At least $11 billion in unemployment claims made in California during the pandemic were fraudulent, state officials revealed Monday in a conference call about the reeling jobless benefits system designed to help millions of out-of-work residents.
And the extent of the fraud — already more than twice as large as earlier estimates — could be even more damaging, encompassing perhaps more than a quarter of the $114 billion paid out since government ordered business shutdowns began in March, sparking an avalanche of job losses.
“Roughly 10% of the $114 billion in claims are confirmed fraudulent, another 17% are potentially fraudulent,” California Labor Secretary Julie Su said during a question-and-answer session regarding the EDD’s efforts to combat unemployment insurance fraud. If 27 percent of the claims are determined to be fraudulent, that would amount to more than $30 billion.
Crime rings operating out of Nigeria, China and Russia have unleashed a wave of fraud that has focused on California’s unemployment benefits as their most tempting target.
The state has already acknowledged that it has paid about $400 million in the names of prison inmates, and last month, federal prosecutors charged a former state labor agency worker, a prison inmate and a parolee in a scheme to defraud California’s scandal-scarred unemployment insurance system.
State officials conceded California wasn’t ready to combat the fraudulent attempts. In a prepared release issued after Su’s comments, the EDD said the precise count of confirmed fraudulent claims so far is 9.7 percent.
“There is no sugarcoating this,” Su said. “California did not have sufficient security measures in place to prevent this level of fraud. Criminals took advantage of the situation.”
As fraud concerns increased, the EDD suspended unemployment payments to 1.4 million California workers — and has made only modest progress in unfreezing those red-flagged accounts. Last month, Gov. Gavin Newsom appointed a new director of the troubled agency, its second since February.
Just over 300,000 workers have taken steps to validate their accounts, said Loree Levy, a spokesperson for the EDD. That indicates that another 1.1 million workers continue to face suspended payments while their accounts are verified by the EDD.