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Speaker 1: On this episode of News World. This is part two

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Speaker 1: of our investigation into the amazing thirty one billion dollars

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Speaker 1: on employment fraud in the EDD department in California. As

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Speaker 1: I looked more closely at the estimated thirty one billion

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Speaker 1: dollars stolen from California's EDD system, I was told that

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Speaker 1: unlike Washington State, where the Nigerian cyber criminals took the

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Speaker 1: bulk of the money, in California it was a wide

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Speaker 1: range of different kinds of criminals who took the money.

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Speaker 1: I was shocked to learn there was a whole network

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Speaker 1: of criminals in prison, not just in California, but across

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Speaker 1: the country who stole much of the thirty one billion.

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Speaker 1: I want to turn to somebody who has been studying

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Speaker 1: this issue of EDD theft by prisoners and better understand

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Speaker 1: how a fraud or this huge proportion could have happened.

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Speaker 1: And I'm really pleased to introduce my guest who's been

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Speaker 1: one of great courageous pioneers and taking on what maybe

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Speaker 1: the largest act of theft and American history. And Marie

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Speaker 1: Schubert currently serves as the District Attorney for Sacramento County, California,

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Speaker 1: a Marie, thank you for joining me, and I want

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Speaker 1: to start by saying, how did this first come to

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Speaker 1: your attention? Well, good morning, speaker, thank you for having me.

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Speaker 1: It first came to my attention through a series of

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Speaker 1: emails from other DA's across California asking a group of US,

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Speaker 1: hey is anybody seeing fraud in the prisons? And a

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Speaker 1: district attorney up in northern California who has a few

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Speaker 1: prisons saying, hey, I'm seeing some fraud. Is anybody else

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Speaker 1: seeing this? And then an inquiry started going out, and

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Speaker 1: then we heard that another district attorney had charged some

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Speaker 1: local jail inmates with fraud. And then I started trying

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Speaker 1: to push any issue with McGregor Scott, who's our US attorney.

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Speaker 1: He represents the federal system for many counties. And that's when, really,

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Speaker 1: as I say, at the tsunami started to be recognized

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Speaker 1: of what we were about to see. Did it shock

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Speaker 1: you both the scale and the degree to which the

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Speaker 1: prisoners while in jail were being successful of stealing. I

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Speaker 1: think it was absolutely staggering when we really started to

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Speaker 1: dive into it. And then we started getting the list,

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Speaker 1: and you know, we had waited for a period of

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Speaker 1: time to get a list in return to a search

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Speaker 1: warrant that was served on the Department of Labor, and

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Speaker 1: then when we realized there was thirty five thousand claims

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Speaker 1: just for the state prison population. Once we got the list,

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Speaker 1: I spent the weekend going through that list, and I

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Speaker 1: immediately started to look to see what types of people

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Speaker 1: are we talking about here, and I focused in on, oh,

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Speaker 1: my goodness, they're better not be people on death row here,

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Speaker 1: And in fact there were people, and many of them. Obviously,

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Speaker 1: the death row population is the worst or the worst,

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Speaker 1: but then when you started to look at the data,

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Speaker 1: the magnitude was so over whelming, and really the brazenness

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Speaker 1: of it was really despicable. To see how easy it

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Speaker 1: was really shocked the conscience. I'm not sure we're ever

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Speaker 1: going to know the amount, but it's going to be

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Speaker 1: billions and billions of dollars that has been ripped off

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Speaker 1: from the state of California. Walk me through this for

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Speaker 1: a second. Now, I'm sitting there on death row and

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Speaker 1: any side I want to steal some money. How do

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Speaker 1: I do that? There's a couple of ways they do it,

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Speaker 1: but I mean, unfortunately, in our prison system, inmates get

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Speaker 1: their hands on contraband cell phones. It's a big problem.

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Speaker 1: The Corrections Department does a lot to try to stop it.

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Speaker 1: They can either use what they call a wall phone.

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Speaker 1: They have access to phones to call friends and families

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Speaker 1: from the prison. They either use that or they use

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Speaker 1: a contraband cell phone. And then what they were doing

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Speaker 1: is they give their information so it's a security number, name,

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Speaker 1: all that stuff to people on the outside, and those

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Speaker 1: people on the outside file their claims. And because this

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Speaker 1: system was so inept and poorly managed, and the fact

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Speaker 1: that people could backdate those claims, they had to just

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Speaker 1: file these claims, and they just file the claims said,

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Speaker 1: oh yeah, I was working as of March twentieth, twenty twenty.

