Officials investigate massive unemployment fraud involving Monterey County Jail inmates.

It started with a phone call involving something that didn’t make a lot of sense: Over the summer, an inmate at the Monterey County Jail was recorded on a jail phone talking to someone on the outside about receiving unemployment benefits.

And given that jail and prison inmates don’t qualify for unemployment benefits, it raised more than a few questions.

Where those questions have led is a massive – and still ongoing – investigation into fraud involving hundreds and maybe thousands of county jail and prison inmates throughout the state whose names and social security numbers were used to obtain Employment Development Department benefits.

In all, officials estimate the total scope of the fraud statewide could reach more than $1 billion.

The tricky question investigators are now trying to untangle: Whether inmates had their identities stolen by people on the outside who then applied for and received the debit cards, or if inmates conspired with individuals or groups on the outside to pull off the massive scam and profited from it as well.

At the Monterey County Jail, District Attorney Jeannine Pacioni says it’s a combination of both. In one instance, multiple benefit cards bearing the names of different inmates were sent to a single address. In another instance, one inmate’s name and identification was used to apply for unemployment benefits in seven other states.

“And we also have two state prisons in the county, and a significant number of prisoners at those prisons have submitted false claims, or have had claims submitted by others under their names,” Pacioni says. “Whether they had their identities stolen or are cooperating with someone, we have to do an investigation because they’re not entitled to the money.”

Monterey County Sheriff’s Office Investigation’s Cmdr. Kathy Palazzolo says the phone call that triggered the investigation involved an unrelated case and a separate law enforcement agency listening in. When they heard the conversation, they reached out to the Sheriff’s Office.

Asked if she considers the widespread scheme a sophisticated one, and Palazzolo says, “It was so easy it was appalling.

“There’s a rap song on YouTube that describes defrauding the EDD,” she says. “But this is not just going on at the jail. This is going to be widespread throughout the county.”

Arrests have already happened related to EDD fraud and inmates in other jurisdictions. At the San Mateo County Jail, for example, inmates have access to the internet and iPads and were, in some cases, able to apply for the benefits directly; the District Attorney there has charged 21 people, the majority of whom are inmates. A number of high-profile inmates, including Scott Peterson, who was convicted in the 2002 murders of his wife and unborn son, had benefits issued in their names.

According to the California Department of Rehabilitation and Corrections, early numbers show prisoners – or someone using their names – filed 35,003 claims, resulting in payouts of $140 million.

Locally, a team that includes Deputy District Attorney Steve Somers, a District Attorney investigator, six investigative aides and a forensic accountant are examining 72 jail inmates whose names were used to obtain benefits. They’ve been assisted by Salinas and Monterey police, as well as CSU Monterey Bay police.

“We sent out a list of social security numbers of inmates who have been in jail since the [Covid-19] outbreak, and we originally couldn’t get any help from EDD because they’re so overwhelmed,” Somers says. “We then went to the U.S. Department of Labor and they accessed the databases they have and were able to see a lot of the social security numbers we had were hitting.

“Obviously there’s balance to be found, and it seems EDD was on the wrong side of the balance, but it’s 2020,” Somers says. “If they had been more careful and the economy collapsed, we might be saying they should have gotten money out faster.”