By Velena Jones

SACRAMENTO (CBS13/AP) — An unemployment claim has been filed in the name of convicted killer Scott Peterson – underscoring the fraud running rampant in California’s prisons and jails, prosecutors say.

In an open letter sent to Gov. Gavin Newsom on Tuesday by prosecutors across the state, the case is described as “the most significant fraud on taxpayer funds in California history.”

Sacramento County District Attorney Anne Marie Schubert said the fraud in Peterson’s name is one of at least 35,000 unemployment claims made on behalf of prison inmates between March and August.

“Quite frankly, the inmates are mocking us,” Schubert said at a press conference on Tuesday.

Schubert said the state has paid out at least $140 million in benefits. At least 158 claims have been filed for 133 inmates on death row, resulting in more than $420,000 in benefits paid

“It is no secret that fraud is widespread in the jails and prisons. In fact, even incarcerated inmates have themselves made reports,” prosecutors wrote in the letter.

The scam involves people outside of prison filing claims on behalf of the inmates, prosecutors say.

Besides Peterson, prosecutors say unemployment claims had also been made and paid in the name of some of California’s most notorious killers. Peterson’s attorney, Pat Harris, said while Peterson’s name surfaced during the investigation, there is no evidence Peterson received unemployment aid from the state.

“This investigation, when it’s completed, will show that he had not a thing to do with any kind of scheme to get fraudulent benefits,” Harris said. “Mr. Peterson has never received any money due to fraudulent benefits. We fully expect that the investigation will show that when completed.”

Peterson has been back in court in recent weeks as he moves closer to a possible retrial of the penalty phase of his murder conviction. The California Supreme Court had overturned his death sentence, but Peterson’s murder conviction for the killings of his wife Laci and unborn son were upheld.

Schubert listed a number of inmates there who had claims filed in their names, including Cary Stayner, convicted of killing four people in or near Yosemite National Park in 1999; Susan Eubanks, a San Diego woman convicted of shooting her four sons to death in 1997; Isauro Aguirre, who was sentenced to death for the 2013 murder of 8-year-old Gabriel Fernandez in Los Angeles; and Wesley Shermantine, part of the duo dubbed the “Speed Freak Killers” for their meth-induced killing rampage in the 1980s and ’90s.

Prosecutors said they learned of the scheme from listening in on recorded prison phone calls, where inmates would talk about how easy it was for everyone to get paid. They said the scheme always involved someone on the outside — usually friends or family members of the inmates, who would then receive the benefits.

In some cases, inmates used their real names. In others, they used fake names and even fake Social Security numbers. In one instance, an inmate used the name: “poopy britches,” Schubert said.

“Quite frankly, the inmates are mocking us,” Schubert said.

El Dorado County District Attorney Vern Pierson says inmates in some cases used a tablet provided by the jail to file the paperwork or had help from someone on the outside.

“We would see the same inmate, I think as many as 14 different claims filed by the same inmate with slightly different variation of their names,” said Pierson.

Once the paperwork was filed, EDD would send a cash card to the listed address.

“People would show up at an ATM machine with a stack of these cards and take out $15,000 in a space of 15 minutes,” he explained.

Pierson said the money is being used both inside and outside of jails and prisons. While some inmates are having cash put on their accounts to use, inmates are also giving the money to associates on the outside.

“They were buying all sorts of things, jewelry, even a car, $150,000 in cash and that’s in one ring, one incident, it’s everywhere,” Pierson said. “There’s definitely connections to various street gangs, as well as other organized crimes.”

Pierson believes it will be impossible to recoup most of the money.

“There is no possible way they can prosecute every single one of them,” he said. “The recovery is going to be relatively minor, most of this money is going to be lost and never recovered.”

Prosecutors are urging the governor to take several steps immediately to address the fraud problem: add resources and staff to help the Statewide Task Force investigate and prosecute the cases, and implement a crossmatch system to check incarceration data against EDD claims.

More from CBS Sacramento:

Gov. Newsom issued a statement about the fraud Tuesday evening.

“Unemployment fraud across local jails and state and federal prisons is absolutely unacceptable,” Newsom said in the statement. “We will continue to fully partner with law enforcement and direct as many resources as needed to investigate and resolve this issue speedily. While we have made improvements, we need to do more. Everything the state does will be done in partnership with the local District Attorneys and I thank them for their commitment to resolving this issue as quickly as possible.”

Copyright 2020 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.

Velena Jones