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Speaker 1: And so then they would just have drop addresses as

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Speaker 1: we call them, so that many of them were fake

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Speaker 1: addresses po boxes. There was really no oversight into making

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Speaker 1: sure that these claims were legitimate. And so you've got hundreds,

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Speaker 1: if not thousands of claims being sent to one, as

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Speaker 1: I call them, a drop address, an address that was

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Speaker 1: just designed to be a place where they could have

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Speaker 1: all these debit cards sent. So there's lots of ways

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Speaker 1: that they're committing it. You know, they would ask their salemates,

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Speaker 1: or they'd ask their other cohorts in prison, Hey, give

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Speaker 1: me your information, we'll get some money. And then the

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Speaker 1: oftentimes the endmates were conceivably getting what we call kickback,

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Speaker 1: so money put on their books, packages sent to them

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Speaker 1: to the prisons through Amazon, lots of ways. They were

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Speaker 1: getting chunks of this money, but the large amount of

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Speaker 1: money was going to people on the outside. Were those

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Speaker 1: people just rollatives or are they part of an organized

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Speaker 1: crime system. I think there's both. Some people call them

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Speaker 1: like one offs, meaning that you know, one person says

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Speaker 1: I'm going to get lucky here until my girlfriend does

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Speaker 1: the claim for me. I think there's a significant amount

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Speaker 1: that's being organized by prison gangs. And we know this

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Speaker 1: from what's happening on the streets of California that there's

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Speaker 1: a link between all of this fraud and the massive

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Speaker 1: gun violence that's occurring in our communities across California. I mean,

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Speaker 1: you're getting a very large increase in the number of

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Speaker 1: shootings and murders, aren't you. Yeah, you know, unfortunately, really

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Speaker 1: across the country, particularly in major urban cities, there's a

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Speaker 1: significant rise in gun violence, and that's particularly true in California.

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Speaker 1: What we're seeing on the streets now is that when

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Speaker 1: people are getting arrested for violence, gun violence, drug crimes,

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Speaker 1: there also happens to be edd evidence in their possession

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Speaker 1: as well. Unfortunately, in my opinion, this fraud has funneled

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Speaker 1: the funds that they need to buy these guns and

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Speaker 1: to perpetuate crime in our communities. There are three examples

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Speaker 1: that I find amazing. One is, isn't there one place

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Speaker 1: in California the gud L seventeen hundred checks at the

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Speaker 1: same address. Yes. So the state auditor came out with

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Speaker 1: a report a couple of weeks ago that was just

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Speaker 1: blistering on how failed the system has been in terms

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Speaker 1: of detecting it. And this has been going on for

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Speaker 1: so long, and I honestly think if the DAS hadn't

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Speaker 1: kind of blown this up, we'd be sitting in the

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Speaker 1: same position today of fraud being perpetuated. But the state

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Speaker 1: auditor found that there was seventeen hundred claims that went

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Speaker 1: to one address, and it's just shocking, and it's probably

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Speaker 1: millions of dollars without any oversight that went just to

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Speaker 1: one address. And we know from the state audit that

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Speaker 1: fraud was suspected of probably half a million claims being

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Speaker 1: sent to twenty six thousand. Addresses the very fact that

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Speaker 1: the system was so incapable of self correction that will

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Speaker 1: send off seventeen hundred checks to the same address and

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Speaker 1: not noticed that that was probably not very smart. Tells

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Speaker 1: you something about how bureaucratically incompetent the system is. Yes,

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Speaker 1: I mean EDD has known for years. They actually had

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Speaker 1: a system in place to do this cross matching, and

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Speaker 1: that was through a federal grant that I think that

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Speaker 1: grant was in twenty thirteen, but then they chose to

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Speaker 1: shut it off in twenty sixteen because they didn't want

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Speaker 1: to have to pay the two million apparently, and now

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Speaker 1: we're sitting here with potentially thirty billion in loss. So

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Speaker 1: what are you saying? So the system was costing two

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Speaker 1: million a year. So in twenty thirteen, I believe it was,

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Speaker 1: EDD got a grant through a company that's now owned

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Speaker 1: by Thompson Writers, but company was called Pondera at the time,

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Speaker 1: and they got a grant to do this fraud detection work.

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Speaker 1: And then the grant ran out, which was typical, but

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Speaker 1: the EDD chose not to continue any kind of fraud

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Speaker 1: detection system at that time. So even though they knew,

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Speaker 1: I mean, they did legislative reports telling them we need

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Speaker 1: to get a cross match, we need to do this.

