Ethics of State Welfare Fraud Study Questioned

ANAHEIM —  Orange County district attorney investigators for the past year have quietly conducted full-fledged investigations into the lives of 450 randomly selected welfare recipients, none of whom are suspected of any wrongdoing.

Since June, 1994, a team of eight special investigators has been working on a state-authorized pilot study of welfare fraud in which it scrutinizes a sample of the county’s welfare population to see if they have more income than they have declared on applications to the county Social Services Agency, officials say.

Using tactics that have drawn the indignation of civil libertarians for what some liken to state-sponsored spying, investigators not only do computer checks of Social Security and driver’s license information, but also interview welfare recipients’ neighbors, relatives and children, asking if the recipient is working or if a parent declared absent is in fact living in the home.

In some cases, investigators have followed recipients to see if they have jobs they have not reported to welfare officials, and they make surprise visits to recipients’ homes, asking to search rooms for signs that a recipient of Aid to Families With Dependent Children--the primary form of welfare--has fewer children than reported.

National welfare experts say they have heard of no similar undertakings by other states. But they say the investigation of some Orange County welfare recipients illustrates the conflict between the public’s desire to protect civil liberties and its desire to crack down on welfare fraud.

“I think the American people genuinely feel the need to support people in poverty who legitimately have a financial need,” said Sid Johnson, executive director of the American Public Welfare Assn. in Washington. “And I think at the same time, they appropriately resent any situations in which their generosity is being taken advantage of.”

Michael Kharfen of the U.S. Department of Health and Human Services, said: “Other states have been more relying upon using data matches with Social Security and employment records to determine whether people are entitled to benefits. But this California study seems more rigorous than what other states do.”

And that outrages civil libertarians.

“I’m utterly amazed at this,” said Harry Simon, a senior attorney with the Legal Aid Society of Orange County. “There’s nothing I’ve seen in state law that authorizes this kind of far-reaching investigation of welfare recipients. And even if there were, it would violate federal constitutional principles.

“They call this a study?” Simon said. “What are they studying? These are people, not bugs.”

Ethics Questioned

UCLA law professor Gary Blasi said Americans historically have had conflicting attitudes: a belief in the principle that no one should be investigated by the government until they are suspected of some wrongdoing, yet a readiness to doubt the honesty of poor people.

“There is a centuries-old notion that being poor is an indicator of immorality,” Blasi said. “There is a presumption that all moral people are hard-working people, and hard-working people have jobs.”

The ethical flaws in the state’s study would seem more significant if a group other than welfare recipients were being investigated, Blasi said.

“If you randomly chose 400 defense contractors to investigate to see how they spend the public’s money, you wouldn’t be able to get a parking place around the courthouse, there would be so many corporate lawyers objecting to it.”

The results of the state study will be specific to Orange County, which was chosen because of the high regard for the district attorney’s welfare fraud unit and its experience studying welfare fraud. But state officials believe that the data should help draw conclusions for other counties and help put a dent in the estimated $1 billion the state loses to fraud annually.

Results are not expected until late fall, but investigators are turning up numerous examples of fraud, they say. Many cases reveal poor people making a few extra dollars. But investigators say they have also found residents maintaining an upper-class lifestyle--including one woman who managed to receive welfare while allegedly living in a Newport Beach apartment and driving a Porsche.

But “for the most part we find people who are committing welfare fraud to be pretty desperate,” said Angelo Doti, director of the county Social Services Agency’s financial assistance department, which serves 120,000 people on AFDC.

Although Orange County normally conducts vigorous welfare fraud investigations that also include visits to neighbors, employers and home sites, typically these investigations occur after social services workers suspect that an application for AFDC is fraudulent.

“In this case, they all start out innocent as newborn babes,” Doti said. “They didn’t do anything right or wrong. There’s no profile of a typical recipient that we’re using either.”

State officials point out that welfare applicants are warned that they can be investigated from the moment they seek public assistance.

“Right there on the application it says you recognize that county, state and federal personnel are going to verify these statements are true,” said Charr Lee Metsker, chief of fraud for the state social services agency.

