A scam run from a California prison highlights government inefficiency
One of the benefits to society from imprisoning criminals is that, while they're imprisoned, they cease committing crimes. However, when it comes to the government's failure to take good care of taxpayer money, two men's stints in California's prisons gave them the time to engage in a massive fraud netting them $5 million in both state and federal unemployment funds. Think about that: our governments are so inefficient that they hand out COVID unemployment funds to nonexistent people created by prisoners.
The story has been out for a few days, but I really didn't want to ignore it. According to the AP, Daryol Richmond is imprisoned in Kern Valley State Prison serving an almost 25-year prison sentence as a repeat offender in robbery and attempted robbery. Telvin Breaux is in the California Correction Institution, serving a 15-year sentence for, among other things, robbery with a firearm.
These two men, despite being locked away, ran a crime ring filing false claims that they and others on the outside had been working at low-level, cash-based jobs until COVID left them unemployed. They created email accounts for these fake people — more than 400 of them — and then used street addresses across Southern California so the government could mail them debit cards.
This scam highlights everything wrong with massive government handout programs. Government bureaucrats have no idea to whom they're sending money and no incentive to find out. Theoretically, in this hyper-computerized age, the bureaucrats could have matched names to addresses but they didn't. (Computer data are used to harass conservatives, not to prevent fraud.) And of course, debit cards are fungible. A check must be deposited or cashed somewhere specific, but debit cards can be used anywhere in a nicely untraceable way.
Image: Daryol Richmond mugshot.
Ultimately, Richmond and Breaux filed $25 million in claims and managed to get $5 million for their efforts. They then spent the money on vehicles, furniture, jewelry, and handbags. (Thieves' and crooks' desire for handbags always mystifies me. Those things must have a massive street value.)
The really depressing part is that, according to the AP, "the $5 million actual loss remains a fraction of the more than $20 billion in unemployment benefits that authorities believe has been stolen since March 2020 as the state approved fraudulent payments in the names of death row inmates and even U.S. Sen. Dianne Feinstein." Again, the system is set up to make crime easy — and that $20 billion is your money.
Milton Friedman famously looked at the four ways in which money is spent — and the level of care allocated to that spending.
When you spend your own money on yourself, you focus intently on both quality and price.
When you spend your own money on someone else, you may be a bit less careful about the actual quality but you'll be careful about the price.
When you spend other people's money on yourself, you have no incentive to economize and focus solely on the quality of what you're getting.
But when you spend other people's money on someone else, you have no incentive to focus on either quality or price.
That last scenario describes the bureaucrats given the responsibility to hand out taxpayer money to whoever files a claim that looks right. They just don't care. They meet their job metrics, fill out the correct paperwork, and just grind through to get their paychecks and pensions.
Americans are a generous people. If the government would take less of their money, they'd be more likely to contribute it to charities that are close to the people whom they help and have a good sense about when they're being ripped off. As it is, the defendants have agreed to pay back a little bit of the money, but for the most part, it's gone with the handbags.