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Speaker 1: So in twenty eighteen they had a report to the

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Speaker 1: legislature saying, oh, yeah, we need to do a cross match.

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Speaker 1: Twenty nineteen, they had the same report. June of twenty twenty,

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Speaker 1: even after the pandemics started, they issued a report to

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Speaker 1: the legislature again saying we need to do a cross match.

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Speaker 1: And so they didn't do it. And then when it

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Speaker 1: all blew up in November, when we blew the whistle

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Speaker 1: on all of this, then they got the system in place.

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Speaker 1: Now there's still significant gaps in the system. Will say

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Speaker 1: they've made some significant improvements because of really what we've

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Speaker 1: now discovered. The other two examples were, if I remember correctly,

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Speaker 1: Diane Feinstein got an unemployment check. There was a report

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Speaker 1: to that. I think somebody was arrested by the US

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Speaker 1: Attorney's office that had filed the claim under her name.

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Speaker 1: I mean, that's the thing about it. You look at

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Speaker 1: the list, and like I mentioned at the press conference,

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Speaker 1: you know you got a claim in the name of

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Speaker 1: John Doe. You would think that was fairly obvious, wouldn't

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Speaker 1: you There was no system. It was just basically a

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Speaker 1: rubber stamping. I mean, somebody in my office made the comment,

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Speaker 1: it's almost like we just flew over the prisons and

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Speaker 1: dropped all the money, you know, the system that's stealing

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Speaker 1: literally billions and billions of dollars. And they had two

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Speaker 1: staff members who were reviewing claims manually. Well, the problem

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Speaker 1: was is they didn't have a fraud detection system like

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Speaker 1: thirty five other states did. And because they didn't have that,

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Speaker 1: they were just, like I said, rubber stamping the payment

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Speaker 1: of claims. And even if they suspected it, then they

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Speaker 1: only had two people that would then have to go

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Speaker 1: in and manually check these things. It was just a

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Speaker 1: poorly managed system. So and in that process you also had,

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Speaker 1: I understand it, people from prisons as far away as

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Speaker 1: Florida applying for California on em plumber. Yes, I mean,

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Speaker 1: when we started to realize that there were people sitting

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Speaker 1: in prison in Florida, I think for murder that they

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Speaker 1: were making claims to the California system. It's not just

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Speaker 1: bad enough that our own inmates are doing it, but

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Speaker 1: now the out of state inmates realized California is easy pickings,

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Speaker 1: and you know that gap has not yet been filled.

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Speaker 1: As far as I know, we don't have a system

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Speaker 1: that's going to say, let's make sure that the inmates

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Speaker 1: in other states are not fleecing the California taxiders as well.

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Speaker 1: The scale of this is really large. You had a

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Speaker 1: couple of comparative numbers in terms of how much bigger

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Speaker 1: this fraud is than some of the operating systems of

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Speaker 1: the California government. To say a number thirty billion, you

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Speaker 1: have to really put that into perspective, and so I

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Speaker 1: started to put into perspective. I said, Okay, let's just

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Speaker 1: compare it to our state budget. It's two times the

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Speaker 1: budget of the California Department of Corrections and Rehabilitations. Two times.

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Speaker 1: We have one hundred thousand people in prison that costs

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Speaker 1: whatever fifty thousand a year to house them. And then

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Speaker 1: you realize it's twice that. I mean, you can look

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Speaker 1: at the education budget, or you can look at transportation budget.

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Speaker 1: Sometimes I sarcastical, we say, maybe we could have fixed

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Speaker 1: the homeless problem with thirty billion dollars. I think you

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Speaker 1: said somewhere that's half of the entire K through twelve

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Speaker 1: education budget. Staggering is the best way to describe it

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Speaker 1: as staggering. We went out and check if you could

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Speaker 1: take the thirty billion, you could eliminate all taxes in

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Speaker 1: the five least expensive stage in the country that their

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Speaker 1: entire budgets collectively are less than thirty billion dollars. Yeah,

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Speaker 1: there's probably the countries in this world that don't have

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Speaker 1: budgets that high. That's right, So it's really amazing. Is

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Speaker 1: it now getting fixed? Well, there's definitely, you know, efforts

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Speaker 1: now to fix a lot of it. I mean, within

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Speaker 1: a very short period of time, EDD had the contract

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Speaker 1: now established to do the cross match With that said,

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Speaker 1: the state auditor has recognized that there's still some significant gaps.

