Scams led California to send COVID jobless benefits to Scott Peterson, death row inmates

Scott Peterson sits in court with his lawyers during his murder trial in 2004.
Scott Peterson, center, during his 2004 murder trial.
(Al Golub / Associated Press)

San Quentin inmate Scott Peterson, convicted of killing his wife and unborn son, was sent California unemployment benefits in recent months, according to a group of state and federal prosecutors who have been investigating fraud in the pandemic relief system administered by the state Employment Development Department.

So was convicted serial killer Cary Stayner, who in 1999 murdered two women and two girls near Yosemite and now is jailed, near Peterson, on death row.

Also allegedly approved for an unemployment debit card: Isauro Aguirre, sentenced to death in 2018 for the torture and death of 8-year-old Gabriel Fernandez.


Nine district attorneys across California and a federal prosecutor on Tuesday made these allegations and called for Gov. Gavin Newsom to intervene to stop such unemployment swindling in California jails and prisons — which may involve tens of thousands of questionable claims totaling hundreds of millions of dollars — though they said they were uncertain if the high-profile claimants were victims of a scam or participants.

Pat Harris, Peterson’s attorney, said he was “absolutely certain Scott was not involved, and any investigation will clear him.”

The district attorneys called the situation “the most significant fraud on taxpayer funds in California history,” according to a letter obtained by The Times, describing crimes that involve identity theft of prisoners as well as alleged conspiracies by individual inmates and organized gangs to game the state system.

“It is a manifest problem that cannot be ignored, and the governor needs to take steps to address it,” said McGregor Scott, U.S. attorney for the Eastern District of California.

The prosecutors contend that the fraud is preventable with systems such as those used by other states that check inmate data against unemployment claims. They asked Newsom to step in to “turn off the spigot” of payments to incarcerated people, contending that EDD’s response to their investigations has been “slow to nonexistent,” according to Sacramento County Dist. Atty. Anne Marie Schubert, who helped form and lead a task force on the issue.

“EDD, it’s just a dysfunctional mess,” said El Dorado County Dist. Atty. Vern Pierson, a member of the task force and president of the California District Attorneys Assn.


Newsom on Tuesday said the fraud was “absolutely unacceptable” and announced his own task force to aid district attorneys and coordinate California’s anti-fraud efforts, adding that the state has already started comparing inmate rolls to pandemic benefit claims.

“Earlier this year, I launched a strike team to expedite unemployment payments and to minimize abuse of the system,” Newsom said in a statement. “While we have made improvements, we need to do more.”

EDD is attempting to weed out claims from incarcerated people who are ineligible and is “pursuing how to integrate such cross-matches moving forward,” said Loree Levy, a spokeswoman for the agency.

Though few dispute the need for unemployment aid during an unprecedented economic downturn — and the potential need for further stimulus money — the latest allegations highlight ongoing problems with EDD that have left many questioning the agency’s ability to administer the massive number of new claims.

Faced with a deluge of fraudulent unemployment claims, California officials said Thursday that 350,000 of the debit cards they issued containing benefits have been frozen because of suspicious activity.

Oct. 22, 2020

So far, investigations have uncovered more than $400,000 in state benefits paid to death row inmates and more than $140 million to other incarcerated people in California’s 35 prisons, according to Schubert.

“The murderers and rapists and human traffickers should not be getting this money,” said Schubert. “It needs to stop.”


Dist. Atty. Cynthia Zimmer of Kern County — which has five prisons, the most of any county in California — called the scope of the scams shocking. Zimmer said her office had found about $16 million in allegedly fraudulent claims in her county alone.

“I’ve been a prosecutor for 36 years,” she said. “I have never seen fraud of this magnitude.”

To be eligible to receive unemployment benefits, claimants must be actively seeking work and be available to accept work, a standard that prison inmates are typically unable to meet.

Schubert and Zimmer said the alleged fraud was taking multiple forms; some claims may have been submitted by inmates directly or by family and friends to whom they gave their personal information. Other inmates may be unwitting victims.

Instances of large-scale organized schemes have also been found, prosecutors said, including possible involvement of prison gangs. Charges have been filed in a handful of cases, but prosecutors say hundreds of investigations are ongoing.

Because the cases are complex and may involve thousands of incarcerated individuals in multiple jurisdictions — some making claims are imprisoned in counties other than where their payments are sent — prosecutors said individual counties, especially small and rural ones where some prisons are located, couldn’t handle the burden of investigations.


Federal prosecutors have helped piece together the scope of the problem, and district attorneys now are asking for more state help to handle the workload. But Pierson, the El Dorado district attorney, said he and others had been told that EDD has only 17 fraud investigators statewide.

