12-17-25 - 10am - California COVID Money Fraud

Episode Transcript

Speaker 1 (00:01):
Michael Castration is not sniff sniff a slice eleven.

Speaker 2 (00:06):
Cut Mike, My, what big cabals you talk about.

Speaker 3 (00:15):
We've unleashed the crazy today and and then I am
going to move on, but I just can't resist Guber
number ninety five sixty seven, Michael, what did it kill
you to maintain a little Christmas spirit while you talked
about the big win coming and then a little you know,
little music notes and then all caps you can even

(00:36):
say it blows.

Speaker 2 (00:43):
It's a Friday. Sure feels like that right now.

Speaker 3 (00:47):
But today I wow, wow, Okay, let's get to the uh.
Maybe Bill don't care about this. I care about it,
so you have to care about it. At the start
of the COVID pandemic back in twenty twenty, just stick
with me here for a moment, California had more than

(01:10):
one hundred and twenty thousand prisoners incarcerated in state imprisons
throughout the state. When in response to the COVID triggered
shutdowns and the layoffs, that's when the federal government started
pumping just massive amounts of money into the state unemployment
conversation programs. So the administration of California Governor Gavin Newsom said, Hey,

(01:36):
there's all this money coming in, and well, i'll tell
you what he said in a minute. But because somebody
that's not using the appropriate text line said something you know,
once you just took to something you talk about, let
me tell you I know about this. So when the
COVID shutdowns started, one of my former employees, who works

(01:57):
for one of the big consulting firms, reached out to
me and wanted to know if I wanted to join
a team that they were putting together to help places
major cities, Denver, Los Angeles, Chicago, they're setting Boston was
on their list, maybe Miami Dade.

Speaker 2 (02:15):
There's a lot of places, because.

Speaker 3 (02:19):
I honestly don't remember which of the tranches of money
that it was, but it was, you know, trillions of
dollars coming down the pipe, and they wanted this consulting
firm was advising these municipalities, these large municipalities, on how
to obtain the money and what they could spend the

(02:41):
money on, and then all of the requirements that were
in place to handle the money, account for the money,
you know, mitigate against fraud, blah blah blah blah blah.
So I didn't jump on the team. Instead, I asked questions,
because before I commit to something, I want to know

(03:02):
what are the parameters, what are the expectations, what's the compensation?

Speaker 2 (03:08):
All those things.

Speaker 3 (03:10):
And the one line or the one statement to me
that said, oh, I'm not going to get involved with
that was something to this effect there are no guidelines.
And I responded and said, what do you mean they're
no guidelines. Treasury has said there are no guidelines. They

(03:31):
are not publishing anything. They're not publishing any notices in
the Federal Register where you have to, you know, give
notification of certain rules and regulations or even policies that
you need to abide by in order to obtain the money.
They're just literally, and I'm not using a word literally,
you know, incorrectly here, I'm saying it literally.

Speaker 2 (03:53):
There were no rules.

Speaker 3 (03:56):
The money was just flowing down the pipeline to these
major cities and to the states, including Colorado and Denver
to use as a self hit. So back to California,
you may start to get the hint. More than one
hundred and twenty thousand inmates and all their state prisons

(04:17):
across the state. So in response to and in fact,
some of the money was for the state's unemployment compensation programs.
So the administration of California Governor Gavin Newsom said, in effect, hey,
let's pay the prisoners in jails because they're unemployed. Now,
why would you do that. We'll get in some details

(04:40):
in a minute, But why would you even think that,
Because on.

Speaker 2 (04:45):
Every dollar that you.

Speaker 3 (04:49):
Dispensate, that you allocate, that you give away part of
that dollar you get to keep because you have overhead,
you have administrative costs, you have everything that you can
possibly imagine, You've got all the bureaucrats that you've got
to pay you and because are no rules, you could

(05:09):
even siphon some of that money off to cover some
of your operating expenses on some other programs that have
nothing to do with unemployment compensation. So if you're thinking,
maybe you're not after the last hour, if you're beginning
to think when Newsom says, hey, let's pay the prisoners
in jails because they're unemployed too, now you may understand

(05:33):
why somebody that is steeped in how to rip off taxpayers,
like most governors are, you may get where this is headed.
It is a fact that prison inmates in California, prisons
in County jails applied for and were paid unemployment compensation

(05:55):
by Newsom's Employment Development Department. The eded NO not ed
ed D. It's even worse than erectile dysfunction. It's ed
it's E trouble, trouble, double D E double D. That's
the group in California that runs their state unemployment compensation system. Now,

(06:15):
to compare and contrast a little bit, the fraud losses
in Minnesota from the exploitation of the covid era social
welfare programs funded by you and I across the entire
country because it's federal money. We know that that Somali fraud,
if I could dares call it, that is well over
a billion dollars, and that investigation is ongoing and they're

(06:38):
finding new instances of fraudulent behavior that are continuing to
be uncovered. But the fraud losses from just the unemployment
insurance scams by individuals throughout the entire state of California,
it's probably going to exceed thirty billion dollars.

