Three Southern California residents have been arrested on federal bribery and embezzlement charges related to a scheme that allegedly caused a California state agency to issue at least $187,513 in unemployment insurance benefits checks to dozens of people who were not eligible for the benefits, with cash kickbacks allegedly going to the organizers of the scheme.

A 31-count indictment returned by a federal grand jury on February 1, 2012, charges three individuals with conspiracy, bribery, embezzlement and obstruction of justice. The individuals were arrested by special agents of the U.S. Department of Labor. David Paul Holden, 30, of Corona, a former employee of the California Employment Development Department (EDD), and Patricia Cordova, 31, of Corona, were arrested February 1, 2012. Narciso “Tony” Rodriguez, 29, of Riverside, was arrested February 2, 2012. The three individuals were arraigned on the indictment in United States District Court in Santa Ana.

According to the indictment, in 2010 and 2011, Holden worked at the EDD office in Anaheim, where he processed unemployment insurance claims and had access to EDD’s electronic database for approving claims and making payments of unemployment insurance benefits. Allegedly, personally and through a network of recruiters, which included Cordova and Rodriguez, Holden approached more than 50 individuals who were not qualified to receive state unemployment benefits because they were already employed, had voluntarily quit their prior jobs, or had been terminated for other reasons, including misconduct. Holden and his recruiters persuaded those people to provide their social security numbers and other information so that Holden could arrange for them to receive unemployment checks. According to the indictment, EDD’s electronic database was manipulated to make it appear that those people were entitled to benefits and caused EDD to issue unemployment benefits checks to those persons.

The indictment is sealed in this case; however, according to the press release, the indictment alleges that the people who were not qualified to receive unemployment benefits from EDD illegally obtained $187,513, but investigators have determined that EDD paid more than $500,000 to unqualified beneficiaries. The press release also states that Holden and his co-defendants received $33,100 in kickbacks, but investigators have determined that the amount of kickbacks and unemployment benefits that went directly to the defendants is more than $85,000.

The question must be asked, if the investigators determined that EED paid more than $500,000 to unqualified beneficiaries, and the alleged conspirators received more than $85,000 in kickbacks, then why are the amounts much less in the indictment? Perhaps the investigators are merely basing such high numbers on their assumptions and do not have proof to substantiate these allegations. This is beneficial for those charged in the case because typically, the higher the loss involved, the steeper the penalty.

In addition to bribery and embezzlement, the indictment alleges that Holden and Cordova took various steps to conceal the scheme and discourage other participants from cooperating with investigators.

Another point the press release makes clear is that the three individuals charged are not the only ones under scrutiny in this case. If what the indictment alleges is true, then investigators believe there was a much larger network involved. There is no doubt that prosecutors will attempt to uncover additional names by offering plea deals to the individuals currently charged in exchange for a possible lesser sentence.

If they are convicted of all counts in which they are charged, Holden would face a statutory maximum sentence of 305 years in federal prison, Cordova could be sentenced to as much as 45 years in prison, and Rodriguez would face a statutory maximum sentence of 15 years in prison.

The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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