The alternative to taking a random sample would be to target only those suspected of fraud, but that would not reveal the extent of fraud in the broader welfare population, said Walter Barnes of the California Department of Social Services and the director of the project.

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When Special Investigators Freddie Moreno and Ana Vega visited a Cypress mother of four in early August after her case was selected, the woman’s sense of intrusion was palpable. After showing their badges and introducing a reporter, they asked to go inside and she allowed them in.

She answered their questions about her rent, her income and her federal college grants, and allowed them to look into each room in the house.

“Why are you here? Are you doing this to everybody?” she asked. “Is this something you do on a random basis?”

Vega told her it was random and asked if she had any questions.

“Actually, I do have questions,” she said. “I do have a problem as to why my second husband was ordered to pay child support and never has. I mean the kid is 14 years old now. I wish somebody from the district attorney’s office would go and investigate him for that and make him pay, rather than coming to me,” she said.

Anti-poverty advocates bristle at tactics used in the pilot project, saying that even the goal of determining the extent of welfare fraud does not justify the intrusive investigations. Some argue that the study focuses on punishing welfare recipients, most of whom are women and children, rather than on assisting them out of poverty.

“I wish someone would take the type of entrepreneurial spirit and pour it into corporate tax fraud and deadbeat dads,” said Tim Shaw, director of the Orange County Housing Task Force, one of the area’s leading anti-poverty advocates. “Why don’t they do that? If you want to take people off of welfare, then let’s go tail these deadbeat dads to work.”

But if recipients are not cheating, county officials say, the investigation is painless.

Courteous Investigators

Investigators are told to be scrupulously courteous once they make contact with a recipient in the study. They ask permission to enter a home after showing their badges, smile at children and inform recipients that a computer selected them at random for scrutiny.

Indeed, the purpose of studying a random sample of recipients rather than targeting a certain group, Doti said, is to avert criticism of unfairness or bias.

Two years ago the Orange County Social Services Agency, the district attorney’s office and the state Department of Social Services conducted a study of families that received aid strictly to assist their children. That study found that one out of four had violated welfare rules, but the results largely focused on immigrants and was decried by advocates for the poor as biased.

Last year, the state commissioned Tom MaCurdy, an economics professor with the Hoover Institution and an expert in welfare reform, to create the study’s procedures.

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The absence of political dissent surrounding the study may be due primarily to the fact that legislative approval was not necessary. The Department of Social Services merely notified the Senate Rules Committee that it would be picking up the $1.2-million tab for an Orange County welfare fraud study. The rules committee did not object, officials say.

None of the local legislators interviewed for this article had heard of the study. Some were supportive; others were not.

“I don’t think anybody’s done a study, and we need one,” said Sen. Rob Hurtt (R-Garden Grove). “I can see the other point, that it’s a violation of your civil rights and the Constitution because you have no basis to suspect wrongdoing. But I would like to remind everybody the IRS comes in any time they want to.”

Said Assemblyman Jim Morrissey (R-Santa Ana), whose district includes some of Orange County’s poorest neighborhoods: “We have to investigate welfare--it’s for the needy, not the greedy. It’s our money. It’s not a question of civil rights. We’re talking about people out there wasting our money and we should pursue it wherever we can.”

Sen. Lucy Killea (I-San Diego) was more leery of the study. The state already knows there is fraud and could spend its money in better ways, she said.

No one has an exact figure for what welfare fraud costs taxpayers. State estimates on cheating range wildly, from 4% to 62%. But applying the lower estimate suggests that AFDC fraud in California costs, at a minimum, about $1 billion annually--enough money to pay for 750 million meals at a nonprofit food kitchen or to buy 50,000 new police cars.

In Orange County, according to the district attorney’s statistics, early investigations into suspect applications prevented the overpayment of $72.5 million in fiscal year 1994 and $83.7 million in fiscal year 1995. Over four years, the unit caught fraud that would have cost taxpayers $288.9 million.

But when the state’s study is completed, the data collected will benefit welfare recipients too, said Wayne Field, the deputy district attorney in charge of the county’s 100-person welfare fraud unit.

“There are really people who need help, but unfortunately the cheaters are taking so much out of available dollars that people who really need help don’t have as much,” he said.