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Speaker 1: You know, not all jails do cross matching, so that's

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Speaker 1: a big gap too. If I get arrested in a

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Speaker 1: certain counting California, I could still try to please the

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Speaker 1: citizens and the taxpayers. But I will say that I

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Speaker 1: think that there's obviously immense pressure to fix these issues,

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Speaker 1: but there's still a long way to go. The amount

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Speaker 1: of investigations and prosecutions that need to take place to

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Speaker 1: hold these people accountable is astronomical, and the amount of

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Speaker 1: money that's needed to do that is also astronomical because

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Speaker 1: we have to be able to investigate and prosecute them. Well,

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Speaker 1: there's a striking and slightly weird the given the scale

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Speaker 1: of theft from her department. The Jelish who's the head

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Speaker 1: of it, has actually been nominated by Biden for a

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Speaker 1: major job in the Department of Labor. I mean, talking

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Speaker 1: about being promoted upward through your failures. That's part of

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Speaker 1: what really surprised me is that the Biden administration both

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Speaker 1: taking Susie Levine out of Washington State, where it was

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Speaker 1: six hundred million dollars and mostly Nigerian cybercrime, and then

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Speaker 1: taking Julie Sue out of California, where there's thirty one

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Speaker 1: billion dollars. It trans me that the administration is a

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Speaker 1: little insensitive to the idea of taxpayers getting ripped off. Well,

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Speaker 1: I think, without getting into the politics of any of

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Speaker 1: these appointments, she's come out, I think, publicly and said, listen,

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Speaker 1: we can't sugarcoat the problem here. It is a massive

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Speaker 1: problem that's occurred here in California, and you know, we

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Speaker 1: have to be willing to acknowledge this if we're going

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Speaker 1: to go fix it. But it is a massive issue.

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Speaker 1: As much as some folks might want to blame the FED,

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Speaker 1: really the blame rest it's the State of California and

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Speaker 1: the EDD Department. But you cannot sugarcoat this, and you

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Speaker 1: cannot try to pivot, in my opinion, because this has

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Speaker 1: been known. It's been known for many years. They had

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Speaker 1: a system in place, and they chose to shut it

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Speaker 1: off because they didn't want to spend the money. That's

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Speaker 1: the bottom line was that system called me. Once the

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Speaker 1: pandemic hit and ED started having, you know, major issues

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Speaker 1: with backlogs and starting to see suspicious claims, Governor knewso

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Speaker 1: did this strike team seeing with some recommendations. You know, Unfortunately,

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Speaker 1: there was nobody on that strike team that is a

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Speaker 1: law enforcement that understands fraud. But one of the things

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Speaker 1: that ultimately came out of that was this implementation of

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Speaker 1: this thing called id ME. Before this program id ME

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Speaker 1: was started, you could just do a claim. You didn't

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Speaker 1: have to show proof of identification. So now when someone

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Speaker 1: files a claim, you have to at least show your

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Speaker 1: driver's license. I mean, I still think there's ways that

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Speaker 1: the crooks get around it. But it is a system

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Speaker 1: that will stop a lot of fraud. Doesn't Bank of

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Speaker 1: America play a major role in all this? Well, Bank

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Speaker 1: of America obviously has a contract with EBB and they

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Speaker 1: were the ones responsible for issuing the debit cards, and

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Speaker 1: so there's been a lot of history about freezing cards

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Speaker 1: on freezing cards, you know. The hard part is that

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Speaker 1: people need to not lose sight of the fact there

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Speaker 1: are innocent people out there that are entitled to benefits

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Speaker 1: that have lost their jobs because of the pandemic, and

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Speaker 1: they're the victims because they're not getting their funds but

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Speaker 1: they're entitled to. But then you also now have massive

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Speaker 1: amount of victims who have been the victims of identity theft,

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Speaker 1: who are now getting federal ten ninety nine forms saying

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Speaker 1: you got to pay taxes on the money you never got.

