S.D. Grand Jury Discovers Fraud in Social Services : Report: Some welfare recipients are overpaid, the jury says, and some workers stole by creating phony cases.

The county Grand Jury announced Wednesday that it has found widespread corruption and fraud in the San Diego County Department of Social Services that has been long tolerated by some department officials.

Completing an eight-month investigation, the Grand Jury’s report said the officials have been indifferent to employee and welfare recipient fraud that has cost taxpayers up to $70 million annually.

The jury found that some welfare recipients are receiving overpayments, and that some employees stole welfare funds by creating phony welfare cases. In addition, some internal investigations of employee corruption and illegal welfare payments were covered up, said the report.

Although department Director Richard Jacobsen was not mentioned in the 17-page report, the document put much of the blame for the troubles ailing the department on policies instituted by Jacobsen and other managers.

“Management either had no idea of the extent of fraud within its system or was concealing such information from the public, the Grand Jury, the (county) chief administrative officer and the Board of Supervisors,” the report said.

The Grand Jury report accused department management of hiding employee wrongdoing and being more concerned about the department’s image then in ferreting out corruption and fraud.

“All through the (department), managers don’t like to hear bad things from people who work for them,” said Bruce H. Bradbeer, a Grand Jury member who spoke at a press conference where the report was released.

In a later telephone interview, Jacobsen denied the report’s allegations and complained that he was not among the more than 100 witnesses who testified before the Grand Jury.

“The Grand Jury has never talked to me about what the policy is at the department,” he said. “We have prudently managed the department. To say that we tolerate fraud and are concerned about the department’s image is not correct. We’re not concerned about covering something up because of the department’s image.”

However, the report said that testimony from current and former employees painted a different picture.

Management’s policy encouraged “a climate of suppression in which staff members cover up mistakes and problems to improve their own image and that of the department,” the report said.

“A lot of these allegations of (corruption and cover-ups) have been reported in clear, unmistakable terms to management at DSS,” said Grand Jury foreman Richard B. Macfie. “And nothing has been done.”

The Grand Jury also scoffed at Jacobsen’s oft-repeated claim that less than 1% of the county’s $711 million welfare budget is lost to fraud. The report called Jacobsen’s claim “highly unlikely” and conservatively estimated that 20% to 30% of welfare recipients receive overpayments they are not entitled to and which cost the county about $70 million annually.

Department officials have “significantly understated fraud and error rates,” the report said.

Jacobsen began backing down Wednesday from the statement that less than 1% is improperly doled out.

“The 1% we quoted came from figures supplied by the (U.S.) Department of Health and Human Services. I’m not standing behind it, saying that it’s a final number. But where that number ought to be, I don’t know,” Jacobsen said.

Rather than prosecuting people who knowingly receive overpayments, management’s policy encourages employees of the department’s Income Maintenance Bureau to continue making the illegal payments, the report said. The bureau runs the county’s welfare programs, such as food stamps and general relief.

Management “fostered the concept that the bureau’s mission is the dispensing of the maximum amount of funds to the greatest number of clients with minimum clerical cost, without taking the time allowed by law to ensure that unqualified welfare payment cases are not granted,” said the report.

So lax is the department’s oversight policy in disbursing welfare monies that employees said the unofficial office slogan is “when in doubt, give it out,” the report said.

“We recommend instead new policies which will lead to ‘when in doubt, check it out,’ ” the report continued.

One of the report’s recommendations was that the Income Maintenance Bureau be separated from the department and turned into an independent welfare department with a new director and management team.

This is the second time this year that the Grand Jury has recommended that a department agency be removed from Jacobsen’s control. In February, the panel recommended that the Child Protective Services be replaced with a new independent agency. The Grand Jury found Child Protective Services to be “out of control, with few checks and little balance.”

On Wednesday, Jacobsen declined to comment on the panel’s recommendations to create the two new departments.

The final Grand Jury report supported many of the allegations raised in December by David Sossaman, a county welfare fraud investigator. Sossaman then told The Times he had uncovered cases involving employee fraud that were either overlooked or covered up.

In his testimony to the Grand Jury, Sossaman complained that management frowned upon his attempts to investigate employees suspected of corruption and ignored recommendations to root out employee fraud.

In a brief telephone interview Wednesday, Sossaman said he was pleased with the Grand Jury’s findings. He said he was particularly pleased with what some believe is a reference to him in the final report, which reads:

“An individual with fresh approaches and solutions to the business of crime prevention and realities is mistrusted as a threat.”

The report charged that senior investigators in the department’s often took over some fraud cases, bypassing proper procedure and creating the appearance of impropriety. The panel’s report noted that some of these “prosecutable cases have been held beyond the statute of limitations.”

This interference by senior investigators has led to division and low morale in the investigations unit, the report said.

The Grand Jury report noted that management has ignored state laws requiring fraud training for investigators. Further, the department does not do background checks of its investigators and employees, the report said.

“Departmental standards for screening prospective employees and dealing with workers demonstrating borderline ethical behavior do not reflect that these people control and disperse large amounts of funds,” said the report.

Grand Jury Foreman Macfie said several allegations of employee corruption brought to the panel’s attention have been forwarded to the district attorney for continued investigation.

Deputy Dist. Atty. Robert Boles, who worked with the Grand Jury in its investigation of the department, said he is familiar with Miranda’s allegation but declined to comment.

The Grand Jury report noted the department has failed to establish a policy to encourage investigators and other employees “to cooperate with law enforcement agencies as allowed by law.”