O.C. Welfare Recipients Subject of Random Fraud Investigations : Assistance: Full-scale probes target 450 people, selected without evidence of wrongdoing. Civil libertarians protest.

Orange County district attorney investigators for the past year have quietly conducted full-fledged investigations into the lives of 450 randomly selected welfare recipients, none of whom are suspected of any wrongdoing.

Since June, 1994, a team of eight special investigators has been working on a state-authorized pilot study of welfare fraud, in which it scrutinizes a sample of the county’s welfare population to see if they have more income than they have declared on applications to the county Social Services Agency, officials say.

Using tactics that have drawn the indignation of civil libertarians for what some liken to state-sponsored spying, investigators not only do computer checks of Social Security and driver’s license information, but also interview welfare recipients’ neighbors, relatives and even their children, asking if the recipient is working or if a parent declared absent is in fact living in the home.

In some cases investigators have followed recipients to see if they have jobs they have not reported to welfare officials, and they make surprise visits to recipients’ homes, asking to search rooms for signs that a recipient of Aid to Families with Dependent Children--the primary form of welfare--has fewer children than they have reported.

National welfare experts say they have heard of no similar undertakings by other states. But they say the investigation of some Orange County welfare recipients illustrates the tension between the public’s desire to protect civil liberties and its zeal to crack down on welfare fraud.

“I think the American people genuinely feel the need to support people in poverty who legitimately have a financial need,” said Sid Johnson, executive director of the American Public Welfare Assn. in Washington. “And I think, at the same time, they appropriately resent any situations in which their generosity is being taken advantage of.”

Said Michael Kharfen, of the U.S. Department of Health and Human Services: “Other states have been more relying upon using data matches with Social Security and employment records to determine whether people are entitled to benefits.

“But this California study seems more rigorous than what other states do.”

And that outrages civil libertarians.

“I’m utterly amazed at this,” said Harry Simon, a senior attorney with the Legal Aid Society of Orange County. “There’s nothing I’ve seen in state law that authorizes this kind of far-reaching investigation of welfare recipients. And even if there were, it would violate federal constitutional principals.

“They call this a study?” Simon added. “What are they studying? These are people, not bugs. . . . Everybody’s interested in curbing fraud everywhere, but that doesn’t mean that the government is entitled to engage in these sort of far-reaching investigations.”

UCLA law professor Gary Blasi said Americans historically have had conflicting attitudes: at once believing in the principle that no one should be investigated by the government until they are suspected of some wrongdoing, but quick to doubt the honesty of poor people.

“There is a centuries-old notion that being poor is an indicator of immorality,” Blasi said. “There is a presumption that all moral people are hard-working people, and hard-working people have jobs.”

The ethical flaws in the state’s study would seem more significant if a group other than welfare recipients were being investigated, Blasi said.

“If you randomly chose 400 defense contractors to investigate to see how they spend the public’s money, you wouldn’t be able to get a parking place around the courthouse there would be so many corporate lawyers objecting to it.”

The results of the state study will be specific to Orange County, which was chosen because of the high regard for the district attorney’s welfare fraud unit and its previous experience studying welfare fraud. But state officials believe the data should help draw conclusions for other counties and help put a dent in the estimated $1 billion the state loses to fraud annually.

Results are not expected until late fall, but already investigators are turning up numerous examples of fraud, they say. Many cases reveal poor people making a few extra dollars. But investigators say they also have found residents maintaining an upper-class lifestyle--including one woman who managed to receive welfare while allegedly living in a Newport Beach apartment and driving a Porsche.

But “for the most part we find people who are committing welfare fraud to be pretty desperate,” said Angelo Doti, director of the county Social Services Agency’s financial assistance department, which serves 120,000 people on AFDC.

While Orange County normally conducts vigorous welfare fraud investigations that also include visits to neighbors, employers and home sites, typically these investigations occur after social services workers suspect an application for AFDC is fraudulent.

“In this case, they all start out innocent as newborn babes,” Doti said. “They didn’t do anything right or wrong. There’s no profile of a typical recipient that we’re using either.

“It was just the luck of the draw,” Doti said.

State officials point out that welfare applicants are warned they can be investigated from the moment they seek public assistance.

“Right there on the application it says you recognize that county, state and federal personnel are going to verify these statements are true,” said Charr Lee Metsker, chief of fraud for the state social services agency.

The alternative to taking a random sample would be to target only those suspected of fraud, but that would not reveal the extent of fraud in the broader welfare population, said Walter Barnes, of the California Department of Social Services and the director of the project.

“If we took our sample only from cases that had only a [fraud] referral, then essentially we’re building a bias into our sample selection,” Barnes said. “We’re trying to find out how much fraud is out there--not how much fraud can we catch.”

*

When special investigators Freddie Moreno and Ana Vega visited a Cypress mother of four in early August after her case was selected, the woman’s sense of intrusion was palpable. After showing their badges and introducing a reporter, they asked to go inside and she allowed them in.

She answered their questions about her rent, her income, her federal college grants and allowed them to look into each room in the house.

“Why are you here? Are you doing this to everybody?” she asked. “Is this something you do on a random basis?”

Vega told her it was random and asked if she had any questions.

“Actually, I do have questions,” she said. “I do have a problem as to why my second husband was ordered to pay child support and never has. I mean, the kid is 14 years old now. I wish somebody from the district attorney’s office would go and investigate him for that and make him pay, rather than coming to me,” she said.

