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Before California's current EDD scandal, two fraudsters ran their own mini version

Before California's current EDD scandal, two fraudsters ran their own mini version

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Before California's $11 billion unemployment fraud scandal broke into the open late last year, Robert J. Maher and John Michael Herron II figured out their own angle to fleece the state of nearly half a million dollars.

Between December 2014 and January 2018, the two Stockton men created 11 phony companies out of thin air, filed false quarterly wage reports in the names of people whose identities they stole, then reported that the "employees" had been fired or laid off, court papers say.

Then, the pair waited for the state's Employment Development Department to mail them unemployment debit cards to cash in.

The end of the audacious scheme came Tuesday morning in a Zoom hearing in federal court in Sacramento, during which Maher, 42, pleaded guilty to mail fraud and aggravated identity theft and agreed to pay $609,335 in restitution.

Maher, who could face up to 20 years, is in custody at the Sacramento County Main Jail and is scheduled to be sentenced June 8.

Herron, 39, took a plea deal in 2019 and is currently serving a sentence of six years and three months at a federal prison in Safford, Arizona, where he is projected to win release in August 2023.

According to federal court documents, the two men called their scheme "the EDD thing" and openly discussed the ramifications if they were caught.

"In one call, on October 28, 2016, Herron advised Maher their fraud scheme carried '20 plus years' and was not a 'petty misdemeanor,'" court records say. "Herron stated that the scheme could be 'a guaranteed thing for life if done right,' but expressed concern that he needed to use new addresses, because his house was going to get 'flooded' with claims."

Federal prosecutors say the two men "filed at least 55 fraudulent claims for (unemployment insurance) benefits seeking a total of approximately $578,185, of which EDD paid out approximately $485,685."

Court filings say the two came up with names for their phony companies — "Joe's Hauling" or "Central Valley Legal Shield," for instance — then used the names, dates of birth and Social Security numbers of individuals they claimed were employees seeking unemployment insurance payments.

"In most instances, after EDD verified the UI claimant's employer and wages (against the fraudulent information previously submitted by Herron and Maher), it notified a bank who then mailed an EDD debit card which could be used to withdraw the fraudulently-obtained UI benefits," court documents say. "All EDD debit cards were mailed to addresses controlled by Herron, Maher, or their associates.

"ATM photographs show Herron using these debit cards to withdraw cash from various ATM's. The debit cards Herron used were issued to, and bore the names of, individuals other than himself; that is, the names of the persons Herron and Maher used to submit fraudulent UI claims. Herron's bank records reflect an influx of cash over 2016 and 2017, including over $30,000 in cash deposits."

As in the current EDD scandal, which some estimates say may grow to as much as $30 billion, some of the money went to Maher while he was incarcerated but still helped Herron manage the scheme through phone calls to discuss "how to navigate particular logistics of the claim process," court records say.

"During Maher's incarceration, Herron periodically deposited money into Maher's Inmate Trust Account," court documents say.

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