Speaker 2 (06:58):
Huh, Where is the cabal? Where is this?

Speaker 3 (07:04):
Is ABC World News Tonight. David Muir our lead story tonight,
is California spent thirty billion dollars, most of who was
fraudulent on inmates. You see, they practiced journalism malpractice by
both Old Mission and co Mission. Now, when the COVID

(07:24):
pandemic first began back in March of twenty twenty, the
economic shutdown policies put in place by Newsom, like most states,
were some including Colorado, were some of the most draconian
imposts anywhere in the country. He had this initial stay
at home order that he entered on March nineteen, twenty twenty.

(07:47):
From April through May of twenty twenty, those policies kept
California largely shut down through the statewide stay at home
order and the closure of all non essential businesses. I'm
not even going to go down that rabbit hole of
what'sn't essential or non essential business because that's a whole
pile of bull crap that I don't want to get
messed up in right now. And then the state began

(08:08):
a phased reopening of just some what they considered to
be lower risk sectors in mid May, but those still
had to comply with very strict health guidelines. So all
of that, all that minutia shaped California's economic landscape during
the early months of the pandemic. Now, what's the governor

(08:29):
to do? What would a governor do when his policies
send a huge number of workers home for an indefinite
period of time and then the businesses that employed them
are forced to shut their doors.

Speaker 2 (08:46):
Well, you look around, you look over.

Speaker 3 (08:48):
There, and there's just like bags and bags of money
laying around. So you say to yourself, hmm, I think
I'll pay them air quotes here unemployment compensation because that's
what the programs for, right, So you forced them into unemployment,
and now including prisoners, you say, well, I think I'll
just pay them unemployment funds for unemployment compensation comes from

(09:12):
a tax that's levied on employers' payrolls. In twenty nineteen,
just before COVID, California's eded collected five point six billion
dollars in unemployment tax and they paid out five point
one billion in compensation to people who were eligible who'd

(09:34):
lost their jobs. So you know that leads you know
the delta between five point six and five point one billion,
you know, about half a billion dollars. So that's probably
be where their overhead, administrative costs, everything else. Five hundred
million dollars in twenty twenty. No, remember two twenty nineteen,
it was five point six billion paid in taxes five

(09:56):
point one billion paid in unemployment compensation. Just a year later,
in twenty twenty, California's same ed paid out thirty three
and a half billion in unemployment compensation by the end
of June. How did they do that? One of the
first COVID era federal spending programs that was put in

(10:16):
place by Congress was the mass even fusion of cash
to the state unemployment insurance funds, since unemployment insurance taxes
had obviously been reduced dramatically by the layoffs. If nobody's working,
there's no employment, there are no salaries from which to
collect unemployment tax. So with the workers laid off, the

(10:39):
revenue from the tax on the pay roads started to
decline precipitously, and at the same time, unemployment claims were
skyrocketing and the state compensation funds were quickly becoming insolvent,
including California. So between March and July twenty twenty, the
federal government paid an additional six hundred dollars per claimant

(11:00):
unemployed person per eligible unemployed person to be paid on
top of the regular benefits paid by California to that
unemployed worker. This was referred to as quote the Federal
Pandemic Unemployment Compensation the FPUC. Well, I could, I could
name that acronym in a minute. The Federal Pandemic Unemployment

(11:24):
Compensation in California got fifty billion dollars in twenty twenty
a loan in those FPUC funds now normally.

Speaker 2 (11:36):
Wit.