Anti-poverty advocates bristle at such tactics, saying even the goal of determining the extent of welfare fraud does not justify the intrusive investigations. Some argue that the state study focuses on punishing welfare recipients, most of whom are women and children, rather than assist them out of poverty.

“I wish someone would take the type of entrepreneurial spirit and pour it into corporate tax fraud and deadbeat dads,” said Tim Shaw, director of the Orange County Housing Task Force, one of the area’s leading anti-poverty advocates. “Why don’t they do that? If you want to take people off of welfare then let’s go tail these deadbeat dads to work.

“And doesn’t Orange County have tremendous financial problems?” Shaw asked, referring to the county’s bankruptcy after losing $1.7 billion in investments last year. “Why wasn’t a team of investigators following around people in the treasurer’s office [before the bankruptcy]?”

But if recipients are not cheating, county officials say, the investigation is painless.

Once they make contact with a recipient in the study, investigators are told to be scrupulously courteous. They request permission to enter a home after showing their badges, smiling at children and informing recipients that a computer selected them at random for special scrutiny.

Indeed, the purpose of studying a random sample of recipients rather than targeting a certain group, Doti said, is to avert criticism of unfairness or bias.

Two years ago the Orange County Social Services Agency, the district attorney’s office and the state Department of Social Services conducted a study of families that received aid strictly to assist their children. That study found one out of four had violated welfare rules, but the results largely focused on immigrants and was decried by advocates for the poor as biased.

Last year, the state commissioned Tom MaCurdy, an economics professor with Stanford University’s Hoover Institute and an expert in welfare reform, to create the study’s procedures.

“This is a study that’s reasonable. It’s not partisan and not driven by much politics,” MaCurdy said.

*

The absence of political dissent surrounding the study may be due primarily to the fact that legislative approval was not necessary. The Department of Social Services merely notified the Senate Rules Committee that it would be picking up the $1.2-million tab for an Orange County welfare fraud study. The rules committee did not object, officials say.

None of the local legislators interviewed for this article had heard of the study. Some were supportive; others were not.

“I don’t think anybody’s done a study, and we need one,” said Sen. Rob Hurtt (R-Garden Grove). “I can see the other point, that it’s a violation of your civil rights and the Constitution because you have no basis to suspect wrongdoing. But I would like to remind everybody the IRS comes in any time they want to.”

Said Assemblyman Jim Morrissey (R-Santa Ana), whose district includes some of Orange County’s poorest neighborhoods: “We have to investigate welfare--it’s for the needy, not the greedy. It’s our money. It’s not a question of civil rights. We’re talking about people out there wasting our money and we should pursue it wherever we can.”

Sen. Lucy Killea (I-San Diego) was more leery of the study.

The state already knows there is fraud and could spend its money in better ways, she said. Using a phrase from her native Texas, Killea said: “You don’t fatten the pig by weighing it more often.”

Still, state social service officials say they are under considerable pressure from politicians and the public to reduce expenditures on welfare.

“Besides, I think taxpayers have a right to know how much it costs,” said Wayne Field, the deputy district attorney in charge of the county’s 100-person welfare fraud unit.

No one has an exact figure for what welfare fraud costs taxpayers. State estimates on cheating range wildly, from a low of 4% to a high of 62%. But applying the lower estimate suggests that AFDC fraud costs, at a minimum, about $1 billion annually--enough money to pay for 750 million meals at a nonprofit food kitchen or to buy 50,000 new police cars.

In Orange County, according to the district attorney’s fraud statistics, early investigations into suspect applications prevented the overpayment of $72.5 million in fiscal year 1994 and $83.7 million in fiscal year 1995. Over four years, the 100-person unit caught fraud that would have cost taxpayers $288.9 million had it gone undetected for the average length of time a recipient is on welfare--about two years.

But when the current state study is completed, the data collected ultimately will benefit welfare recipients too, Field said.

“There are really people who need help, but unfortunately the cheaters are taking so much out of available dollars that people who really need help don’t have as much,” he said.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Increased Vigilance

Since fiscal 1992, the number of food stamp and Aid to Families With Dependent Children cases investigated and denied in Orange County has nearly doubled, while the amount saved has increased by 35%:

INVESTIGATIONS

*--*

Cases Investigated Denied benefits ’92 7,935 5,005 ’93 10,192 6,854 ’94 12,919 8,444 ’95 14,558 9,485

*--*

****

SAVINGS (In millions)

‘92: $61.9

‘93: $70.9

‘94: $72.5

‘95: $83.

Source: Orange County district attorney’s office

Researched by APRIL JACKSON / Los Angeles Times

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Ferreting Out Fraud

About one-quarter of Orange County’s new welfare claims are referred to the district attorney’s office as fraudulent. Since 1981, more than half the claims investigated have been found to be illegitimate:

Investigated: 70,518

Denied benefits: 41,958

Big Savings

Since 1981, most of the $510.2 million saved in Orange County by the federal, state and county governments has been in Aid to Families With Dependent Children expenditures. Here’s how the $400.2 million in AFDC savings breaks down:

Funding agency Savings

Federal: $200.1 million

State: $189.3 million

County: $10.8 million

Source: Orange County district attorney’s office

Researched by APRIL JACKSON / Los Angeles Times