At least $11 billion has been looted from California’s coffers in an unemployment fraud scheme run rampant across the state, while another $20 billion in possible losses is still being investigated.
California Labor Secretary Julie Su told reporters in a conference call Monday that of the $114 billion the state has paid in unemployment claims during the coronavirus pandemic, 10 percent, or $11.4 billion, involves fraud and another 17 percent is under investigation.
“There is no sugarcoating the reality,” Su said during a press conference Monday. “California has not had sufficient security measures in place to prevent this level of fraud, and criminals took advantage of the situation.”
Nearly all of the fraudulent claims were paid through the federally supported Pandemic Unemployment Assistance program. The program was approved by Congress to provide unemployment assistance to those who usually wouldn’t be eligible, such as independent contractors.
Officials say the program’s broad eligibility requirements made it an easy target for criminals, including from Russia and Nigeria. In December, 21,000 prisoners scored more than $400 million from the state, including 100 prisoners on death row.
The California Employment Development Department (EDD) froze the accounts of 1.4 million relying on the assistance earlier this month while it investigated the fraud. As of last week, 1.2 million of the accounts were still suspended. EDD said the other claimants “are either being sent a questionnaire to complete to help EDD determine if they meet eligibility requirements for continued benefits, or are receiving a Determination Notice letting them know about a disqualification and their appeal rights.”
The state also has been trying to clear a persistent backlog of claims — more than 940,000 as of Jan. 20.
While admitting the state had been unprepared, Su also said the Trump administration had failed to provide guidance to foil sophisticated unemployment schemes.
Su detailed an agency in overdrive trying to process the explosion of new claims as businesses were shuttered. Some 19 million claims have been processed by the department.
“It should be no surprise that EDD was overwhelmed, just like the rest of the nation’s unemployment agencies,” Su said. “As millions of Californians applied for help, international and national criminal rings were at work behind the scenes working relentlessly to steal unemployment benefits using sophisticated methods of identity theft.”
On Monday California Democrats House Speaker Nancy Pelosi and Sens. Dianne Feinstein and Alex Padilla called on President Biden to create a federal task force designed to assist states in rooting out organized fraud in jobless claims.
“California and many other states are experiencing fraud at a much greater rate than previously understood, perpetrated by international and interstate criminal organizations moving from state to state,” they wrote in a letter.
The Associated Press contributed to this report.