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Investigation into massive fraud at EDD in early stages

Neil Esoy

SANTA BARBARA, Calif. - Law enforcement officials from all over California, including the Santa Barbara County District Attorney's Office, are starting the long and tedious task of investigating what could be the worst case of fraud in state history.

The District Attorney's from Sacramento, San Mateo, El Dorado and Kern Counties held a joint new conference on Tuesday to announce a scheme by inmates and prisoners at county jails and prisons in California to defraud the Employment Development Department. The state agency oversees and distributes unemployment benefits to out-of-work Californians.

Investigators believe scams have cost taxpayers up to one billion dollars. It appears people incarcerated for various crimes were able to receive money from the EDD using fake names and social security numbers through bogus accounts. At the same time, at least tens of thousands of Californians who lost their job when the pandemic hit and really need the benefits haven't received any money. Many of them have been waiting since March and April to receive their benefits and can't even get through to a human being at the EDD for help.

The NewsChannel contacted officials at the Lompoc Federal Prison and the San Luis Obispo County Jail to find out if they had any information about prisoners who may be involved in this scheme. Representatives from both facilities told us they are not aware of any inmates being involved at this point. We also reached out to Ventura County authorities and have not received a response. The Santa Barbara County District Attorney's Office confirmed the EDD identified at least 143 inmates at the Santa Barbara County Jail who may be involved.

A statewide task force has been created to investigate and local authorities are asking Governor Gavin Newsom to get involved. Sources involved in the investigation tell The NewsChannel that this case is extremely complex. They believe most of the heavy lifting will fall on local jurisdictions in California, yet state and federal agencies will also be involved. The EDD only has 18 investigators and most of the money stolen is from the federal government. Plus, how do you punish someone who's sitting on death row?

Sacramento County District Attorney Anne Marie Schubert announced that inmates on California's death row are involved in the scam and received $421,000 in illegal EDD benefit payments. One of them is Scott Peterson, a Cal Poly graduate, who murdered his pregnant wife Lacy just before Christmas in 2002.

An EDD spokesperson sent The NewsChannel a statement for this story:

EDD has been working with the assistance of the U.S. Department of Labor, Office of Inspector General (DOL OIG) on cross-matches with inmate populations to identify suspect claims.  We’re also 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 addition, EDD is working collaboratively with state cyber-security experts. 

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C.J. Ward

C.J. Ward is the evening anchor for KEYT News Channel 3 and the station’s lead investigative reporter. To learn more about C.J., click here


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