Speaker 3 (11:37):
While terminated workers in California can apply for benefits immediately,
there is a one week waiting period period before the
worker actually begins to receive the money. But when COVID hit,
Lowsom eliminated that one week period, and so if you
got terminated, you began receiving the money almost immediately after applying.
You walked in or you went online, you applied for it,

(11:58):
and boom, you got a you know, you got a
debit card. You got to you gotta check somehow, or
money shut up in your checking account. And in Congress,
because they're just as stupid as these governors, they fully
funded the Pandemic Unemployment Assistant Program that extended those same
unemployment benefits to self employed people, to gig workers. You're

(12:20):
like an Uber driver or door dash driver. And to
others that are not normally eligible for unemployment compensation because
they don't have an employer that pays into the system,
and all of that gets funded entirely with federal money
from you and me. Now, finally, congress fully, I shouldn't

(12:42):
say finally that way, I should say finally congress fully
funded the pandemic Emergency Unemployment Compensation program that extended unemployment
benefits two additional weeks of benefits after their regular unemployment
in their UI benefits were exhausted. All fully federal states

(13:06):
didn't have to do anything. It was just manna from heaven.
Between the CARES Act thirteen additional weeks, then you had
the Continued Assistance Act that added eleven additional weeks. And
then of course the wonderful American Rescue Planned that was
the one I couldn't think of earlier.

Speaker 2 (13:27):
That was the one that the team that the consulting
firm wanted me to work on.

Speaker 3 (13:32):
That added twenty six additional weeks and an all through
fifty three weeks, so you had continued coverage for unemployment
benefits was extended nearly eighteen months, all the way to
September four of twenty twenty one.

Speaker 2 (13:48):
After COVID began.

Speaker 3 (13:50):
And the funding for every one of those time extensions
for benefits was provided, Congress authorized it, You and I
paid for it.

Speaker 2 (14:00):
What'd that do well?

Speaker 3 (14:01):
That left all these programs in the states just drowning
in money to hand out the applicants for unemployment insurance.
And the last thing that a politician wants to do
is have money sitting up on a shelf. It's like
you look up and it's not the ouf on the shelf,
it's the bag of money on the shelf. And you
think yourself, oh, I could be buying votes with that.

(14:24):
I got to get that out the door, you would think.
But you would be wrong that these state governments would
understand the importance of trying to be a good steward
of the money that you and I paid in through
our income taxes and from our federal borrowing. That they
might want to safeguard that, that they might want to

(14:46):
put some rules and regulations in place. But like I said, no,
we're not going to put any rules and regulations in place.
It's just going to be bag fulls of money. And
certainly not the Gavin administration. They didn't care. Do you
think that they could even say fiduciary responsibility. Do you
think Gavin Newsom can even spell fiduciary? I sincerely doubt it.

(15:07):
So they began to use the excuse that the expansion
of eligibility, Oh, it's overwhelming our system. So Newsom's ed
EDD was unable to implement. Actually, I think I should
say this. Instead, they decided not to implement fraud detection

(15:30):
mechanisms at the same scale as the new level of claims.
In other words, their fraud detection system became overwhelmed, and
rather than try to befit up to the new level
of money flowing through the system, they just let it
overwhelm their fraud detection system and just don't worry about that,
just let it go. So, rather than allow any delay

(15:55):
to perform even a rudimentary screening effort such as you know,
just simply cross referencing the claimants against other state databases
to find out whether, hey, they're collecting in Colorado and California,
which would obviously disclose ineligibility in California, their EDED simply
approved the claims and process the payments. Just push the

(16:15):
money out the door. Now, I remember having a conversation
with the consulting firm at the time that that's what
we're trying to help these places do, which is why
I washed my hands of it.

Speaker 2 (16:25):
I wanted nothing to do with it.

Speaker 3 (16:28):
NBC I found one report NBC News December of twenty twenty.
They swerved into a little actual journalism. NBC News reported
in December of twenty twenty that tens of thousands of
prison and jail inmates, including convicted serial killers and member

(16:52):
Scott Peterson, the cop you know it was convicted of
killing his wife or something, they've carried out what prosecutors
described tuesday as possible league the largest fraud scheme in
California history. And then the report goes on to tell
you just how bad it was. Bernie made Off got
nothing on you've governed.

Speaker 2 (17:16):
No, he doesn't.

Speaker 3 (17:17):
We're talking about this fraud in California over the COVID money.
And the reason this is important is because the federal
government has become so and I know this is shocking
news to you, has become so inept, so incompetent, so big,

(17:38):
so monstrous that it is unmanageable, and things like this
add up. I mean, you know, thirty billion here, a
billion up in Minnesota or more, and pretty soon you're
talking about real money. And what's most infuriating to me
is while I'm very fortunate in my life, I mean

(18:00):
I'm not as fortunate, not as fortunate as someone like Dragon.
But you know, I make I make a good living,
and you know I've done pretty well and don't have
any debts, and you know, I'm pretty good. But when
I pay my freaking income tax and I see how
much is going to this kind of bull crap and
realize that, oh, taxes really don't have to be that high,

(18:23):
if we would just operate efficiently and operate like a
real business, I get really ticked off. And then I
find and I forget what prompted me to even think
about this consulting firm yesterday. But then when I dig
in and I find this NBC News story to help

(18:46):
support my contention, as lawyers like to do, if I
do follow on and realize, well, yeah, and what are
we doing? Once again, where's the accountability? So back to
the story. Now. I remember this NBC News report is
not a local affiliate. This is the NBC News website.

