Jailhouse call uncovers unemployment aid scam

It was the first break in what turned out to be the biggest jailhouse scam in California history. It involved millions of dollars in fraudulent unemployment payments to prisoners and their co-conspirators on the outside. And it happened quite by accident at the San Mateo County Jail.

“It was just before July 4. I was listening to a recording of a call made by prisoner I had been monitoring. About an hour into the call they started talking about this scam,” said Inspector Jordan Boyd, a nine-year veteran of the San Mateo County District Attorney’s Office.

As with all county jails, calls in and out of the San Mateo County lockup in Redwood City are monitored and recorded. The inmate whose call was being monitored this time was facing an armed robbery charge and had a history of directing outside crimes while in custody, Boyd said.

At the time, the state’s Employment Development Department was being swamped with millions of unemployment claims from people put out of work by the coronavirus pandemic.

“He was talking with an associate on the outside,” Boyd said. “The guy was talking about how everyone was getting rich by submitting false unemployment claims and how easy it was to do.”

A couple of minutes later, another caller on the outside came on the line and offered to submit an unemployment claim for the inmate in return for a cut of the state-issued benefits.

That’s when the red light started flashing in Boyd’s mind.

“I thought, ‘This is only the beginning. If people on the outside are working this scam, it’s only a matter of time before inmates start devising their own schemes,’ ” he said.

And that’s just what happened.

The San Mateo inmate contacted a friend doing life for murder at the California State Prison at Corcoran (Kings County).

“The Corcoran inmate had a contraband cell phone,” Boyd said. “They would do three-way calls between the inmate here, a person on the outside and the Corcoran inmate with the cell phone. They would exchange inmate personal information and personal information on people on the outside with the Corcoran inmate via Instagram,” Boyd said.

The Corcoran inmate would then use his smuggled cell phone to file false claims online with the state Employment Development Department.

Boyd tipped state prison officials to the scheme. A search of the Corcoran inmate’s cell found a dozen pieces of lined paper filled with names, addresses, driver’s license numbers and other personal information on various people.

“It was spreading like the virus itself,” Boyd said.

Prison authorities also found the inmate’s contraband cell phone. It was the third illegal phone prison officials had taken off the inmate that year, Boyd said.

The San Mateo District Attorney’s Office opened an investigation that led to fraud charges against 11 county inmates, two state prisoners and eight friends or family members on the outside.

Most of the claims in the San Mateo case were backdated to March 1, 2020. EDD would mail out a Bank of America debit card preloaded with 39 weeks ($17,500) of back unemployment insurance benefits.

The crook submitting the application would then get notified that a BofA account had been opened in his name. He would establish a PIN number and communicate that back to whomever the card was being mailed to so he could begin the withdrawals of $1,000 per day once the card arrived.

As the scam spread throughout the prisons, even the names of Death Row inmates were used to file claims.

The prison schemes were part of several fraud schemes that state officials estimate cost the state $4 billion in unemployment benefit losses.

In an email, EDD spokeswoman Aubrey Henry estimated that $3.5 million of the claims filed during the pandemic have been “deemed potentially fraudulent.” Approximately $1.9 million of the suspect claims have been disqualified. EDD suspended payments for an additional $1.4 million claims Wednesday.

The people whose names are attached to the suspended claims — both real and fake — are being notified about what information will be needed from them to verify identity or eligibility for payments to resume. If no official response is received, the claim will be canceled, Henry said.

Henry said the department has also “applied additional fraud detection screening to existing claims.”

San Mateo County District Attorney Steve Wagstaffe said his talks with other district attorneys showed that “this criminal fraud has occurred in almost every state prison and county jail in California.

“That is a horrible fallout of the pandemic,” Wagstaffe said.

For investigative veteran Boyd, one of the most stunning parts of the story is the brazen attitude of the inmates.

“These guys knew they were likely being recorded,” he said. “The guy in Corcoran even talked about how they might be recorded. And they still talked about what a great scam it was.”

San Francisco Chronicle columnist Phil Matier appears Sundays and Wednesdays. Matier can be seen on the KGO-TV morning and evening news and can also be heard on KCBS radio Monday through Friday at 7:50 a.m. and 5:50 p.m. Got a tip? Call 415-777-8815, or email pmatier@sfchronicle.com. Twitter: @philmatier