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Jan. 15, 2021 - Epoch Times

20:35

California’s Billions of Dollars Unemployment Fraud Exposed | D.A. Michael Hestrin

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	There has been some talks about unemployment fraud in California right now.
	Could you tell us more about this?
	We have discovered, unfortunately, massive amounts of unemployment fraud that's coming from our jails and our prisons.
	How did you find this out?
	Those counties that had prisons as well began looking into whether or not inmates in their county were receiving these funds, and that really just started a cascading effect of one county after another finding this fraud.
	Not only do we have it in our county, but it was widespread through our prisons.
	Usually there is some verification process.
	When people get laid off, then the EDD verifies.
	What happened here?
	It's kind of hard to comprehend what happened, how this state could just start sending out money based on online applications where there's no verification that someone's actually out of a job.
	So in terms of the size of this fraud, what do you think it will be?
	To my knowledge, it's the largest There's no fraud in the history of California.
	I think it dwarfs anything that we've seen before, and I think it's going to be devastating.
	And the people in this state should be demanding answers as to what happened, how this happened, and then most importantly, how are we going to know that it's never going to happen again?
	California's district attorneys are uncovering billions of dollars in unemployment fraud.
	My guest today is Michael Hestrim.
	He's the district attorney of Riverside County.
	Today, he discusses how this could be the largest fraud in the history of the state and the financial impact on California residents.
	Welcome to California Insider.
	Michael, it's great to have you on.
	Welcome.
	Thanks for having me.
	We want to talk to you about unemployment fraud.
	There has been some talks about unemployment fraud in California right now.
	Could you tell us more about this?
	Well, so myself and a group of DAs around the state are leading a task force where we have discovered, unfortunately, massive amounts of unemployment fraud that's coming from our jails and our prisons.
	And so it's happening now, and we're really kind of in the initial stages of unraveling the scope of all this.
	But it looks like it's going to be very massive in scope and devastating to the state.
	How did you find this out?
	One of my colleagues up in Northern California happened to find a few instances where people that were in their local jail in San Mateo County were applying for and receiving unemployment payments.
	And so obviously that's fraud.
	These people are not unemployed in the normal sense.
	They're in custody.
	They've committed crimes.
	And so they actually prosecuted those cases in San Mateo County.
	And then we elected DAs.
	There's 58 counties in California.
	We get together routinely every month, every few months at roundtables.
	And at one of those roundtables a few months back, he said, you all might want to look into this.
	And so those counties that, well, all counties have county jails, but those counties that had prisons as well began looking into whether or not inmates in their county were receiving these funds.
	And that really just started a cascading effect of one county after another finding this fraud in their county.
	And how big was it?
	You started looking into it yourself, like in your county.
	How big is it?
	So Riverside County is a large county.
	We're the fourth largest county by population in California.
	And we have three prisons as well as extensive county jail system.
	So we started looking into this.
	And when I say we, I mean the DA's office has a Bureau of Investigation.
	So I asked our Bureau of Investigation to look into this, work with the prison wardens and their staff, And begin to try to figure out whether or not we had this in our county.
	And it was pretty stunning what we found, to be honest.
	What we found is that not only do we have it in our county, but it was widespread through our prisons.
	After just a few weeks of initial searching, we found that just in our county, and keep in mind I'm only one of 58 counties in California, we had 1,500 That includes people that are incarcerated, that includes people that are serving prison sentences in our county, that were receiving these funds, 1,500.
	So, you know, as we began to look at it more, we got more details, but that number for us is, it's a huge number, and the dollar loss for the state is going to be staggering.
	And how did you guys find this out when you looked into it?
	How was that possible to look into the prisons?
	Well, we're working with the prison staff, but we're also working with the state agencies, EDD, and cross-referencing essentially is what we're doing.
	We're getting lists of people who are in custody and then lists of people who are receiving these funds, and we're able to make the matches and say, well, that person's receiving these funds.
	And then as we dig deeper, we're also able to find what address they used in their application.
	These applications are online, electronic applications, and they're being done at a high volume.
	And so one of the things we've been finding is that many of the prisoners and inmates that are committing this fraud are using the same addresses on the outside of the institution.
	So that tells us that there's coordination, that this isn't just kind of a one-off, you know, a few inmates got an idea to do this.
	It tells you that there's broad coordination.
	In fact, some of the addresses that are being used to commit this fraud that's in Riverside County is also being used to commit the fraud in other counties.
	So there seems to be some central addresses and some central IP addresses that are being used to do this.
	Now, when I think about unemployment, and I've been a business owner and I know how it works, usually there's some verification process.
	When people get laid off, then the EDD verifies.
	What happened here?
	Well, what happened is California had very few safeguards, if any, before they sent out money.
