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California EDD Fraud Victims, Lawmakers Frustrated About Latest Unemployment Scam Involving Prisoners

SAN FRANCISCO (KPIX 5) – Prosecutors and district attorneys from nine counties across California believe more than $140 million in state benefits have been paid out to prisoners, even those on death row.

This comes on the heels of another big problem with unemployment insurance benefits from the California Employment Development Department (EDD).

"The news was incredibly disturbing and disheartening. But unfortunately, it's not a surprise. This is a department that has been failing California for many months, in many different regards," said Assemblymember David Chiu (D-San Francisco).

As KPIX 5 has been reporting for weeks, people who lost their jobs during the pandemic and got their EDD benefits through Bank of America debit cards had their accounts drained of thousands of dollars and still haven't received credits.

Last month, EDD announced the freezing of more than 350,000 accounts due to suspicious activity.

Fraud victims are furious their accounts may have been frozen because of the recent scam involving prisoners.

ALSO READ: Prosecutors: Over 35,000 Unemployment Claims Filed In Names Of Prison Convicts, Including Death Row Inmates Scott Peterson And Cary Stayner

Prosecutors believe prisoners themselves, or people connected to them, were using their identities to bilk the state out of hundreds of millions of taxpayer dollars.

More than 50 people have contacted KPIX 5 regarding their accounts that were either frozen, hacked into and depleted of funds. Some fraud victims received refunds after KPIX 5 highlighted their cases to EDD and Bank of America.

For them, news of this latest fraudulent activity involving prisoners, is hard to hear.

"You have these guys scamming the system working their way through and they were able to get it, so it's frustrating," said Union City resident Maria Ramirez.

Michael Bernick is the former director of the Employment Development Department.  He believes there are three factors contributing to the rampant fraud, and the recent use of prisoners' identities to game the system.

"The amount of money going through the system, over $110 billion paid out in unemployment assistance here in California. Two, the emphasis earlier this year on paying quickly, and three, the more sophisticated forms of identity theft are factors," Bernick told KPIX 5.

Prosecutors believe the fraudulent claims may have been filed by prisoners themselves, or by family members, or friends. Some may be victims.

"Now we're seeing the other side of things. So it's frustrating, really frustrating," said Ramirez.

Prosecutors believe this fraud is preventable with a system used by other states to cross-check inmate data against unemployment claims, and are calling for Gov. Gavin Newsom's help.

Part of the problem is there are only 17 EDD fraud investigators statewide.

Months into the pandemic, EDD was faced with millions of unemployment claims.

"It's interesting to note that some of the people who are saying this is outrageous are the same people who were saying to EDD, 'pay people, pay people, pay people and don't worry about program integrity,'" said Bernick "And so, there is that tradeoff."

Assemblyember Phil Ting (D-San Francisco) announced Wednesday a bipartisan effort to get more answers from Bank of America on behalf of constituents whose accounts were hacked or frozen and are unable to get their issues resolved.

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