California has given out at least $20 billion in false unemployment benefits to criminals, state officials said Monday, confirming a figure that is lower than previously estimated but still accounts for more than 11% of all benefits granted since the outbreak began.
Nearly all of the fraud was blamed on a hastily approved expansion of unemployment benefits by Congress, which allowed self-employed persons to receive weekly checks from the government with insufficient controls to prevent people from receiving benefits who were not eligible.
“I don’t think people realize the magnitude of the amount of money that has been issued erratically to undeserving people,” said Assemblyman Tom Lackey, a Republican from Palmdale, who brought an illustration of 29 dump trucks full of $100 bills, representing just over half of the money lost to fraud.
According to a June investigation from the US Department of Labor’s inspector general’s office, the pandemic ushered in rampant fraud at unemployment agencies around the US, with at least $87 billion in fraudulent payments issued by states. Scammers allegedly grabbed roughly 30% of all jobless benefit payments in Arizona alone, according to state officials.
The deception was so widespread in California that state officials approved at least $810 million in benefits in the names of inmates, including dozens of notorious criminals on death row. State officials even sent $21,000 in benefits to a Roseville home in the name and Social Security number of U.S. Senator Dianne Feinstein, which was part of a total of $2 million in bogus payments made to the same location.
On Monday, however, Gov. Gavin Newsom’s administration sought to reassure state lawmakers that California’s fraud pipeline had been shut down. According to Rita Saenz, director of the Employment Development Department, the state has adopted new identity verification software that, combined with other preventative measures, has prevented an estimated $120 billion in fraud efforts.
“2020 was an anomaly, a criminal assault on the unemployment insurance program across the country,” Saenz told senators during an oversight hearing on Monday.
“Last year, we shut the door on that kind of fraud,” she stated.
State officials assessed the theft to be worth up to $31 billion in January. However, state officials amended that figure down to $20 billion on Monday. Former U.S. Attorney McGregor Scott has been retained by the Newsom administration to assist in the prosecution of scammers, with the department stating on Monday that investigations are still ongoing.
However, the department is nonetheless beset by other issues. When people claim unemployment benefits, the information they provide to the state may differ from the information provided by their former employer. When this occurs, state officials must interview these individuals in order to settle the issues.
However, these interviews can take up to six months to complete. This delay, according to Saenz, is “unacceptable.” She did say, however, that the state has a new policy that pays people their benefits while they wait if they clear the state’s fraud filters. About half of the persons waiting for interviews, according to Saenz, are paid.
“For some, things aren’t progressing quickly enough.”There are still some obstacles to overcome,” she stated.
Since the beginning of the epidemic, California has paid out over $178 billion in jobless benefits based on 25.5 million total claims. According to Saenz, this is four times more than the worst two years of the Great Recession a decade earlier.
The sheer volume of claims overwhelmed the department, resulting in a significant backlog and making it practically difficult for those calling the agency’s call centers to receive a response. A state report released in January blamed the Newsom administration for “major mistakes and inaction” in the first four months of the pandemic, saying the department did little to stop the fraud.
The auditor’s office announced on Monday that the department had completed 13 of the 21 recommendations thus far.
“We noticed areas of concern throughout our audits, and EDD has made significant work in addressing them.” “However, considerable actions must still be done to address areas of risk,” said Bob Harris, the department’s audit manager.
Saenz assured legislators that the agency had met all of the auditor’s timelines for making adjustments. She stated that by the end of November, the agency intends to complete the hiring process for its newly constituted fraud investigation team.
Other adjustments, on the other hand, will take longer. The agency is developing a new method that will transfer unemployment benefits directly into people’s bank accounts rather than mailing checks or debit cards, which are more vulnerable to fraud. However, according to Saenz, this will take a few years to implement.
Some MPs were irritated by the delay, saying they were concerned that people were losing faith in their government.
Assemblywoman Cottie Petrie-Norris, a Democrat from Laguna Beach, stated, “When one of our government agencies fails this poorly, I feel it undermines the public confidence.”
