DA explains how inmates at San Mateo County jail, including convicted murderers, got $250K in EDD benefits

Court documents reveal how inmates pulled off the alleged heist from behind bars, amassing a mini fortune of taxpayer money within weeks.
SAN MATEO COUNTY, Calif. (KGO) -- More than a million California workers are still waiting for unemployment benefits, yet the EDD swiftly paid a quarter million dollars to jail inmates running a scam in the San Mateo County Jail.

Now, court papers reveal how the inmates pulled off the alleged heist from behind bars, amassing a mini fortune of taxpayer money within weeks.

RELATED: Scammers get EDD benefits while 1 million jobless still can't

"We charged 21 people with ripping off the California EDD to get money for unemployment - money that is destined to be going to people who are actually out of work,'' San Mateo County District Attorney Stephen Wagstaffe said. "These fellows in the jail were having money direct deposited into their accounts because they applied for benefits and said they were unemployed.''

And while millions of Californians have been running into roadblocks at the EDD, the complaint says the jail inmates got benefits swiftly., and apparently without questions from EDD.

"The EDD just pretty much acknowledged, 'we're overwhelmed, we don't have the resources to catch all the fraud and scammers out there,' '' Wagstaffe said. His staff alerted the EDD of the fraud, and even then, Wagstaffe said the EDD couldn't immediately stop the money from flowing to the suspected fraudsters.

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"They said until we filed charges they couldn't stop writing money to these guys,'' Wagstaffe said. "That's why we moved our investigation rather quickly, got these 21 and put a stop to it at least as to these guys.''

So how did the inmates pull off this suspected scheme from behind bars?

Wagstaffe says they talked over jail telephones. planning their scheme, even using three-way conference calls. And he said they used county-issued iPads or computers in the jail law library to file claims.

"And it worked for them,'' he said. "It worked for them for several months until we just stopped it.''

Here's how it was done:

Court papers say inmates collected names and social security numbers of fellow inmates, and friends on the outside. They used that personal data to file bogus claims.

Prosecutors said the inmates claimed to be self-employed. and that they lost work due to the pandemic. They claimed the regular state benefits plus the $600 per week boost from the federal government for pandemic unemployment assistance.

Not only did they get claims approved, they got their money swiftly - often within a couple of weeks. The complaint says one claim was filed July 24th and within 10 days, a $20,000 payment was mailed to an address in Palo Alto.
Another claim was even quicker; it was filed July 30th, and just one week later EDD mailed a big payment -- $21,000 -- to an address in Oakland, according to court papers.

RELATED: EDD applicants find themselves in 'purgatory' without an approval or denial

This, as thousands of unemployed workers were running into a myriad of obstacles to getting legitimate benefits from EDD. Many are stymied by requirements to prove their identity, or other verification, while the jail inmates apparently sailed through without problems.

"This is just crazy,'' said Alicia Lee, a recent college graduate who lost her restaurant job in the pandemic nearly six months ago, and has yet to receive a dime of benefits. The EDD keeps questioning her identity.

"It's not fair, life is not fair, but this is really not fair," she said.

The EDD declined to discuss charges that the inmates received this money with relative ease, or why the EDD did not catch the suspected fraud.

Wagstaffe said an inspector discovered the scheme by chance.

"He heard the inmate talking about it. 'Hey here's how you can get this easy money. It's not being checked on,' '' Wagstaffe said.

So what happened to the money?

Officials said debit cards loaded with money were delivered to various addresses the inmates designated in the Bay Area and the Central Valley. Friends or family members on the outside were given PIN numbers and instructed to cash them in. Officials say they recovered a total of about $150,000 cash at various locations. And Wagstaffe says suspects also went on a spending spree with much of the cash.

"They used taxpayer money for their own purposes, for fun like trips to Vegas,'' Wagstaffe said. "And one guy we're pretty sure...well he used it for drugs.''

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Wagstaffe said he has watched numerous stories on ABC7 detailing the struggles of unemployed workers who can't get benefits and have run out of money for food, rent and mortgage payments.

"I sat there and thought of these very people on Channel 7, that have been trying somehow to survive, not getting money while hundreds of thousands of dollars were being deposited from EDD to these criminals,'' he said. "It's wrong and immoral and I'm glad we brought it to a stop at least in this jail."

Many of those struggling workers are still just trying to get through on the EDD phone line, hoping to find out why they haven't received benefits.

"I know I'm unemployed, and I know it's due to coronavirus,'' said Ima Holcomb of Calistoga, who lost her job at a Napa Valley winery association. Her job was greeting visitors to wineries that had to shut down in the pandemic. "So I don't know what I did wrong. There is no one to tell me why I'm not getting benefits.''

"I was told I'm disqualified but I don't know why,'' said Melissa Gutierrez of Oakland, who lost her bartending job when bars had to close under shelter-in-place rules. She and Holcomb never got benefits until they came to 7 On Your Side and we pointed out the apparent inequity to the EDD.

Six months after the pandemic hit, the EDD admits it still has a backlog of 1.1 million workers waiting for benefits. And it concedes fraud is a problem, but one it can't discuss due to "ongoing investigations." State legislators are growing tired of the barriers to information. this amid evidence the schemes are only growing.

Wagstaffe says the convicts were communicating also with prisoners in other jails. Right now the Monterey County sheriff is investigating the possibility that 26 inmates at the Salinas jail were also filing fraudulent EDD claims, an official there confirmed. There was no further information on that investigation.

But Wagstaffe says he remains troubled that EDD money - taxpayer dollars intended to help folks through the pandemic - went to suspected fraudsters.

"Two were convicted of murder, one was sitting in our jail awaiting charges of murder,'' Wagstaffe said. "We were paying these murderers, as taxpayers, our money was going to these murderers...instead of helping unemployed individuals who are just trying to put food on the table."

Take a look at more stories and videos by Michael Finney and 7 On Your Side.

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