Santa Barbara County Jail | Credit: Daniel Dreifuss (file)

Santa Barbara County Jail inmates collected at least $1.4 million in COVID benefits, prosecutors say, as part of a massive unemployment scheme that’s played out in correctional institutions across the state. While the number of local fraudulent claims ― 143 ― was reported last month, the associated dollar figure was not previously known.

Senior Deputy District Attorney Brian Cota said it’s not yet clear how many inmates were involved; individuals may have filed multiple claims. He said his office is in the beginning stages of what will be an arduous investigation that will take several months to complete. No charges have been filed yet.

Last week, nine California District Attorneys described the scam in a letter to Governor Gavin Newsom as “the most significant fraud on taxpayer funds in California history,” estimating payments from the state to ineligible recipients behind bars could total more than $1 billion. More than $400,000 has gone to death-row inmates, including Scott Peterson, who was convicted in 2004 of murdering his wife and unborn child. Cota noted that the suspected Santa Barbara participants are among the county’s most serious offenders, as lower-level inmates were released or transferred to home confinement at the start of the pandemic. 

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The fraud, investigators say, was uncovered in both state prisons and county jails, and it took multiple forms. Inmates sometimes submitted the claims themselves, or friends and relatives on the outside would file the paperwork on their behalf. Authorities also discovered larger-scale rackets orchestrated by gangs. To be legally eligible for unemployment benefits, an applicant must be actively seeking work and be available to accept work. Duping the system is a felony crime punishable by up to three years in prison.

The situation first gained attention this summer when authorities investigating unrelated crimes took note of suspicious phone conversations among San Mateo County inmates. In Riverside County, one inmate was overheard bragging that he’d purchased a $400 watch for his mother, “thanks to the state.”

It appears that the state agency responsible for vetting and distributing unemployment funds ― the Employment Development Department (EDD) ― was ripe for criminal exploitation, especially during the chaos of COVID. Unlike equivalent departments in most other states, California’s EDD does not cross-reference applicants’ identifying information, such as Social Security numbers, with California Department of Corrections or county jail data before rubber-stamping claims. Shocked by the oversight, state legislators and prosecutors have pressed Newsom to take swift action to dramatically reform the agency.

In response, Newsom assigned a team of technology and government systems experts to study the department’s operations. He also promised to help local jurisdictions prosecute their cases. “To expedite and strengthen these efforts, I have directed the Office of Emergency Services to stand up a task force to coordinate state efforts and support investigations by local District Attorneys,” Newsom said in response. “We will continue to fully partner with law enforcement and direct as many resources as needed to investigate and resolve this issue speedily.”

Meanwhile, the EDD is struggling to process legal claims filed by unemployed Californians. According to the most recent numbers, the agency is saddled with a backlog of approximately 580,000 applications stuck somewhere in the approval process.

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