Knabe Praises Bust Of Multi-Million Dollar Child Care Fraud Ring

Los Angeles County Supervisor Don Knabe offered congratulations today on the successful bust and arrests of a widespread child care fraud ring that involved the theft of over $3 million in taxpayer’s funds. In 2007, Supervisor Knabe led the effort to pass State legislation to combat fraudulent use of funds for government-subsidized child care programs – fraud which costs California’s taxpayers millions of dollars per year.

I could not be happier that the criminals involved in this fraud ring are now behind bars, but I am also still outraged at the continued theft of taxpayer dollars intended for families in need, said Supervisor Knabe. The fact that we have tens of thousands of children on a waiting list for these child care subsidies shows that there is still a great need for the State to address the serious fraud problems in these important programs

The bust announced today involved charges being filed against 55 different people, which were spread across five separate criminal complaints. The fraud ring was allegedly run, in part, by a convict currently in federal prison on a narcotic trafficking term. The $3 million bust is believed to the largest of its kind to date in the nation.

Today’s bust is a prime example of how California’s child care programs, which issue over $1.2 billion in taxpayer dollars each year, are highly vulnerable to fraudulent activity and improper payments, due to a gap in appropriate oversight at the State level, said Supervisor Knabe.

A 2005 report to the Legislature indicated that fraud could exist in up to 7 percent of all child care payments statewide. The report also estimated that 6.2 percent of all child care payments are erroneously issued, as a result of inconsistent practices and policies.

Throughout 2006 and 2007, Supervisor Knabe continually advocated in Sacramento for decisive action on this issue. In 2006, Knabe sponsored Senate Bill 1421 (Margett) to address fraudulent activity in child care programs. This led to a bipartisan dialogue, and passage of Senate Bill 84 (Ducheny) by the Legislature, which was then signed into law by Governor Schwarzenegger in August 2007.

The Legislature’s action calls for a best-practices study, which is due back by September of this year. It will report on the best practices for the prevention, detection, and investigation of improper payments and fraud in all subsidized child care programs. Additionally, local efforts across California, such as the highly-effective fraud mitigation and prevention activities in Los Angeles County, which last year prevented over $50 million in erroneous child care payments from occurring, will be reviewed as part of the study.