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Statewide inmate unemployment fraud could cost California a billion dollars

Kern Valley State Prison (FILE)
Posted at 8:38 PM, Nov 25, 2020
and last updated 2020-11-25 23:38:32-05

It's a fraud scheme that may cost taxpayers a billion dollars. The Employment Development Department has paid $140-million to inmates in recent months and about $16 million was dished out to inmates in Kern County. 23ABC's Bayan Wang has explored how something of this scale could go on unnoticed.

Kern County District Attorney Cynthia Zimmer and legislatures are raising said this is the biggest taxpayer fraud case in California's history.

While thousands of local, state, and federal inmates were involved in this huge scheme, getting paid unemployment dollars unjustifiably, thousands of Californians who actually need unemployment money are still waiting for it.

"This is clearly a massive failure," said Assemblyman Vince Fong.

"It's something that should never happen," added Assemblyman Rudy Salas.

Prosecutors across the state believe an estimated $1 billion of pandemic unemployment money may have been sent to inmates across California in what's being described as the biggest taxpayer fraud scheme in the state's history.

"It's the biggest case of fraud against the state government," said Kern County Deputy District Attorney Joe Kinzel.

The Employment Development Department (EDD) is now in hot water as investigators confirm more than 20,000 unemployment claims filed under the names of inmates in California jails and prisons were paid out between March and August with more than $140 million sent their way.

Kern County District Attorney Cynthia Zimmer said 4,000 of these claims were made in Kern, 2,500 of them were approved totaling about $16 million.

"The EDD never cross-matched. In other words, when they were looking for people who were applying for unemployment benefits, they never cross-matched those with names for people in California state prison," explained Zimmer.

According to Zimmer, friends and family of those inmates did most of the work -- applying for unemployment under the inmate's name.
"EDD will send a bank card then, with cash on the bank card to the outside person who cashes it. Then sends a money order to the inmate inside the prison to go into the inmate's books."

While inmates cash out jobless Californians are struggling with more than half-a-million unemployment claims still backlogged within the EDD as of November 13.

Democratic Assemblyman Rudy Salas and Republican Assemblyman Vince Fong are calling for swift action.

"We need to make sure that the EDD is making sure that these benefits are going to people that qualify for them and not going to inmates or people that are trying to defraud the system," said Salas.

"The EDD is probably the worst agency in the state of California," responded Fong.

It's also important to note that back in September the EDD halted their unemployment services to optimize their technology and to address fraud. since then, they've been using a third-party verification system that they say is much better.

According to Zimmer, this isn't just going to be a slap on the wrist for those involved. She said this is a felony offense and there is prison time waiting for those who are convicted.