(19:09):
This is from December of twenty twenty, and it started
out talking about how tens of thousands of prison and
jail inmates, including convicted serial killers, have carried out what
prosecutors described today as possibly the largest fraud scheme in
California history, up to a billion dollars according to the
DA in Sacramento County, and she said, quote, the fraud

(19:31):
is honestly staggering. Between March and August, the DA said
that inmates housed in every single California prison and in
jails across the state filed thirty five thousand claims totaling
one hundred and forty million dollars in benefits. Sometimes, they
write those benefits were paid directly.

Speaker 2 (19:51):
To inmates inside the jail.

Speaker 3 (19:54):
In other cases, the money was sent to relatives and
friends outside the prisons in jails. It and I'm just joking,
but it makes you think to yourself, why am I honest?

Speaker 2 (20:09):
Why do I try to, you know, play by the rules?

Speaker 3 (20:12):
Why did I They're playing by the rules because there
were no rules and no rules. And Gavin Newsom looks
at it, just like Jared Poultus looked at, you know,
building the damn hospital down at the Convention Center. Just
looks at it and builds it. And you know never
is used. I don't think a single patient went through
that hospital at the convention Center. And then the fraud

(20:36):
that I just described to you, just like having a baby,
continue for another nine months. Both the inmates themselves as
well as the all of their accomplices working with them
on the outside, access the online application system for unemployment compensation,
So using both their own social Security numbers and their birthdays,
as well as social Security numbers and birthdays of anybody

(20:59):
else they could get their on. They got the payments
via the prepaid debit cards, and they got mailed to
whatever address the prisoner listed on the application. So you're
sitting in you know, some jail in Sacramento, and you've
got a brother in you know, in downtown Denver, somewhere
in Rhino, So use his address and he gets a
debit card.

Speaker 2 (21:19):
Min He's just he's collected money like crazy.

Speaker 3 (21:24):
But there were even instances where the investigators found that
physical checks were mailed to the prisons, and prison officials
allowed those checks to be deposited into the prisoner's commissary accounts.

(21:45):
Nothing nothing more complicated than cross referencing applicant names against
the names and social Security numbers. Of just you know,
let's let's do a database check here, let's cross reference
the names of all the applicants against all people who
are currently incocerated. That that would have instantly revealed and

(22:08):
probably more likely than not stop the fraud. More than
a billion dollars paid to prison inmates. So Minnesota, huh,
you're just you're pikers. Compared to California, And if you're curious,
thirty five states, at least according to the California Auditor,

(22:30):
thirty five states do cross match unemployment applications against state
prison rosters. Twenty eight of those thirty five states go
one step further, and they cross match an applicant against
county and local jail registers. Why because those facilities house
individuals who have demonstrated an inclination toward breaking the law,

(22:52):
and they got a lot of time on their hands,
they got nothing else to do, and of course taxpayers
provide them with computers, and or they sneaked cell phones in,
or somehow they've got access to the interwebs. Now maddening,
these state prisoners were only one aspect of this employment fraud.

(23:16):
Nuisom's administration failed to show even a bare minimum level
of competence has been known since January twenty twenty one,
when the California State Auditor published a report on multiple
levels of ineptitude, wasting, fraud in the edd's handling of
COVID era funding. They put out an executive summary which

(23:38):
resulted in more than ten billion dollars in claims that
they've determined to be fraudulent. They allowed claimants to collect
benefits even though they were using suspicious addresses. In one case,
seventeen hundred claims from one single address. The staff made
at least a billion dollars in payments to claimants, despite

(24:00):
the staff having concerns about the legitimacy of their identities,
and they just let it go through. The Employment Division
was unprepared to guard against inmate frouduse. It didn't cross
match all the incoming claims against the incarceration data paid
out roughly eight hundred and ten million dollars in benefits
to more than forty five thousand claimants who were in jail.

(24:25):
That seventeen hundred claims from one address one billion dollars
to forty five thousand inmates out of a prison population
of one hundred and twenty thousand Yeah, Minnesota, you got
some catching up to do.

Speaker 2 (24:40):
Good morning, Michael and Dragon.

