Thieves looted Calif. welfare recipients cash via ATMs

Jan 28 2011 - 3:14pm

SAN FRANCISCO -- Federal and state investigators are trying to figure out who stole welfare benefits from hundreds of California's neediest families by compromising a system in which the state places those benefits into debit-card accounts, The San Francisco Chronicle has learned.

In the first days of the new year, the thieves gained access to recipients' card numbers and pass codes before draining their accounts -- which had just been funded -- during a blitz of ATMs around Los Angeles County.

The victims -- parents who live throughout California -- use the state's Electronic Benefit Transfer cards, which simplify the payment of cash assistance to 1.6 million people and their dependents.

The state Department of Social Services and the U.S. Secret Service, which is leading the investigation, declined to comment on the case Thursday. The company that the state hired to operate the system, Affiliated Computer Services, a subsidiary of Xerox Corp., also would not comment.

Maricela Rodriguez, a spokeswoman for the state agency, said only that "we are aware of the issue that occurred and have taken steps to address it and mitigate the risk of future similar issues."

But an e-mail alert that the state sent to county officials said that about 200 welfare recipients had called during the first days of January to complain that their accounts were empty. The state later reimbursed them and encouraged them to order new cards and change their pass codes.

"The state is working with (Affiliated Computer Services) and law enforcement to determine how these benefits were potentially compromised," the state alert said.

Robert Hollenbeck, an investigator with the Fresno County district attorney's office who is handling his county's response to the fraud, said the thieves had stolen information from about 300 cards, often taking more than $500 from individual families. He estimated that the total haul exceeded $150,000.

The victims did not obtain their cards at the same location, nor did they shop at a common store or use a single ATM. The only thing they had in common, Hollenbeck said, was their use of the benefit cards, suggesting embezzlers or computer hackers as possible culprits.

The campaign of mass withdrawals from ATMs in Los Angeles County, Hollenbeck said, would have required multiple suspects.

"It's preying on people who are the least able to deal with these financial hardships -- that's the part that's most aggravating about it," Hollenbeck said. "And to not have confidence in our own (welfare) system is frustrating. It's important we have these benefits going to the right people."

In Sonoma County, officials said, six families lost a total of $4,100 before they were reimbursed. Most of the accounts were picked clean.

"It really makes an impact -- these are some of the poorest families in the state," said Karen Fies, who directs welfare-to-work benefits for the county. "We've been assured that the vendor has made some changes to their system so this issue, whatever it was, can't be duplicated again."

The thefts happened less than a year after the state began prohibiting recipients from using the debit cards at casinos, bars, massage parlors, medical marijuana dispensaries and other businesses that officials deemed to be inconsistent with the welfare program.

(E-mail reporter Demian Bulwa at dbulwa(at)sfchronicle.com.)

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)

 

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