A former California Employment Development Department employee admitted this week in federal court to fraudulently obtaining more than $768,000 in COVID-19 unemployment payments for dead people and unsuspecting, ineligible claimants.
Phyllis Hope Stitt, 61, of Carson pleaded guilty Wednesday, Jan. 8, to one count of conspiracy to commit mail fraud and bank fraud for filing at least 29 phony unemployment insurance claims. Stitt’s former boyfriend — Kenneth Earl Riley, 64, of South Los Angeles — pleaded guilty to the same charge.
Stitt and Riley face a maximum of 30 years in prison when they are sentenced on May 9.
According to a plea agreement with federal prosecutors, the pair carried out the fraud from March 2020 to September 2021 while Stitt was employed by the EDD, where her job duties included determining claimant eligibility for unemployment benefits and processing claims.
The conspiracy involved at least 10 victims who did not authorize the filing of unemployment claims on their behalf.
Stitt acquired the names, dates of birth, Social Security numbers and other identifying information of individuals applying for unemployment benefits. She then filed fraudulent EDD applications for unemployment and COVID-19 benefits for individuals who were ineligible because they were employed, not unemployed due to the pandemic or were deceased, the plea agreement states.
In order to have EDD approve the fraudulent applications, Stitt submitted false information indicating claimants had worked in California, had become unemployed due to the pandemic and were entitled to benefits. She also provided the EDD with phony employment histories and driver’s license information for the claimants.
Stitt backdated the unemployment claims to maximize benefits and gained control of payments by including on the fraudulent applications return mailing addresses that Riley could access.
Debit cards and accounts created as a result of the fraudulent applications were used by Riley and others to make ATM cash withdrawals in Los Angeles and San Bernardino counties, as well as bank transfers and retail purchases, the plea agreement states.
The California State Auditor noted in a 2021 report that the EDD’s failure to bolster its fraud detection efforts until months into the pandemic resulted in at least $10.4 billion paid out for claims that may be fraudulent.
Even as late as December 2020, nearly a year after the first COVID-19 case was reported in the U.S., EDD was allowing claimants to continue to collect benefits using suspicious addresses because it did not establish payment blocks for their claims, the report states.
Additionally, $1 billion of the $10.4 billion paid for suspicious claims was the result of EDD’s decision to remove a key safeguard against payment to claimants whose identities it had not confirmed.
In one instance, Edward Kim of Los Angeles allegedly submitted at least 400 fraudulent pandemic claims with the EDD, according to an arrest affidavit filed by the U.S. Department of Labor. At least 120 of those claims were filed under the names of inmates incarcerated in California prisons, authorities said.
The EDD said it has since obtained restitution orders stemming from criminal convictions for nearly $20 million in pandemic-related fraud.
The case against Stitt and Riley was investigated by the U.S. Department of Labor’s Office of Inspector General, the FBI and the Investigation Division of the California Employment Development Department. It was prosecuted by the U.S. Attorney’s Office.
“EDD has a zero-tolerance policy on fraud,” the agency said in a Thursday email. “Not only do we conduct thorough background checks on EDD and any related system vendor staff, but we also have strict protocols and training in place for governing staff access to program and customer information, as well as upholding requirements to properly protect confidential information.”
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