At least $ 11 billion has been plundered from California’s coffers in an unemployment fraud scheme that has spread across the state, while another $ 20 billion in possible losses is still being investigated.
California Labor Secretary Julie Su told reporters on a conference call on Monday that of the $ 114 billion the state paid in unemployment claims during the coronavirus pandemic, 10 percent, or $ 11.4 billion, involve fraud and another 17 percent are under investigation.
“There is no way to soften the reality,” Su said during a news conference on Monday. “California does not have sufficient security measures in place to prevent this level of fraud and criminals have taken advantage of the situation.”
Almost all fraudulent claims were paid through the federally supported Pandemic Unemployment Assistance program. The program was approved by Congress to provide unemployment benefits to those who would not normally be eligible, such as independent contractors.
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Officials say the program’s broad eligibility requirements have made it an easy target for criminals, including Russia and Nigeria. In December, 21,000 prisoners raised more than $ 400 million from the state, including 100 death row prisoners.
The California Department of Employment Development (EDD) froze the 1.4 million accounts that relied on assistance earlier this month while investigating the fraud. As of last week, 1.2 million accounts were still suspended. EDD said the other applicants “are receiving a questionnaire to complete to help EDD determine whether they meet the eligibility requirements for continued benefits, or are receiving a Notice of Determination informing them of a disqualification and their rights of appeal.”
The state has also been trying to clear a persistent backlog of complaints – more than 940,000 on January 20.
Despite admitting the state was unprepared, Su also said the Trump administration has failed to provide guidance to thwart sophisticated unemployment schemes.
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Su detailed an overdrive agency trying to process the explosion of new claims as companies closed. About 19 million complaints have been processed by the department.
“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 asked for help, international and national criminal groups were working behind the scenes, working tirelessly to steal unemployment benefits using sophisticated methods of identity theft.”
On Monday, the president of the California House of Democrats, Nancy Pelosi and Sens. Dianne Feinstein and Alex Padilla, asked President Biden to create a federal task force designed to help states eradicate organized fraud in unemployment claims.
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“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.
The Associated Press contributed to this report.