“At the line level,” he said, “they are trying to do their best, but they don’t have adequate resources or support.”

The potential fraud came to light after district attorneys in Los Angeles, Lassen and San Mateo counties uncovered questionable claims coming from local jails and prisons, in part from monitoring recorded phone conversations of inmates while investigating unrelated crimes, said multiple sources familiar with the investigations. Investigators also noticed large money orders being sent to inmates.

Riverside Dist. Atty. Mike Hestrin said the scheme works typically by someone on the outside doing the paperwork. The payments usually go to an address outside of prison. Once the cash card is obtained, the person on the outside puts some of the funds into the inmate’s prison account, where it can be used to buy services and goods such as food and stamps.

“One guy on a telephone call bragged he just bought a $400 watch for his mother thanks to the state,” Hestrin said.

San Mateo County Dist. Atty. Stephen Wagstaffe, who is not a member of the task force but whose investigators uncovered such fraud months ago, said he believed the problem was “dramatically wide.” Wagstaffe said charges had been filed against 22 people in his jurisdiction for applying for benefits while incarcerated or helping an inmate to do so — felonies that could result in three years in prison. He said four of those defendants had pleaded guilty so far. In one instance, the alleged fraudster was a convicted murderer awaiting transfer to state prison and, once transferred, continued the scam, Wagstaffe said.


In another case, a suspect disappeared after posting bond on a $1-million bail order, some of which Wagstaffe suspects was paid with EDD funds, he said.

“It’s such an easy scam to do,” said Wagstaffe. “It spreads like wildfire among the inmates.”

Scott, the federal prosecutor, said unemployment fraud in prisons is a national problem, and 10 assistant U.S. attorneys have been hired in recent months specifically to investigate it, including one in California.

In August, Pennsylvania U.S. Atty. Scott W. Brady and Pennsylvania Atty. Gen. Josh Shapiro charged 33 people, including inmates at eight state and county jails and prisons in western Pennsylvania and their accomplices, with illegally obtaining Coronavirus Aid, Relief and Economic Security (CARES) Act unemployment benefits.

In California, Scott worked with district attorneys to file a subpoena on behalf of the U.S. Department of Labor to compel the California Department of Corrections and Rehabilitation to release a list of all incarcerated people. The Department of Labor compared that list with unemployment insurance data from March to August, according to the letter, and found that more than 35,000 inmates had filed claims, and more than 20,000 had been paid. One unidentified inmate was paid more than $48,000.

The data showed that 133 California death row inmates had 158 claims in their names, with one receiving more than $19,000 so far, according to the letter to the governor.


Schubert said prosecutors are asking state authorities to ensure that the California Department of Corrections and Rehabilitation, which has been helping with the investigations, regularly shares identifying data such as Social Security numbers with EDD to help weed out fraudulent claims — a system used by 35 other states, she said. Twenty-eight states also share that data at the county jail level, according to the letter.

CDCR spokeswoman Dana Simas said the agency “has worked with the Employment Development Department, the U.S. Department of Labor and the local district attorneys to stop these illegal activities inside state prisons. We will continue to partner with the local district attorneys to provide whatever resources and information are needed to investigate and prosecute this latest development.”

State legislators have been raising alarms for months about suspected fraud in the growing unemployment benefits program, which has paid out an unprecedented $110 billion on 9 million claims since the COVID-19 pandemic began in March. Just last month, the EDD said 350,000 of the debit cards it issued containing benefits had been frozen because of suspicious activity, including cases where dozens of claims were filed using a single address.

The agency has a backlog of about 580,000 claims that it has not paid because they are stuck in processing.

Hit with a flood of more than 9 million applications for unemployment benefits, California is trying to identify which of them may be fraudulent.

Aug. 7, 2020

“The ineptitude at EDD knows no bounds,” said Assemblywoman Cottie Petrie-Norris (D-Laguna Beach), chairwoman of the Assembly Accountability and Administrative Review Committee. “This latest report of widespread EDD fraud by inmates is particularly outrageous, because this is a very simple problem to solve.”

But as claims languish and the pandemic continues to wreak havoc with the economy, prosecutors are frustrated that little has changed.


“Really, at this point stopping the bleed is the most important thing, because the fraud is continuing,” said Fresno County Dist. Atty. Lisa Smittcamp, who has found about 860 questionable claims from inmates at Pleasant Valley State Prison, amounting to about $3.6 million. “These are just random cash cards they are sending out, and they are being completely irresponsible with taxpayer money.”