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Speaker 1: So there's a huge amount of people that have been

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Speaker 1: impacted as a result of all them. That would really

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Speaker 1: make you pretty irritated if you suddenly got a tax

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Speaker 1: bill for a check you'd never received and then found

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Speaker 1: out that actually the check had gone to a criminal. Absolutely,

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Speaker 1: I mean I'd be furious about it. And then find

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Speaker 1: out that these criminals are using that money to perpetuate

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Speaker 1: crime on the streets of California is even more of

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Speaker 1: a gut punch. To what extent of the district attorneys

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Speaker 1: who have been elected with sources help, To what extent

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Speaker 1: have they've been willing to go after this, And to

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Speaker 1: what extent do they just shrug it off. Quite frankly,

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Speaker 1: I'm not sure any of them have done anything. As

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Speaker 1: soon as we realize the magnitude of this, the dh

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Speaker 1: Association created a statewide task force on this. I'm the

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Speaker 1: chair of the task force. We've invited all elected das

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Speaker 1: to be participants to understand how it works, to how

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Speaker 1: to investigate it. I think you need to talk to

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Speaker 1: George Gascone or chess of o'dine from San Francisco and

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Speaker 1: ask them what they're doing, because I haven't seen anything yet. Listen,

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Speaker 1: We're never going to be able to prosecute all these people,

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Speaker 1: but there is a population of them that are very,

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Speaker 1: very violent criminals, that are members of gangs, that are

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Speaker 1: perpetuating guns, drugs, violence on the streets, perhaps human trafficking,

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Speaker 1: and those are the folks that every California should be

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Speaker 1: concerned about, no matter where you live, no matter your politics,

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Speaker 1: and you know, I am very confident that occurring in

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Speaker 1: Los Angeles County, it's occurring in San Francisco. We know

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Speaker 1: it's happening in every jurisdiction in our state, and we

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Speaker 1: can't just pretend like it didn't happen. I think very

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Speaker 1: few people realize how big the challenge is and how

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Speaker 1: much money is involved now. And we've been talking to

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Speaker 1: people at the Heritage Foundation of attracting this. They say

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Speaker 1: there are smaller but similar problems, and I think Maryland

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Speaker 1: and Illinois and Louisiana, so it's at least five states

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Speaker 1: to a significant amount of illegal claims and have paid

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Speaker 1: those substantial amounts of money. It all comes back to

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Speaker 1: the failure of our state to have this system in place.

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Speaker 1: We tout ourselves like California is the most technologically savvy

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Speaker 1: state in the country. We're the biggest state in the Union.

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Speaker 1: Yet thirty five other states, including very small states, have

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Speaker 1: this system in place, and we chose not to do it.

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Speaker 1: It's just a bitter pill to swallow. I gather there

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Speaker 1: are now plans to go ahead and implement a more

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Speaker 1: sophisticated system. DA's are working with the folks from the

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Speaker 1: Governors Office and Office Emergency Services to try to get

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Speaker 1: some systems in place to try, as I keep saying,

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Speaker 1: to slow the spicket down and stop the bleeding here.

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Speaker 1: So I definitely think we're on a good path. It's

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Speaker 1: not perfect yet, and there's still significant gaps. We can't

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Speaker 1: stop what happened in the past. We can only hopefully

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Speaker 1: prevent it in the future. At least. It's a serious

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Speaker 1: wake up call the need to have sophisticated systems because

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Speaker 1: you're now up against people who understand how to game

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Speaker 1: the system if there's no check on it. Yeah, it's

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Speaker 1: a very very expensive wake up call, is what it was.

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Speaker 1: I just keep saying this, it's not just about the

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Speaker 1: money that's been lost. It's the fact that we have

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Speaker 1: basically allowed taxpayer dollars to fund guns, gangs, drugs, and

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Speaker 1: whatever else type of crime on the streets of California. That's,

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Speaker 1: to me, is the most significant impact of this policing

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Speaker 1: of California money. Well, listen, thank you very much for

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Speaker 1: taking this kind of time, and I really am grateful

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Speaker 1: that you would help educate us on what's going on

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Speaker 1: in the largest state in the country, and I look

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Speaker 1: forward to seeing you sometime when I get a shift

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Speaker 1: to come to California. All right, Thank you, speaker, I

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Speaker 1: appreciate it very much. Thank you to my guest Anne

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Speaker 1: Marie Schubert. You can read more about the thirty one

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Speaker 1: billion dollars California add fraud on our show page at

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Speaker 1: newtsworld dot com. News World is produced by Ginger Sweet

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Speaker 1: sixty and Art Media. Our executive producer is Debbie Myers,

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Speaker 1: our producer is Garnsey Sloan, and our researcher is Rachel Peterson.

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Speaker 1: The artwork for the show was created by Steve Penny.

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Speaker 1: Special thanks to the team at Gingwich three sixty. If

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