	You know, 35 states out of 50 that have unemployment insurance programs have a Social Security cross-matching system as a safeguard.
	So in other words, somebody applies for unemployment insurance, the state, before sending them a check or a debit card, is able to cross-reference with Social Security database to ensure that they were in fact working and how long they've been working and how long they've been contributing to Social Security, for example.
	Our state chose not to do that.
	And it baffles me as to why we would not sign on to a system, a safeguard, that 35 other states are doing.
	It's kind of hard to comprehend what happened, how this state could just start sending out money Did people apply online and then they got the check or a debit card?
	How were they able to deposit the money when they were in prisons?
	Okay, so my understanding of the way this worked is that somebody was applying in the name of a prisoner.
	Now, that could have happened from inside an institution, but I think more often it happened outside.
	Somebody on the outside was submitting the application in the name of someone who's in custody.
	Now, of course, I've already heard that some inmates receiving these monies are claiming that they had their identity stolen.
	But what's interesting is what we're finding is that a lot of times the inmate, the money, the debit card, and I believe that that's the majority of it.
	These are debit cards that get sent to an address.
	But a lot of times it's the inmates' relatives that are receiving the debit card.
	So not very likely that was a stolen identity.
	So we've still got work to do in terms of tracking down the money and where it went.
	But again, very few controls.
	Somebody submits an application and they receive a debit card that's ready to be used on anything.
	What I heard was there was a big delay on processing these unemployment claims.
	Do you think they just, because of the delay, they just took off some of these processes, the checkpoints?
	It certainly looks that way to me.
	I mean, I guess I'm speculating because I don't have any first-hand knowledge that that's what happened, but it looks like at some point in the last few six months or so that there's just no safeguards are in place.
	And I understand the need with the lockdowns and this year the people out of work because of the virus and lockdowns that came.
	So I understand the urgency to get funds out to those who need it, but To not have any safeguards to think about fraud is naive at best and absolutely reckless.
	We reached out to the EDD and they brought up that 90% of this fraud happened due to the pandemic.
	And what are your thoughts on that?
	I can't dispute that.
	They may be right.
	It may be pandemic-related.
	I understand that the state, as I said, has great urgency and desire to get money out to those states.
	That deserve it.
	There are a lot of people out there that have lost their livelihoods, families that are trying to just survive and having trouble.
	And so, you know, I think the money was intended for them.
	But I would say, you know, whether or not it happened because of the pandemic California is the largest state in the union, and we should have at all times safeguards against fraud.
	If there are no safeguards, people are going to steal, people are going to commit fraud.
	It's part of human nature, and we have to accept that.
	Having a system where we're just giving out free money with no checks, no verification, is silly.
	There was also a whistleblower that came out of EDD and mentioned that there was cases of people, some applicants were 120 years old or there was an 8-year-old based on birthdays.
	Do you know much about that?
	We have seen some of that, that some of the applications were filled out with, for example, the name would be, you know, the name of a cartoon character or, you know, silly names.
	So, again, to me, that's more evidence that nobody's looking at these.
	They're coming in, they're getting the address, they're getting the amount, and they're sending out the debit cards.
	And there were some homes, some addresses that had multiple people receiving checks?
	Was it a number of them?
	Yes.
	For example, recently I found out that 21 of our prisoners, our inmates that are incarcerated in Riverside County, applied for EDD funds using the same address also in Riverside County.
	So obviously not all 21 live there.
	There's coordination going on.
	Somebody is working with the prisoners on the outside to coordinate this and make sure that they're getting the money.
	So nobody was checking on the EDD site that this address is receiving 21 applications.
	Not that I can tell, honestly.
	I don't want to speak for EDD because I don't want to, you know, obviously they should answer those questions, but not that I can tell.
	I just don't think there was any, very little, if any, verification process going on.
	That's what it appears to me is that pretty much any inmate could sign up, request funds, say they were unemployed and the state was paying them.
	So what would you tell the leadership at the EDD? What should they do now?
	Well, you know, the EDD, as far as I can tell, they're cooperating with this investigation now.
	Early on, they were somewhat reluctant.
	They were reticent with information, but they're working closely with us now.
	I don't think that there's any choice now.
	We've got to get to the bottom of this.
	So I would tell them, let's go ahead and expose all this as deep as it goes, as big as it goes.
	Let the chips fall where they may, and then we'll kind of have to The first thing we have to do is figure out if there's going to be prosecutions and who and what the crime is.
	And then I think we've all got to get together and decide we can never let this happen again.
	We are the safeguards of the taxpayer money and they expect more from us in government.
	This is a failure of government to protect the taxpayer money and it's a breach of trust.
	There's just no way around it.
	And so We've got to repair that and we've got to make sure we set up common sense, logical safeguards that prevents fraud.
