California officials said the state had sent out fraudulent unemployment benefits amounting to $11 billion. The California Employment Development Department (EDD) said it had processed almost 20 million claims since the onset of the Wuhan coronavirus pandemic. An estimated 10 percent of these claims had been confirmed as fraudulent ones while an additional 17 percent are still being investigated for suspected fraud.
In a Jan. 25 press release, the EDD reported that unemployment claims it processed from March 2020 to January of this year has totaled $114 billion.
According to the press release, the amount of claims EDD processed during the first eight weeks of the pandemic equaled the total claims it processed during the whole of 2010. Driven by the Wuhan coronavirus pandemic, California processed a record amount of unemployment benefit claims under the federal Pandemic Unemployment Assistance program. But this provided a window of opportunity for thieves and fraudsters.
California Labor and Workforce Development Agency Secretary Julie Su said that EDD "is now working with some of the country's most successful fraud prevention businesses and law enforcement agencies." She added: "We know that many Californians are waiting on payments, and EDD is working quickly to validate their claims and get their benefits to them."
According to the Virginia-based security firm ID.me, 35 percent of unemployment benefits applications across the country are fraudulent. ID.me has been hired by 21 states including California to investigate and combat benefits fraud. The company's founder and CEO Blake Hall said that it is blocking "about $1 billion in fraud per week" in the states it serves.
"California should be commended for also moving early to screen high-risk claims filed prior to ID.me's introduction, preventing further loss to taxpayers," Hall said.
Hall earlier warned that funds California paid out to fraudulent claims were directed to foreign crime organizations. These groups filed unemployment claims using stolen identity information and relied on "money mules" to pick up benefit debit cards. He called the scheme "a very sophisticated cyber-attack that's being run at scale." (Related: Jobless claims fraud on the rise as coronavirus boosts unemployment.)
Unscrupulous parties have been trying to dupe California's benefit system for sometime now
It was previously estimated that the EDD paid up to $4 billion in taxpayer money to fraudsters. One such case involved a former EDD employee who managed to collect $21,000 in unemployment benefits using the details of California Sen. Dianne Feinstein. Federal authorities arrested 43-year-old Andrea Gervais in December 2020 over her role in the benefits fraud scheme. It was only after Bank of America (BofA) flagged the suspicious claims made under the senator's name that Gervais's involvement came to light. BofA is in charge of administering EDD benefit debit cards.
BofA previously pointed out unemployment benefits fraud in the state after it found 640,000 accounts with suspicious activity. BofA Senior Vice President for State Government Relations Brian Putler wrote in a December 2020 letter to legislators that the bank found a number of red flags in these accounts. Some claims were filed using the names of infants, children, centenarians and non-residents.
"We have identified more than 640,000 accounts for EDD to evaluate as to whether they are fraudulent and the associated card should be frozen or the account closed. Our assessment is that there is activity consistent with fraud in those accounts on the order of approximately $2 billion," Putler wrote. He remarked that "the scale of [unemployment benefits] program fraud in California is unique."
Meanwhile, a group of nine district attorneys said incarcerated individuals also received unemployment benefits. The district attorneys added that many of these inmates were not even jailed in California. In a November 2020 letter to Gov. Gavin Newsom, the group noted that "the volume of fraud as well as the types of inmates involved is staggering."
According to the attorneys, unemployment benefits fraud in prisons encompassed all types of inmates. They elaborated that death row inmates and those serving life sentences with or without the possibility of parole received unemployment checks. Rapists, child molesters, human traffickers and other violent criminals were also named as unemployment benefit recipients.
Head over to Collapsifornia.com to read the latest on California's unemployment benefits fraud.
Sources include:
EDD.CA.gov [PDF]
CALMatters.org [PDF]
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