LAKE COUNTY, Calif. – On Monday, the California Employment Development Department provided an update on its efforts to get unemployment benefits to those struggling due to the COVID-19 pandemic while stopping a multibillion-dollar wave of fraud against the unemployment system that has increased over the past year.
Investigations across the state – including in Lake County – have uncovered tens of thousands of cases of unemployment benefit fraud that state officials are estimating total at least $11 billion, and could be as much as $30 billion.
In November, the California District Attorneys Association wrote to Gov. Gavin Newsom to ask him to become personally involved “in halting what appears to be the most significant fraud on taxpayer funds in California history.”
The group reported that district attorneys and federal prosecutors, along with local, state and federal law enforcement, “have discovered that there is rampant and large-scale pandemic unemployment assistance fraud occurring in our communities, in the jails and in state and federal prison.”
The Lake County District Attorney’s Office has confirmed to Lake County News that it is investigating numerous EDD fraud cases that emanated from the Lake County Jail.
In its Monday report, the EDD said that between March 2020 and January 16, 2021, it processed 19.5 million claims and paid out $114 billion in unemployment benefits.
EDD confirmed that 9.7 percent of payments – or more than $11 billion – have been made to fraudulent claims.
It also identified that up to an additional 17 percent of payments – totaling $19 billion – made during this time have been made to potentially fraudulent claims. The EDD said these claims are under investigation.
The state said the estimates it provided on Monday “are likely to shift as new claims come in and as older claims that have been flagged as suspicious are either validated or confirmed as
fraudulent.”
EDD estimated that the department’s existing fraud screening measures and new security protections put into place last fall prevented up to $60 billion in payments to fraudulent claims.
“EDD is now working with some of the country’s most successful fraud prevention businesses and law enforcement agencies to protect the state’s unemployment benefit system,” said California Labor and Workforce Development Agency Secretary Julie Su. “We know that many Californians are waiting on payments, and EDD is working quickly to validate their claims and get their benefits to them.”
EDD said it experienced more than five times as many unemployment claims in 2020 than in 2010, the worst full year of the Great Recession, and processed as many claims within the first eight weeks of the pandemic shut down as it did during all of 2010.
Nationally, unemployment systems paid more than $500 billion to unemployment benefits in 2020, according to a draft report by the National Association of State Workforce Agencies.
The EDD said California processed a record amount of unemployment benefit claims in 2020, primarily driven by the COVID-19 pandemic. “This flood of activity provided a window of opportunity for thieves.
California has been hit hard by fraud from international and national crime syndicates particularly targeting the federal Pandemic Unemployment Assistance, or PUA, program.
“EDD was clearly under-prepared for the type and magnitude of criminal attacks and the sheer quantity of claims,” said Rita Saenz, the state’s new EDD director, who Gov. Newsom appointed in December. “We are focused on making the changes necessary to provide benefits to eligible Californians as quickly as possible and stopping fraud before it enters the system.”
Nationally, 35 percent of unemployment applications are fraudulent, according to ID.me.
The U.S. Department of Labor said California’s PUA program was particularly susceptible to fraud because it did not require income or employment verification upfront and allowed claimants to back-date their claim to February.
As of Monday, the EDD estimated that roughly 95 percent of the known fraudulent payments in California were made to PUA claims. The remaining 5 percent is associated with California’s existing Unemployment Insurance, or UI, program.
By comparison, in 2019, fraud accounted for about 6 percent of California’s total UI payments, the EDD said.
California has become one of the first five states to implement ID.me to prevent fraud in the unemployment system, said Blake Hall, CEO of ID.me.
Hall said the fraud targeting PUA programs is a national problem, calling it a crisis that “transcends any one state.”
On Monday, Hall said 21 states are either live with ID.me or in the final stages of implementation, noting that the program is blocking about $1 billion in fraud per week across the states it serves.
“The fraud rate for new claims is at least 35 percent and over ten times what we see at federal agencies,” Hall said.
The Newsom administration has come under fire due to the fraud issue. However, on Monday, the EDD maintained that last summer Newsom had set up a task force led by California’s Office of Emergency Services and law enforcement agencies to investigate fraud.
The agency said that beginning in October it instituted secure measures to verify claimants’ identity through the ID.me program to increase both claim efficiency and fraud detection, and expanded its contract with security firm Thomson Reuters to provide industry best practices to identify fraud.
In a legislative approach to ending the fraud, last month, State Senate Republican Leader Shannon Grove (R-Bakersfield) introduced a bill to mandate that EDD make it a standard practice to regularly cross check unemployment claims against records in state prisons.
Grove, who accused Newsom’s administration of allowing fraud to run rampant in state prisons, also at that time delivered a letter supporting the California District Attorneys Association letter to the governor weeks earlier, and demanded that Newsom provide them adequate resources to investigate and prosecute EDD fraud cases.
Grove’s bill, SB 39, was introduced in the State Senate on Dec. 7. It cites an estimated 35,000 Pandemic Unemployment Assistance claims that were filed on behalf of inmates between March and August of 2020, noting that half of those claims were paid despite the individuals being ineligible under current law.
State Senate records show that the bill has been sent to committee to be referred for assignment.
Email Elizabeth Larson at This email address is being protected from spambots. You need JavaScript enabled to view it.. Follow her on Twitter, @ERLarson, or Lake County News, @LakeCoNews.
State reports on multibillion-dollar unemployment benefit fraud and fraud prevention efforts
- Elizabeth Larson
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