SAN MATEO COUNTY (CBS / AP) — California's system for paying unemployment benefits is so dysfunctional that the state approved more than $140 million for at least 20,000 prisoners, local and federal prosecutors said Tuesday, detailing a scheme that resulted in claims filed in the names of well-known convicted murderers like Scott Peterson and Cary Stayner.
The discovery of more than $140 million in unemployment fraud and counting could be traced back to the San Mateo County Jail, District Attorney Steve Wagstaffe told KPIX 5.
Back in July, an investigator with the San Mateo district attorney's office was listening to a call recorded inside the jail from an inmate, when the scam came into focus.
"The word spread faster than the pandemic, that there's a scam where you can get money put into your account," Wagstaffe said.
Then, thanks to a convicted murderer sentenced to Corcoran State Prison for a 95-years-to-life sentence, the scam took root beyond San Mateo County to the state prison system.
"And as we found out, when he was there, he was spreading the word, spreading the gospel about how's there's easy money," Wagstaffe said.
From March to August, more than 35,000 inmates were named in claims filed with the California Employment Development Department, with more than 20,000 being paid, according to Sacramento County District Attorney Anne Marie Schubert. At least 158 claims were filed for 133 death-row inmates, resulting in more than $420,000 in benefits paid.
"It involves rapists and child molesters, human traffickers and other violent criminals in our state prisons," Schubert said.
The list includes Peterson, who was sentenced to death after being convicted of killing his pregnant wife following a trial that riveted the nation. The California Supreme Court recently overturned Peterson's death sentence and has ordered a lower court to review his murder conviction.
Schubert confirmed there was a claim made in the name of Scott Peterson, but declined to provide further details.
Peterson's attorney, Pat Harris, said while Peterson's name surfaced during the investigation, there is no evidence Peterson received unemployment aid from the state.
"This investigation, when it's completed, will show that he had not a thing to do with any kind of scheme to get fraudulent benefits," Harris said.
Schubert listed a number of inmates there who had claims filed in their names, including Stayner, convicted of killing four people in Yosemite National Park in 1999; Susan Eubanks, a San Diego woman convicted of shooting her four sons to death in 1997; Isauro Aguirre, who was sentenced to death for the 2013 murder of 8-year-old Gabriel Fernandez in Los Angeles; and Wesley Shermantine, part of the duo dubbed the "Speed Freak Killers" for their meth-induced killing rampage in the 1980s and '90s.
Prosecutors said they learned of the scheme from listening in on recorded prison phone calls, where inmates would talk about how easy it was for everyone to get paid. They said the scheme always involved someone on the outside — usually friends or family members of the inmates, who would then receive the benefits.
In Kern County, home to five state prisons, one address was used to receive benefits for 16 inmates.
"In my nearly four decades as a prosecutor in this state, I have never seen fraud of this magnitude," Kern County District Attorney Cynthia Zimmer said.
In some cases, inmates used their real names. In others, they used fake names and even fake Social Security numbers. In one instance, an inmate used the name: "poopy britches," Schubert said.
"Quite frankly, the inmates are mocking us," Schubert said.
So far, 22 people have been charged in San Mateo County, including six people who were not in prison. Prosecutors said dozens of other investigations across the state are continuing.
Prosecutors blamed the Employment Development Department, which has been overwhelmed by more than 16.4 million benefit claims since the pandemic began in March, resulting in a backlog that at one time totaled more than 1.6 million people.
But prosecutors said in its haste to approve benefits, the department did not check unemployment claims against a list of prisoners, as many other states do. San Mateo District Attorney Stephen Wagstaffe said that when he notified the department about inmates fraudulently receiving benefits, they told him they could not cut off the payments until they were formally charged with a crime.
The problem was so bad that on Monday, nine county district attorneys sent a letter to Gov. Gavin Newsom asking for him to intervene.
"We face a manifest problem that requires action, not talk," said McGregor Scott, U.S. Attorney for the Eastern District of California.
Employment Development Department spokeswoman Loree Levy said the agency has been working with the Department of Labor's Office of Inspector General on cross-checking claims with inmates, saying they are "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."
In an email to the AP, Newsom called the fraud "absolutely unacceptable." He said he first learned of the fraud earlier this year, which prompted him to order the department to "review its practices and take immediate actions to prevent fraud and to hold people accountable."
Newsom said he has ordered the Office of Emergency Services to set up a task force to assist prosecutors with their investigation.
"While we have made improvements, we need to do more," Newsom said.
© Copyright 2020 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.
for more features.