LOS ANGELES (AP) – Sophisticated hackers, identity thieves and foreign criminal groups stole more than $ 11 billion in California’s unemployment benefits last year, but the extent of the fraud could grow a lot: billions more in payments are under investigation .
California Labor Secretary Julie Su told reporters on a conference call on Monday that of the $ 114 billion the state paid in unemployment insurance claims, about 10% – or $ 11.4 billion – was confirmed as fraudulent.
Almost $ 20 billion more – another 17% – is considered suspect and much of it can be considered fraud, she said.
“There is no way to soften the reality,” said Su. “California did not have sufficient security measures in place to prevent this level of fraud, and criminals took advantage of the situation.”
Almost all fraudulent claims were made through the Pandemic Unemployment Assistance program, with federal support. The program was approved by Congress to provide unemployment benefits to people during the coronavirus pandemic who are generally not eligible to receive them, as independent contractors. But, officials say, his broad eligibility requirements have made him an easy target for criminals, including Nigeria and Russia.
Although he admitted the state was unprepared, Su also blamed the Trump administration for failing to provide the state with the guidance and support needed to thwart sophisticated fraud networks. She said a series of safeguards put in place last year blocked billions of dollars in potential fraud schemes.
Su described an agency struggling to keep up with a flood of new claims for unemployment insurance as the pandemic closed companies and raised unemployment rates. And this reserve of new money was also a bait for criminal enterprises.
“It should come as no surprise that EDD was overloaded, as were the rest of the country’s unemployment agencies,” said Su. “While millions of Californians applied for aid, international and national criminal groups were working behind the scenes, working tirelessly to steal unemployment benefits using sophisticated methods of identity theft.”
The state has also been trying to clear a persistent backlog of complaints – more than 940,000 on January 20.
Officials noted that fraud problems were widespread in the US
Washington State was one of the first to be hit by fraudulent unemployment claims, which are believed to be linked to a West African fraud network using identities stolen from previous data breaches, such as the massive 2017 breach by Equifax. More than 122,000 fraudulent claims made in the state have diverted $ 600 million.
Washington managed to recover $ 357 million as a result of the state’s collaboration with federal law enforcement officials and financial institutions across the country.
Prosecutors across the state have been attacking unemployment benefits fraud in recent months. On Monday, Orange County district attorney Todd Spitzer announced charges against two business owners who opened a store in Garden Grove, California, for the sole purpose of filing false unemployment claims. He also announced the indictment of eight people, including six state prisoners, involved in two other unemployment fraud schemes.
Also on Monday, House Speaker Nancy Pelosi and California cords Dianne Feinstein and Alex Padilla, all Democrats, asked President Joe Biden to create a federal task force to help states stop crime fraud organized into unemployment claims.
“California and many other states are facing fraud at a much higher rate than previously thought, perpetrated by international and interstate criminal organizations moving from state to state,” they wrote in a letter.
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Associated Press writers Rachel La Corte in Olympia, Washington, and Adam Beam in Sacramento contributed.