How a California Inspector Uncovered Billions in Unemployment Fraud

Commentary

An inspector with the San Mateo District Attorney’s (SMDA) office says he was the first in California to uncover the multibillion-dollar unemployment scandal last summer.

Jordan Boyd discovered the Employment Development Department (EDD) fraud while monitoring a county jail inmate’s recorded phone call.

Boyd told California Insider that he overheard in calls a discussion about a scam that was happening in the community. The inmate “was talking with other colleagues on the outside and having three-way conversations with others on the street who had successfully filed for unemployment,” he said.

The inmate and those in his housing unit then made additional calls to friends and relatives on the outside, providing them with the names, birthdays, and social security numbers of themselves and fellow inmates.

This information along with “few checks and balances on EDD’s side,” allowed for claims to be filed on behalf of those incarcerated, leading them to receive thousands in unemployment benefits.

The Start of the Investigation

The SMDA’s office reported the fraud to EDD and began working with investigators to determine how big the fraud was from inside the county jail.

“We knew of at least two inmates in separate housing units that sent their information over recorded telephone calls, but we didn’t know if it ended there,” Boyd said.

The DA’s office gave an EDD investigator a list of 90 inmates that lived in the housing units and found that about 30 of them had filed claims with EDD.

It was later discovered that about 900 inmates in a San Mateo county jail were participating in the scam.

At the time, EDD reported to the SMDA that despite the claims being fraudulent, they were unable to stop the unemployment cash from being sent until a criminal complaint was filed.

“This was very frustrating for us,” Boyd said.

Within weeks, the county put together a case involving 21 people, including state prisoners, inmates, and outsiders.

Widespread Fraud

Immediately after uncovering the fraud, the district attorney’s office informed prison officials and other district attorneys within California, who then launched their own investigations.

It was soon learned that the fraud had already spread throughout the state to other county jails.

Officials said in January that California could have sent out as much as $11 billion in pandemic unemployment benefits to fraudsters.

Boyd highlighted an investigation that occurred in Beverly Hills after many individuals were shopping on Rodeo Drive with their Bank of America EDD debit cards.

“It was only a matter of time before everyone caught on,” Boyd said.

Boyd reported that with more counties uncovering of the fraud, EDD is working with Bank of America to cross reference previous and continuing fraudulent claims.

He recalled that at the start of San Mateo’s investigation, EDD had only one analyst who was receiving and processing requests to cross-check potential fraudulent claims.

“I don’t know if EDD has increased their resources since then or if that’s why it’s now taking longer,” Boyd said. “Unfortunately, now that this has grown and become such a humongous undertaking statewide, it seems EDD is overwhelmed, and so whereas we were getting turnarounds of next day or several days, it’s my understanding that now the turnaround times are much greater because they’re doing more with the same number of resources that they’ve had.”

How They Got Away With It

As a result of the pandemic, EDD had relaxed its standards to allow for individuals that were previously ineligible for unemployment, including self-employed workers, who were now able to qualify for the social service.

Boyd explained how scammers took advantage of the relaxed qualifications for unemployment by claiming they were self-employed.

“There’s no way to check what their previous employment was, so they were filing these claims as though they were self-employed,” he said. “We had a number of individuals that were filing. They were construction laborers, barber apprentices, and we did hear of one instance of a woman [who] had filed a claim using her 5-year-old daughter’s information, claiming she was an unemployed fashion model.”

Inmates got away with receiving large amounts of unemployment benefits through backlogging unemployment records to the start of the pandemic unemployment insurance program in March 2020.

Once a claim was approved, a pre-loaded Bank of America card was mailed out to them with loaded with money eligible to withdraw.

“Hopefully with the joint effort of both the local state and federal partners, we can put an end to this,” Boyd said.