SACRAMENTO, Calif. — San Quentin inmate Scott Peterson, convicted of killing his wife and unborn son, received 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 did convicted serial killer Cary Stayner, who murdered two women and two girls near Yosemite in 1999 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.

The DAs called the situation “the most significant fraud on taxpayer funds in California history,” according to a letter obtained by the Los Angeles Times, describing fraud that involves identity theft of prisoners as well as alleged scams 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.


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.

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 38 prisons, according to Sacramento County Dist. Atty. Anne Marie Schubert, who helped organize and lead a task force that uncovered the alleged dupery. In total, payments to those ineligible due to incarceration in prisons and jails could total nearly $1 billion, the prosecutors claim.

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

Kern County District Attorney Cynthia Zimmer, whose district 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.”

Newsom on Tuesday announced a task force to tackle the problem.


“Unemployment fraud across local jails and state and federal prisons is absolutely unacceptable,” the governor said in a statement. “Earlier this year, I launched a strike team to expedite unemployment payments and to minimize abuse of the system. When we saw evidence of fraud in correctional facilities, I directed the Employment Development Department to review its practices and to take immediate actions to prevent fraud and to hold people accountable when fraud is not prevented.”

EDD officials said confidentiality rules prevented them from confirming that benefits had been paid to Peterson, Stayner and Aguirre.

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 different counties than where their payments are sent — prosecutors said individual counties couldn’t handle the burden of investigations, especially rural counties, including Lassen and Amador, where prisons are large and the district attorneys’ offices are small.

Federal prosecutors have helped piece together the scope of the problem, and district attorneys now are asking for Newsom to intervene because state unemployment authorities have failed to respond sufficiently.


“EDD, it’s just a dysfunctional mess,” said El Dorado County Dist. Atty. Vern Pierson, who is also involved in the task force and is president of the California District Attorneys Association. Pierson said he and other DAs had been told that EDD had 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 County and San Mateo County 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.

Riverside District Attorney Mike Hestrin said the scheme works typically by someone on the outside doing the paperwork. The payments typically 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 goods and services such as food items 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 District Attorney Stephen Wagstaffe, who is not a member of the task force but whose investigators uncovered such fraud months ago, said he also believed the problem was “dramatically wide.” Wagstaffe said charges had been filed against 21 people in his jurisdiction for applying for benefits while incarcerated or helping an inmate to do so — all 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.


“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 was a national problem, and that 10 U.S. assistant district attorneys have been hired in recent months specifically to investigate it, including one in California.

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 give them 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 have 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 says prosecutors are asking for the California Department of Corrections and Rehabilitation, which has been helping with the investigations, to share 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.

“With the world of technology we have today, it would not be that difficult to investigate some of these claims before they issue the cards,” said Fresno County Dist. Atty. Lisa Smittcamp. “They are not communicating to stop the bleed.”


Her office has found about 860 questionable claims from inmates at Pleasant Valley State Prison, amounting to about $3.6 million in funds.

Newsom said EDD and CDCR are working to match social security numbers of those in state custody to identify the scope of the problem, based on his directive.

“To expedite and strengthen these efforts I have directed the Office of Emergency Services to stand up a task force to coordinate state efforts and support investigations by local District Attorneys,” Newsom said. “We will continue to fully partner with law enforcement and direct as many resources as needed to investigate and resolve this issue speedily. While we have made improvements, we need to do more. Everything the state does will be done in partnership with the local district attorneys and I thank them for their commitment to resolving this issue as quickly as possible.”

EDD officials confirmed they are attempting to weed out claims from incarcerated people who are ineligible.

“EDD has been working with the assistance of the DOL OIG on cross-matches with inmate populations to identify suspect claims,” said Loree Levy, a spokeswoman for the agency. “We’re also pursuing how to integrate such cross-matches moving forward as part of enhanced prevention efforts during this unprecedented time of pandemic-related unemployment fraud across the country.”

State legislators have been raising alarms for months about suspected fraud in the massive unemployment benefits program, which has paid out an unprecedented $110 billion on 9 million claims in the eight months since the COVID-19 pandemic began in March.


Stay-at-home orders issued by state health officials and aimed at reducing the spread of the coronavirus forced the closure of much of the economy, putting millions out of work.

Just last month, the state Employment Development Department said that 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.

Democratic state Assemblyman Jim Cooper of Elk Grove, a retired sheriff’s captain, estimated last month at a legislative hearing that unemployment fraud was “conservatively in the hundreds of millions if not a billion dollars.”

EDD Director Sharon Hilliard told legislators recently that the agency had been working with federal authorities to identify and stop fraud schemes, some of which appear to be international in scope.

“EDD investigators are busy working with national, state, and local partners to expose, identify, and prosecute offenders to the fullest extent of the law,” the agency said in a statement last month.

It cited dozens of cases, including more than 100 people arrested by the Beverly Hills Police Department in recent months during an investigation that confiscated 200 EDD-issued debit cards potentially worth up to $4 million in benefits.


EDD officials said they had been actively participating in the investigations and took the problem seriously.

“The EDD is dedicated to investigating suspicious activity, and we work with our local, state and federal law enforcement partners in order to protect the unemployment insurance program for California’s workers in need,” said Loree Levy, an agency spokeswoman, when the San Mateo scam was discovered.

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.

State lawmakers have complained that the EDD has not stopped fraud even as the agency has also failed to make timely payments to hundreds of thousands of Californians who have legitimate claims for unemployment benefits.

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

The fraud problems identified by the prosecutors have angered state lawmakers who have been pressing for months for the EDD to get a handle on stopping bogus claims.


“The ineptitude at EDD knows no bounds,” said Assemblywoman Cottie Petrie-Norris, a Laguna Beach Democrat and 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. EDD must stop squandering taxpayer dollars and immediately implement these simple, common-sense fraud prevention steps. Anything less is a total dereliction of responsibility.”

The multiple problems at EDD convinced Newsom in July to appoint a strike team of technology and government operations experts, who issued a report in September calling for an overhaul of the state agency.

The strike team found that the EDD needed to change an internal culture that delayed approval of legitimate claims based on fears of fraud. Agency officials said at the time they believed fraud was involved in tens of thousands of claims from people who had not responded to identity verification requests.

But as claims languish and the pandemic continues to wreak havoc with the economy, prosecutors said they were frustrated by the current situation.

“There are so many unemployed people in this state, people losing their homes, they’ve lost their livelihoods, and yet to find out there are criminals taking advantaged of this situation, it’s just so bad,” said Pierson. “There are ways to prevent this.”


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