OC DA charges 6 in unemployment fraud, says office needs help to catch more

At least six California prisoners, including two convicted murderers and four Orange County residents accused of bilking state taxpayers out of more than $500,000 in unrelated plots to exploit loopholes in the state's unemployment system, are the latest to be charged in connection with the sprawling fraud scheme that state officials now estimate totals nearly $10 billion.

Orange County District Attorney Todd Spitzer, who brought the charges Monday, said the cases are the tip of the iceberg, adding that without state intervention, his office, the third largest in California, won't be able to keep up with cases he said are yet to be uncovered.

"The resources that this agency, just the Orange County DA's office that I speak for ... our agency is not going to be able to pursue this under the existing platform," Spitzer said at a news conference. "We don't have the investigators. We don't have the attorneys. We don't have the resources."

Fraud investigators in his office have all shifted their focus to the scheme, meaning caseloads involving allegations of everyday fraud such as identity theft have been largely put off.

"This is massive, organized fraud, and the state needs to mount a massive, organized response," said Assemblywoman Cottie Petrie-Norris, D-Laguna Beach, chair of the Assembly Accountability and Administrative Review Committee, which is conducting oversight hearings this week into the state's handling of unemployment claims. "This will require a dedicated effort, clear ownership and adequate funding."

The alleged scheme was first uncovered by a task force of California DAs last November. Initially, the prosecutors focused their investigation on claims stemming from jails and prisons after they said more than 350,000 claims were filed in a five-month period last year under the names of state prisoners, including more than 130 on death row, and thousands more serving time in county jails. Early estimates placed the total of stolen money around $1 billion.

But the charges announced by Spitzer this week paint a more detailed picture of the scale of the scheme.

Spitzer on Monday announced felony charges against two Garden Grove men accused of intentionally setting up a storefront business last November for the purpose of filing fraudulent unemployment claims for people who did not qualify. One of the claims filed by the men was on behalf of a 99-year-old woman whose application claimed she had lost her employment as a housekeeper as a result of the pandemic. Spitzer said the woman had not worked for several decades.

The owners of the business, Huy Duc Nguyen and Mai Dacsom Nguyen, allegedly received $200 to $700 for each claim they filed. Spitzer said they filed more than 1,000 fraudulent unemployment claims, netting more than $490,000 from the state since November after advertising their services in Vietnamese. Spitzer charged them with several felony counts of making false statements, perjury and conspiracy to defraud another of property.

"They saw an opportunity and they exploited it," Spitzer said. "They didn't do it to help people who are down on their luck and needed a few extra dollars to get them through."

Spitzer said the claims paid in the other two cases in which he filed charges made it through the system because California is one of a few states that does not have a system for cross matching claimants' information with state prison and county jail rosters.

An Anaheim tax preparer is accused of taking advantage of this loophole by conspiring with four state prisoners who allegedly gave her their personal identifying information to file false claims under their names. One of them was Leonel Hernandez, 30, who is serving a 50-years-to-life sentence in Kern Valley State Prison for murder. Spitzer said the tax preparer, Sandra Pineda, claimed on Hernandez's application that he had worked 40 hours a week and had an income of nearly $50,000 but was no longer able to work because of the pandemic.

Pineda is also accused of filing false claims on behalf of Ryan Vargas, a third-striker serving a 64-year sentence at Kern Valley State Prison for assault with a firearm, Hector Jimenez, a third-striker serving a 23-year sentence in Solano State Prison for first-degree burglary and Greg Garcia, who is incarcerated at the Substance Abuse Treatment Facility and State Prison, Corcoran.

Prosecutors said Pineda obtained prepaid debit cards from the claims and then withdrew thousands of dollars from ATMs in Orange County.

Pineda was charged with five felony counts of making a false statement, one felony count of conspiracy to defraud another of property and five felony counts of perjury. Vargas, Jimenez and Garcia were charged with one felony count of filing a false statement and one felony count of conspiracy to commit theft by false pretenses.

In the third unrelated case, Spitzer accused Rosalva Bahena, of defrauding the state out of $50,000 by conspiring with her brother, Bruno Galindo, who is serving a 44-year sentence for attempted murder and gang charges, and a second state prisoner, Guillermo Rodriguez, who is serving a 110-years-to-life sentence for strangling his female neighbor to death in Fullerton.

Bahena, who is on parole after serving a state prison sentence for carjacking, allegedly filed fraudulent unemployment benefits applications using personal identifying information from prison inmates obtained from Galindo. The claims Bahena received netted approximately $50,000, Spitzer said.

Bahena recently pleaded not guilty to three felony counts of perjury, three felony counts of filing a false statement, three felony counts of money laundering derived from criminal activity and one felony count of conspiracy to commit theft by false pretenses. She is due in court on Feb. 2.

Galindo and Rodriguez received similar charges.

"When you have this kind of fraud going on that we detected in a relatively short period of time through intensive investigative techniques, we know that there's other cases out there and I know from my colleagues, the other elected district attorneys in the state, that they are either investigating or have already filed cases themselves," Spitzer said.

Federal prosecutors have said in recent weeks they also have several cases in the pipeline.

Requests for comment from Gov. Gavin Newsom were not immediately returned.