Speaker 1 (24:42):
Since excels electrical engineers can't figure out how to keep
power lines from arcing when they touch each other, they
had to offer it up to kids six to twelve
years old to see if they can come up with
creative ideas and then maybe offer a generous one hundred
dollars college scholarship to the top five.

Speaker 3 (25:01):
Answers or do you like some I don't know whether
Apple still does this, but they would pay bounties for
bug detectors. People out there that you know are working
on an operating system and OS and they and they
find a bug and it's a serious bug. You know, Apple, Microsoft, Google,

(25:23):
others would would pay bounties for those things. So open
it up to your point, open it up. And I
hate say this about engineers, but I thought engineers could
fix anything. I thought engineers were a lot smarter than
lawyers and could just fix anything.

Speaker 2 (25:45):
Apparently not. That will allow them up, Dragon, Michael Brown
at iHeartMedia dot com. Michael Brown at iHeartMedia dot com.
That'll get the engineers all pissed off.

Speaker 3 (25:55):
But why are we worried about California anyway because it's California. Well,
except the problem is its federal money. It's not like
California tax revenues were being impacted again, back to NBC.
As part of its temporary COVID nineteen procedures, the EDED
instructed the staff to automatically backdate new claims to the

(26:18):
date the claimant said they became unemployed. In other words,
staff were told to enter an effective date for a
claim that could be weeks before the date the claimant
actually filed, allowing that individual to be paid benefits for
those weeks before anybody.

Speaker 2 (26:33):
Nobody was looking.

Speaker 3 (26:34):
But in just case somebody was looking, they might catch
up with them. NBC. The Department Labor provided guidance instructing
states to backdate pandemic related claims to the week in
which claimants first became unemployed. According to EDD, it automatically
backdated new claims to comply with this guidance. EDED asserted

(26:54):
that automatically backdating claims reduced the manual workload they would
have otherwise being required to pay claim in.

Speaker 2 (27:01):
In other words, they didn't want to do the work.

Speaker 3 (27:04):
Oh my gosh, I gotta manually enter something. No, I
don't get paid to do that. I mean, I show
up at nine o'clock, but by ten thirty it's lunch time.
I don't get back till two, and then I gotta
check my mail and do my Amazon order, and by
at that time it's four o'clock and I gotta go home.
I sincerely doubt that the Department of Labor Guidance took

(27:27):
into consideration the fact that the California EDD was accepting
in paying on claims without any verification process whatsoever. Their
decisions just poured more money into the pockets of the
fraudsters than they would have received based solely on their
initial application.

Speaker 2 (27:45):
So do you get what I just said?

Speaker 3 (27:49):
They actually got paid more than what was on their
basic initial application. As of late December of twenty twenty,
California's EDD had paid had more than two point two
million claims submitted during the pandemic for which it could
not confirm the identity that claims.

Speaker 2 (28:09):
That's twenty four percent.

Speaker 3 (28:10):
That's a full fourth of the nine and a half
million dollars claims, and that's from those filed from the
time the Cares Act became law in March. It doesn't know,
It simply does not know how many legitimate or are legitimate?
And how many are fraudument At least five hundred and

(28:30):
thirty four thousand of the claims were paid unemployment insurance
benefits in excess of their traditional dollar threshold for at
least flagging it and pursuing a criminal investigation of an impostor. Now,
remember this is a report that was issued in January
of twenty twenty one, and we know from examples reported

(28:51):
by NBC that the prison inmates about the prison inmates,
that fraudulent claims continue to be paid all.

Speaker 2 (28:59):
The way and Hill, what do you think happened?

Speaker 3 (29:03):
Oh, the fans money ran out September four of twenty
twenty one. They simply ran out of money, Otherwise it
would have continued. That's why the ultimate amount of the
fraud is expected and estimated to exceed thirty billion dollars.
But the report, the initial report only identifies ten point
four billion because it only goes up to December of

(29:24):
twenty twenty. Governor Newsom's administration has never revisited the auditor's
report from twenty twenty one. I can't find any post
pandemic comprehensive analysis or an audit by the California government,
in the governor's office or the auditor for that matter.

(29:45):
I can't find anything.

Speaker 2 (29:47):
Now.

Speaker 3 (29:47):
The Biden Justice Department investigated and prosecuted individual fraudulent actors, schemes,
the facts of many, and many included fraud through the
end of covid Era, but not one single agency at
the federal level has taken on a comprehensive analysis of
this fraud up through the end of the federal funding
on September four of twenty twenty one. Now statue limitations, yeah,

(30:12):
just going to expire no later than September of next year.
So Trump Department of Justice step up, Gavin Newsom step down.