State lawmakers from both sides of the legislative aisle demanded on Wednesday that the Legislature conduct hearings to probe the disgraced Employment Development Department, which has been jolted by revelations of unemployment claims being filed on behalf of state prison convicts.

California investigators have identified at least $400 million paid on an estimated 21,000 unemployment benefit claims that were filed on behalf of state prison convicts, according to state Sen. Jim Nielsen, a Republican whose district includes parts of Tehama County, Butte County, Glenn County, Sutter County, and Placer County.

“The EDD fraud related to the payments to prisoners is particularly egregious,” Sen. Nielsen said Wednesday in an interview with this news organization. “It is another sign of the incompetence of state government. It comes on the governor’s watch.”

Nielsen wants the next set of legislative hearings to focus specifically on the prison fraud problems at the EDD.

State Assemblymember David Chiu, a Democrat who represents portions of San Francisco, also demanded on Wednesday state legislative hearings to look into wide-ranging blunders caused by the EDD.

“Our offices have to jump through hoops to get our constituents the benefits they need, and yet, EDD is sending debit cards to state prisons without question,” Assemblymember Chiu said in comments emailed to this news organization. “That doesn’t add up.”

Gov. Gavin Newsom says he has announced a task force to look into the situation. Sen. Nielsen said that’s inadequate.

“We need to get in there and review the entire workings of the EDD,” Sen. Nielsen said. “Task forces are not effective. If you want another state task force, you need a strike team of accomplished and seasoned investigators who will go in there, almost FBI style, and find out how this all happened, and then report back to the Legislature.”

This news organization requested a comment from Gov. Newsom’s office on Tuesday and on Wednesday regarding the EDD’s latest difficulties.

Assemblymember Chiu is seeking EDD hearings that go beyond the prison fraud scandal. These include Bank of America’s debit card system that is used to deliver EDD-authorized payments to unemployment beneficiaries.

“We would also like to see hearings on issues with Bank of America freezing accounts, social security numbers on EDD mail, and other ongoing issues at EDD,” Assemblymember Chiu’s office stated.

In November, the state auditor revealed that the EDD put millions of workers in jeopardy of identity theft because the labor agency mailed letters to people containing their full social security numbers, the state auditor reported Thursday.

The disclosure served up a fresh embarrassment for the embattled agency that has failed to promptly and accurately pay unemployment claims at a time of historic job losses amid coronavirus-linked business shutdowns.

“EDD has sent at least 38 million pieces of mail containing claimants’ full Social Security numbers since the start of the COVID-19 pandemic,” the state Auditor said Nov. 19 as part of a scathing report regarding the EDD’s performance.

The results of that could be catastrophic, California Auditor Elaine Howle warned in a report to the state Legislature and Gov. Gavin Newsom.

Despite the grim landscape littered by EDD failures, the prison fraud issue particularly rankled Sen. Nielsen.

Among the intended recipients of unemployment benefits: Scott Peterson, convicted of the 2002 murders in Modesto of his wife Laci Peterson and the Petersons’ unborn son Conner; and Cary Stayner, a serial killer convicted of the murders of four women in 1999 near Yosemite National Park.

“The prison fraud is probably the most egregious of the many legendary failures of the EDD,” Sen. Nielsen said. “The EDD has failed to pay hundreds of thousands of Californians. Then they get it rubbed in their faces that $400 million that could have been paid to them legitimately instead was directed to state prison inmates.”


By Kelley Wheeler

Kelley Wheeler is a Metro reporter covering political issues and general assignments. A second-generation journalist, worked with all major news outlet, she holds a vast expeirience. Kelley is a graduate of USC with degrees in journalism and English literature. She is a recipient of Yale’s Poynter Fellowship in Journalism.

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