Critics Challenge Study That Found Welfare Cheating Rate of 62% : Aid: Only six of 135 alleged fraud cases were prosecuted. The Orange County research has been widely cited to justify spending millions on catching cheaters.

Last November, the Orange County district attorney’s office made a startling announcement: A six-month study of a sample of 216 family welfare cases found that recipients had committed fraud in a whopping 62% of them.

The finding struck a nerve in a state already wary of welfare cheats. Since the study was released, lawmakers from Los Angeles to Sacramento have pointed repeatedly to Orange County’s fraud rate in pushing for expensive fraud detection programs, and Gov. Pete Wilson cited the 62% figure in advancing his own plans for welfare reform.

But there is growing criticism over just how valid the study of Aid to Families With Dependent Children recipients is.

To date, prosecutors have filed criminal charges in only six of the cases for alleged overpayments totaling $33,529--a fraction of the $168,000 spent by the California Department of Social Services to conduct the study.

Critics maintain that the tiny number of prosecutions only shows that investigators grossly exaggerated the fraud rate in the first place, failing to take into account that people sometimes make mistakes when dealing with a complex bureaucracy.

“For them to throw that 62% number out the way they have is intellectually dishonest,” insisted Casey McKeever, an attorney who specializes in welfare reform issues in Sacramento.

Indeed, more than one-quarter of the 135 welfare recipients whom Orange County officials accused of welfare fraud in November are back on assistance today.

Statewide, officials in Sacramento estimate, the fraud rate for all AFDC cases is only about 4%.

Officials with the district attorney and the Orange County Social Services Agency, which collaborated on the project, defend their handling of the study.

They blame the small numbers of prosecutions on the difficulty of obtaining the evidence needed to win convictions in welfare fraud cases, combined with a backlog in the courts.

But they assert that their “aggressive” probe was responsible for another 89 welfare cheats in the study agreeing to voluntarily withdraw from the rolls rather than face criminal prosecution, thus saving $1.2 million in taxpayer dollars over the next 33 months.

Two examples cited by investigators who worked on the study show the wide range of alleged abuses.

In one case, investigators said, a woman failed to report her husband’s earnings as a fruit picker for three months in 1992. At the time, she was receiving a $326-per-month AFDC grant for one of her two children, who is a U.S. citizen. The total overpayment: $652.

She was charged with a misdemeanor.

In another instance, a woman had reportedly withheld information that her husband was employed and living in the same house with her and their two children. As a result, she received $13,939 in AFDC and food stamps, investigators said. Prosecutors have filed felony fraud charges against the woman, who was not identified.

But critics have suggested that state and county welfare officials targeted illegal immigrants as a main sample in the study because they suspected they might find a higher incidence of fraud among that group.

The study focused on a subset within the AFDC caseload that is 68% Latino--half of whom were either undocumented or in the process of obtaining legal status. Latinos in general make up 38% of all aid recipients. Meanwhile, despite the fact that the authors of the study cautioned others against using their findings to make generalizations about the AFDC population, their research has been widely cited by lawmakers statewide to help justify spending millions of dollars on anti-fraud detection projects, including fingerprinting of AFDC and General Relief recipients.

However, analysts say the so-called Child-Only Fraud Pilot Project has obvious statistical flaws, including the method that investigators used to calculate the 62% fraud rate.

Investigators stated in the report that they had rooted out 135 cases of fraud. Based on the original computer-generated sample of 500, the fraud rate would have been calculated at 27%. Instead, investigators threw out more than half the cases for a variety of reasons, then figured the 62% rate based on the number they actually probed.

Advocates for the poor have been especially critical of the low number of prosecutions.

They also rejected the conclusion that the 89 people who voluntarily asked to be taken off aid during the investigation must have been welfare cheats, as suggested in the study.

Officials determined that fraud was present if there were any “substantial changes to case eligibility because of the investigation.” These changes might include a family’s failure to supply the necessary information to investigators, a change in the makeup of the household, a grant reduction, an overpayment or the discontinuation of aid.

Wayne Field, chief of welfare fraud investigations for the district attorney, maintains that in all 135 cases, the people were in fact guilty of welfare fraud.

“I can tell you that in every single one of the 135 cases, it was not human error but intent to defraud,” Field said. “

The study states that every dollar spent on fraud investigation results in $7.29 in taxpayer savings.

However, according to the legislative analyst’s office in Sacramento, a nonpartisan research agency that serves state legislators, the study overstates the amount of future savings.

Bill Lucia, who analyzed the study recently at the request of a legislator whom he declined to identify, said investigators inflated the average length of time that recipients remain on aid and used higher, outdated average grant levels to determine savings.

Despite the apparent inconsistencies, Lucia said, the Orange County study figured prominently in a legislative subcommittee’s decision earlier this month to recommend that the Assembly approve $330,000 for similar fraud studies in Alameda and Fresno counties.