After a judge ruled in September that the IRS can’t keep coronavirus relief funds from inmates, the door was left open for scammers to take advantage of the decision.
Scams are happening across the country, but California has been particularly hard hit. Scammers have grifted millions in jobless benefits using prison inmates’ names. It is being called the most significant fraud of taxpayer funds in California history.
A U.S. judge ruled that the IRS can’t keep withholding coronavirus relief payments from incarcerated people. This potentially cleared the way for at least 80,000 checks totaling more than $100 million to be sent to people behind bars in the U.S., the Associated Press reported.
U.S. District Judge Phyllis Hamilton ruled in favor of two Californians who brought a class-action lawsuit on behalf of other incarcerated or formerly incarcerated people. The judge ruled that there was nothing in the Coronavirus Aid, Relief, and Economic Security (Cares) Act that prohibited those in jails and prisons from receiving the relief funds, The Los Angeles Times reported.
“It’s very clear that the IRS is in the wrong and they have to make these payments to incarcerated folks,” said Los Angeles-based civil rights attorney Lisa Holder, one of the lawyers on the case on behalf of the Equal Justice Society. “They don’t have any viable legal argument.”
Covid relief legislation passed in March authorized payments of up to $1,200 per person during the pandemic. The IRS added a section on its website that cited the unrelated Social Security Act in claiming that incarcerated people were not entitled to the funds, ABC News reported. The IRS and U.S. The Treasury Department told corrections officials to intercept any checks that arrived at jails, prisons, or detention facilities and return them to the federal government. But the September judgment changed this.
Some community activists applauded, saying the money would help many Black communities since incarceration is a financial strain on the families of inmates.
It’s not clear exactly how many incarcerated people qualified for the pandemic relief payments, but there are about 1.5 million people behind bars in the U.S. Imprisoned foreign nationals, people without Social Security numbers and people claimed as a dependent on another person’s taxes don’t qualify for the checks.
Although the court decision may have helped some inmates and their families, scammers have also taken advantage.
In fact, scams led California to send covid jobless benefits to death row inmates. A group of state and federal prosecutors have been investigating fraud in the pandemic relief system administered by the state Employment Development Department.
Nine district attorneys across California and a federal prosecutor have called for Gov. Gavin Newsom to intervene and stop such unemployment benefits from being paid. So far, the scams may involve tens of thousands of questionable claims totaling hundreds of millions of dollars.
District attorneys say it’s “the most significant fraud on taxpayer funds in California history,” according to a letter obtained by The Times. The letter describes crimes that involve identity theft of prisoners as well as alleged conspiracies by individual inmates and organized gangs to game the state system.
“It is a manifest problem that cannot be ignored and the governor needs to take steps to address it,” said McGregor Scott, U.S. attorney for the Eastern District of California.
Newsom responded by saying the fraud was “absolutely unacceptable” and announced his own task force to aid district attorneys and coordinate California’s anti-fraud efforts, adding that the state has already started comparing inmate rolls to pandemic benefit claims.
“Earlier this year, I launched a strike team to expedite unemployment payments and to minimize abuse of the system,” Newsom said in a statement. “While we have made improvements, we need to do more.”
So far, investigations have uncovered more than $400,000 in state benefits paid to death row inmates and more than $140 million to other incarcerated people in California’s 35 prisons, The Los Angeles Times reported earlier this week.
Scammers are not limited to California. Authorities said unemployment fraud in prisons is a national problem.
In California, more than 35,000 inmates have filed claims and more than 20,000 have been paid. One unidentified inmate was paid more than $48,000.
In August, Pennsylvania U.S. Atty. Scott W. Brady and Pennsylvania Atty. Gen. Josh Shapiro charged 33 people, including inmates at eight state and county jails and prisons in western Pennsylvania and their accomplices, with illegally obtaining Coronavirus Aid, Relief and Economic Security (CARES) Act unemployment benefits, The Morning Call reported.
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Authorities said as many as 10,000 Pennsylvania prisoners may have fraudulently received payments.
Pennsylvania State and federal officials said in July that an investigation uncovered 4,000 instances of fraud and prevented $44 million in fraudulent benefits from reaching bank accounts of scammers.