'Major, major disaster,' says lawmaker of massive CA EDD prison fraud scheme

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The fraud was first uncovered months ago when 21 inmates in San Mateo County were charged with filing false claims with the California Employment Development Division, which oversees the state’s unemployment benefits.

Several have already pleaded guilty.

But on Tuesday, prosecutors around the state revealed the extent of the scheme, which may be the biggest case of fraud on taxpayer funds in the state’s history.

The state has mistakenly paid out coronavirus unemployment benefits to thousands of incarcerated people in facilities around California, from county jails to death row, totaling at least $140 million and possibly much more.

"We so rushed to get the money to people, which you can understand, just didn’t do the work and provide the security and the identification that’s necessary to do it right," said State Senator Jerry Hill of San Mateo, who chairs the Senate Labor, Public Employment and Retirement Committee. "It’s incredible…and it’s very sad because a lot of those hundreds of millions of dollars that have gone to prisoners in San Quentin and on death row could have gone to people at home who are struggling right now and need to put a meal on the table."

It is unclear at this point whether inmates who were paid benefits actually filled out the applications and received the money themselves, or whether their identities were used by another party.

EDD has been so overrun with claims and administrative issues this year that the agency stopped taking new claims for two weeks earlier this fall in order to overhaul its systems.

Hill told KCBS Radio the system, which was already antiquated, was nowhere near prepared for the sudden and massive unemployment brought on by the coronavirus pandemic.

"All of a sudden when that triples and quadruples in numbers and immediately it puts such pressure on the system that, and the training that’s necessary, that they could not deal with it," he said.

While some fixes have been put in place, Hill said: "This is a major, major disaster for not only employers in California, but just shows the lack of oversight."