. So just how did a beauty pageant contestant rule the stage while taking in payments? Today, we're examining the fraud that took away hundreds of millions from people who really needed it. These... See More
. So just how did a beauty pageant contestant rule the stage while taking in payments? Today, we're examining the fraud that took away hundreds of millions from people who really needed it. These people are defrauding the system. Reporter: At this year's Ms. Toyota Long Beach grand prix beauty contest if there was an award for being a shameless con artist, California insurance officials say 22-year-old Shawna palmer would take the crown, because while she was strutting the stage wearing high heels, investigators say she was taking in worker's comp, saying she couldn't wear a shoe for any length of time after fracturing a toe in March. She was illegally collecting worker's comp claims and benefits for a period of several months that totalled $24,000 for an injury she said occurred at work. Reporter: To claim the comp benefits she claimed the foot injury kept her from working at this store, a claim they believed until pictures showed up in social media and she was arrested. This young lady certainly possessed a certain amount of beauty, obviously she had a certain amount of bravado to pull off this scam. But when it came to the brains department I think she is a little lacking. Man described as her father said this when confronted with the allegations in Los Angeles. All we'll say is it is absolute crap. Reporter: Investigators describe the case of just a slice of a multi-billion dollar drag on the economy, cases often uncovered in the most bizarre ways. Investigators say dancing hamster Leroy Barnes, we're not sure which one he is, pulled this out of his hat in costume while claiming $51,000 in benefits. He claimed part of a ceiling fell on him in a previous job stopping him from working. This woman, Kathy Cashwell was raking in three grand a month, claiming a shoulder injury left her from being able to stand, grab, or run. But when she suddenly ended up on "The price is right" boy, did she spin that wheel. Last month, they arrested 260 individuals, from those arrests we found out they defrauded the state of $4 million. It is not just comp, but disability being scammed every year. Every year, social security pays out more than $175 billion to people on disability. Most in dire need of help. But in the last fiscal year alone nearly 72,000 allegations of fraud were reported to social security's office of inspector general. When people that don't need it or abusing it I think everybody becomes outraged. Again and again, cameras are the enemy of the disability scammer. This man driving off on his motorcycle. Investigators tell us he claimed he could not drive or even go out alone. And the guy tossing the football, he said he had shoulder problems and needed an electric cart to run errands. This woman running the motorized wheelchair claimed she had difficulty running, bending or squatting. All three had their claims denied. But it takes a lot of work. We got a look at the Washington state's remote San Juan islands with the cooperation disability investigations program, a sort of csi unit for sniffing out social security disability fraud. Armed with hidden cameras and posing as cell phone company workers, agents found their targets on one recent case working in a coffee shop. Ramona and Hayes and Corey eglash, owners of the shamelessly named "The place to come when you're on the run." Both claimed they couldn't work in some cases, and even the property manager suspected something was not right. What were these two likes? He was crooked as a dog's bag leg, neither one could tell them the truth if their life depended on it but other than that. The agent ran the investigation. Both were incredibly chatty and seemingly perfectly able-bodied. A far cry from their applications for disability payment payments. She wrote here I can't work, due to anxiety, PTSD. There are days I can't leave my home. Corey is on record in her application to support her claim. I doubt that today she could work in a retail store on a part-time basis or actually put gas in a car. I mean, that is pretty extreme, she can't even put gas in a car. I'm driving. That is a stupid question. Princesses do not walk. The government was paying Ramona a thousand dollars a month for disability based on your application, and that was not all. She received over $42,000 in social security and another $50,000 from the state of Washington. So about $50,000 total. Corey was not receiving disability yet. His application is what helped set off the red flag that brought agents to their door. He has difficulty bending, squatting, sitting, kneeling, completing tasks, concentration, understanding, using hands, getting along with others. Pretty inclusive. The investigators dug up records that Corey had a second job at a nearby aquarium, volunteered at a senior center and even volunteered at the home. When we looked at him, we discovered her already on. Both are now doing time in federal prison. Ramona eventually pled guilty to mail fraud. Most everything we bake is gluten-free. Corey was[ convicted ??[ ??wo/ of mail fraud and recently sentenced to ten months in prison and a $10,000 fine. People are brazen, there is an element that is looking for any way to defraud v??he government and they will do it. Meanwhile, the latest poster child in the fight against disability fraud is free on bail, facing $42,000 in restitution and up to a year in jail if convicted. "Nightline," in Seattle.
This transcript has been automatically generated and may not be 100% accurate.