	So these inmates that committed the fraud, what's going to happen to them?
	That's a great question.
	You know, one of the dilemmas we have as prosecutors is some of the people who are receiving these funds are people on death row.
	People that are serving life in prison for multiple murder, heinous crimes, murder of a child.
	What do we do?
	We could prosecute them for another crime of theft, but they're already doing life in prison.
	So in some ways, we're going to have to work through and figure out what the right and equitable thing to do in every individual case.
	But it's a great question.
	What happens to them?
	In many ways, I think that's kind of the perfect storm of why this happened the way it did.
	People that are already in prison, they don't fear any consequences for stealing.
	And so, you know, this is sort of a free crime in a sense.
	As I said, I'm not saying that I'm not going to prosecute.
	I am going to prosecute these cases, the ones in Riverside County anyway.
	But I don't expect, you know, lengthy prison terms from this.
	And many of the people that are doing this fraud are already serving lengthy prison terms for heinous crimes.
	So you're right.
	It's a big problem.
	It's a dilemma.
	And is there a chance for this money to get paid back?
	Are these prisoners?
	Has the money been spent?
	Is it there?
	I don't hold out much hope that we're going to see any of this money back.
	We, as the prosecutors, we will certainly prosecute those cases through the criminal justice system.
	But frankly, when the fraud is being committed by people who are already incarcerated, I just think that money is probably spent.
	I'll give you an example.
	One of the things that we are doing as part of our investigation is pulling phone records for people that are committing these frauds.
	As you may or may not know, or your viewers may not know, but whenever somebody's incarcerated, there are phones that they can use to call their family, friends, loved ones, whomever.
	But those calls are all recorded, and there's a notice that comes on that tells the inmate that their call is being recorded.
	So we're pulling those calls and listening to them.
	And what we're finding is that the inmates committing this fraud are quite brazen about it.
	Some are bragging, you know, I'm being paid by the state.
	I bought my mom a $400 watch.
	This is great.
	You know, tell him Friends how to do it.
	It's really easy.
	You just put your application in.
	Here's how you do it.
	And so, you know, there's confirmation of what we're seeing in terms of the cross-referencing.
	This is spreading or the information is spreading among inmates that there's free money to be had.
	So in terms of the size of this fraud, what do you think it will be?
	Sure.
	You know, when you look at the scope, you're asking me the scale, the scope of the fraud, it's stunning.
	You're talking about, you know, billions of dollars of taxpayer dollars that have been lost.
	I think, and I'm estimating here, I think it's going to be double-digit billions, 10, 11, 12 billion dollars of taxpayer funds that have been essentially stolen through fraud.
	This is a To my knowledge, it's the largest fraud in the history of California.
	I think it dwarfs anything that we've seen before, and I think it's going to be devastating.
	And the people in this state should be demanding answers as to what happened, how this happened, and then most importantly, how are we going to know that it's never going to happen again?
	Because I'm a prosecutor.
	Two or three years from now, I can go ahead and prosecute more of these cases.
	But this should never happen again.
	It shouldn't be this easy to reach into the Treasury and steal the taxpayers' money.
	That's what happened.
	So the money that was going out of state, was this people applying from out of state or were people sending the money out of state?
	I think both.
	But I think there are people that applied out of state.
	How would that...
	It's just...
	It's unbelievable.
	Yeah, this whole thing is somewhat unbelievable.
	And, you know, as we began to look into it, you know, we expected to find some fraud, but we never imagined the scope of this fraud and just happening right in front of everybody and quite brazen, as I've said.
	So it's disconcerting and, you know, it's...
	What a year it's been.
	And sort of, you know, just when you think the bad news is going to end, then you get hit with this.
	And we've got to pick ourselves up here in California and do a better job for the citizens of the state.
	One more question.
	Do you think this might be going on outside of the prisons as well?
	I do.
	I think that the gangs are involved.
	As you know, the California prisons are really run and dominated by a series of criminal organizations known as prison gangs, and they really control a lot of the illegal I think this is yet to be fully investigated.
	We're getting to the bottom of it.
	But I think we're going to find out that they at least had a hand to play.
	And I wonder if some of this money is not going to end up in the hands of local gangs buying guns.
	Buying drugs.
	And that's my fear.
	And I think that that's what we're going to find.
	That we, the taxpayers, have paid for the guns and the drugs that are fueling our crime on our streets.
	Do you have any other remarks for our audience?
	No, I just think that, you know, what I would say is this is a huge failure in this state.
	You know, we're at the point right now where we just don't know how big it's going to be.
	We're just going to go through it.
	And I really hope that there is, and I haven't seen it.
	I think the California state government at this point is focused on this and they're cooperating.
	And I just hope that continues because we have to just get to the bottom of it, no matter how big it is.
	Thank you.

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