Advocates Fear Efforts to Thwart Unemployment Fraud in California Could Hurt the Formerly Incarcerated

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Efforts to tamp down on fraud at the agency could unintentionally penalize formerly incarcerated people, advocates say. (Google Maps)

The way Katie Dixon sees it, the incarcerated population is “low hanging fruit,” and have gotten caught up in lawmakers’ recent efforts to combat unemployment fraud.

“It's easy to go after folks that has already been identified as a criminal or something like that,” said Dixon, who was formerly incarcerated and is now a community organizer with the nonprofit Legal Aid at Work.

Dixon is specifically referring to two pieces of legislation currently advancing through committees in the California Legislature that each aim to tamp down on unemployment fraud involving incarcerated people. Those scams have bilked the state out of at least $810 million, according to a state Employment Development Department (EDD) estimate. Other outside estimates put that figure even higher.

The main thrust of the bills would be to establish a cross-matching system between EDD and the California Department of Corrections and Rehabilitation to ensure people currently incarcerated in state prisons don’t receive unemployment benefits. Unlike at least 35 other states, California doesn’t use a cross-matching system, and district attorneys across the state, as well as the California state auditor, have both pointed to the absence of that safeguard as a big reason why it’s been so easy to dupe the system.

But Dixon and other advocates say the current proposals could end up penalizing vulnerable people, both with and without criminal records.

How We Got Here

Around Thanksgiving last year, DAs from across the state announced that over 30,000 fake unemployment claims had been filed in the names of people incarcerated in California. Sometimes the scammers used real names and Social Security numbers. Sometimes they made up identities.

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“In one case, someone had the audacity to put their name as ‘Poopy Britches,’ ” said Sacramento County District Attorney Anne Marie Schubert, who is now running for state attorney general.

The roughly $810 million in fake claims linked to incarcerated people is part of the at least $11 billion in fraud that EDD confirmed earlier this year — a figure that some fear could as much as triple once the agency finishes reviewing all the claims it has flagged as suspicious (although EDD has recently confirmed there have been fewer cases of fraud than expected).

And while advocates acknowledge there are clear cases of fraud coming out of state prisons, they emphasize it’s uncertain how many people in those facilities were active participants in scams as opposed to those whose identities were stolen and used by scammers.

Proposed Fixes

The two primary bills in question are Senate Bill 39 from state Sen. Shannon Grove, R-Bakersfield, and Assembly Bill 110 from Assemblymember Cottie Petrie-Norris, D-Laguna Beach. Both would require CDCR to provide EDD with the names and Social Security numbers of its currently incarcerated population.

Both bills also would only require CDCR to share state prison roll data, not that of county jail rosters.

“Sometimes folks who are in county jails actually are still eligible for unemployment insurance in certain circumstances,” said Petrie-Norris, who amended her bill to exclude jail rosters. “And so we wanted to make sure ... that we don't get them caught in the crosshairs of this well-intentioned bill.”

Both bills would also place limits on how often CDCR data should be refreshed. AB 110 requires CDCR to send new data to EDD on the first of every month, while SB 39 specifies that it can’t be more than three months old so that, "it's all current inmates and only current inmates,” said Grove.

Both bills received unanimous support in lower committees last week.

If Most Other States Are Doing This, Why Not California?

Even with the time-limit requirements in the bills, advocates worry that EDD could be relying on flawed data, to the detriment of formerly incarcerated people.

Attorney Stacy Villalobos, who works with Dixon at Legal Aid at Work, said California’s criminal justice system has a documented history of poor record keeping.

"Some of these other states who are cross-matching right now have better systems, frankly, than California does,” she said.

Villalobos points to a 2019 report from the Stanford Criminal Justice Center that found gaps in data at the California Department of Justice.

“Up to 60% of its arrest records were missing dispositions, which means that people could have been arrested for something and then the charges were dropped,” she said. “But that information isn't in the system. We don't know what happened with those arrests.”

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Because of this, Legal Aid at Work fears that EDD could be flagging people — and preventing them from receiving unemployment checks — based on incomplete information.

“We just don't believe that CDCR is capable of disseminating accurate information to anyone, let alone someone outside of their already complicated landscape,” Dixon added.

The Legislature has acknowledged these gaps in the recent past, including with a 2019 bill from Rob Bonta, the former assemblymember and recently confirmed state attorney general. And Petrie-Norris says she intends to continue efforts to ensure data integrity across state agencies through her role as chair of the Assembly's Committee on Accountability and Administrative Review.

For her part, Grove said she thinks her bill's 90-day requirement will be an effective triage tool.

Furthering Inequities

Both Legal Aid at Work and the National Employment Law Project have expressed concerns that both bills will increase preexisting equity gaps.

In an open letter to Grove opposing SB 39, Legal Aid at Work wrote that the bill could keep legitimate applicants from their benefits “and lead to wrongful denial of a critical safety net resource to formerly incarcerated individuals — who already face particular difficulties getting back into the labor market because of the stigma attached to their convictions.”

Incarcerated people are more vulnerable to identity fraud, advocates argue. And while Petrie-Norris doesn’t disagree, she says her bill will help incarcerated people who have been victims of identity theft by catching fake claims before they’re paid out.

“That creates a huge, huge nightmare that is so difficult for people to dig themselves out of," she said. “So that's an important facet of this bill as well.”

Other Options

Advocates recommend narrowing the focus of the cross-match scans as an immediate step that could help begin to address their concerns about the risks of inaccuracies in state criminal databases.

The cross-matching review should be confined to applicants of the Pandemic Unemployment Assistance (PUA) program, Villalobos said, where 95% of fraud cases came from during the pandemic, according to EDD. That way, recipients of regular unemployment insurance won’t be subject to any accidental snagging caused by issues like incomplete or inaccurate arrest data that might result from a blanket review.

"When we're expanding the scope of the cross-matching to beyond where the issue is, then we're going to have a lot more wrongful denial,” Villalobos said.

Grove acknowledges that her bill would require a broad review, but points out that regular unemployment insurance is not immune to fraud either, and that the state is already facing a fraud bill in the tens of billions of dollars.

“That number is going to be ... paid back by small businesses that have been shut down over the last year and haven't been able to have revenue,” Grove said.

But while Dixon and Villalobos both agree that striving to prevent fraud is an important goal, they think the two bills on the table feel like they’re scapegoating the formerly incarcerated.

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“We’re lifelong offenders now, you know what I’m saying, that’s how we’re seen,” Dixon said.