesday.

But a large part of the scam involved federal government money “in the form of the $600 per week supplemental unemployment insurance,” US Attorney McGregor Scott said at the news conference.

Schubert blamed the state’s lack of a cross-matching computer system that would flag applications from those in prison. While 35 other states have such a program, California does not.

Death row inmates’ names linked to scam

At least 133 death row inmates have claims made in their names. They include Scott Peterson, who was convicted in 2004 of killing his wife and unborn child in a case that gained attention worldwide.

Some inmates, or people using their IDs, filed more than one claim and even used fake names such as John Doe. Some of the instances may be prisoners working the system, but others may be victims of identity fraud, Schubert said.

For the prisoners, being involved in a fraud such as this would mean even more legal trouble, and an attorney for Peterson said he’s confident his client had nothing to do with it.

“They are not making any accusations against Scott at all at this point,” attorney Pat Harris told CNN. “There is no accusation that he did anything wrong. I am 100% confident they will find that Scott was in no way involved in anything fraudulent.”

San Mateo has filed charges against 22 people, six of whom were outside of the prison system.

Four convictions in San Mateo so far

These cases have resulted in four convictions so far, according to San Mateo County District Attorney Steve Wagstaffe. Investigations are ongoing, but there may be as much as $500 million involved in the fraud in San Mateo alone, Wagstaffe said.

When alerted to the fraud, California’s Employment Development Department told investigators it could not stop the payments until charges were filed. Schubert called on Gov. Gavin Newsom to intervene and immediately “turn off the spigot.”

EDD is working with the US Department of Labor and Office of Inspector General on cross-matching with inmates to identify suspect claims, EDD spokeswoman Loree Levy told CNN.

“We’re also pursuing how to integrate such cross-matches moving forward as part of enhanced prevention efforts during this unprecedented time of pandemic-related unemployment fraud across the country,” Levy said.

Though efforts for restitution will be made, “the vast majority of the money will never be repaid,” said El Dorado County District Attorney Vern Pierson.

In San Mateo, the scam came to light when an investigator working on an unrelated case in July was listening to jail recordings. The inmate began talking about a scam he had heard of regarding unemployment benefits, Wagstaffe said.

The investigator ran names through the Employment Development Department and found matches. Each inmate was also associated with people on the outside, according to Wagstaffe.

4,000 applications from Kern County

Kern County, which is home to five state prisons, the most in any California county, has filed one case so far. District Attorney Cynthia Zimmer said she anticipates “many, many more.”

About 4,000 applications were made in the name of Kern County inmates, according to Zimmer, and 2,382 inmates have received benefits so far. The fraud there involves $16 million, she said.

“I have never seen fraud of this magnitude,” Zimmer said Tuesday.

US Attorney McGregor Scott said “a handful of people” have been indicted by a grand jury in Sacramento and Fresno, and there are “lots and lots of open investigations on the federal side.”

Those who have been indicted were not inmates, Scott said. He estimated “thousands at federal penitentiaries have likewise undertaken this fraud.”

Earlier this year, Newsom directed the Employment Development Department to work with the state prison system and initiate a data match that would flag Social Security numbers of those incarcerated.

“We will continue to fully partner with law enforcement and direct as many resources as needed to investigate and resolve this issue speedily. While we have made improvements, we need to do more,” said Newsom in a statement.

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