CA Unemployment Agency Head Blames Trump Admin for Massive EDD Fraud and Failures

“Trump administration ‘neglected’ California’s efforts to combat unemployment fraud, EDD head says,” the Sacramento Bee reports Tuesday.

“Nancy Farias swung back hard against allegations by Rep. James Comer, R-Ky., that California has done a poor job fighting unemployment fraud,” the Bee reported.

“President Donald Trump’s administration ‘neglected’ state efforts to combat domestic and foreign criminals collecting billions of dollars fraudulently from overwhelmed unemployment systems, California’s Employment Development Director said Monday. ”

Isn’t that odd, because in January 2021, the California State Auditor completed an audit of the EDD, and said the EDD has been aware of internal problems for more than 10 years, while failing to prepare for inevitable economic downturns in the state, throughout the Gov. Jerry Brown administration and now into Gov. Gavin Newsom’s. “EDD had no comprehensive plan for how it would respond if California experienced a recession and UI claims increased correspondingly,” the audit reported.

The State Auditor explained:

“The economic shutdowns in early 2020 led to historically high numbers of UI claims in a very short time (claim surge), and further shutdowns began in December 2020, raising the potential for additional spikes in unemployment. This audit reviewed EDD’s response to the claim surge, its handling of the resulting backlog of unpaid claims, and the assistance it has provided to individuals through its call center.”

Overseeing the EDD was California Labor and Workforce Development Agency Secretary Julie Su, who confirmed that, in 2020, fraudsters stole at least $11.4 billion in unemployment benefits from California, the Globe reported. And 800,000 unemployment claims were paid late, along with 12.7 million delayed eligibility determinations.

But what led to the total $31 billion in fraudulent claims was when then-Secretary Julie Su made the decision to suspend most EDD eligibility requirements, according to the audit. It was only federal oversight which caught this and notified the EDD that they could not suspend eligibility requirements.

Farias contended it was President Donald Trump’s administration ‘which left neglected state UI systems fighting domestic and international criminal enterprises effectively on their own.’”

The Audit found:

“In March 2020, the secretary of the Labor and Workforce Development Agency (agency secretary) directed EDD to pay claimants UI benefits before determining whether they met key program eligibility requirements, and EDD expanded this directive to include most program eligibility determinations. In April 2020, the agency secretary further directed EDD to temporarily stop collecting the certifications claimants must regularly submit that assert they remain eligible for benefits.”

So, California’s Employment Development Director Nancy Farias is blaming the Trump Administration when it was the Trump Administration which caught and notified the EDD that they could not suspend eligibility requirements.

The EDD is an executive branch agency, with oversight done by the Governor.

The Globe contacted the Governor’s Press Office in 2021 and asked, “With the latest scathing State Audit of the EDD, what can and will the Gov. Newsom administration do about this? The EDD is an executive branch agency, with oversight done by the Governor.” We heard back from the governor’s press office representative quickly, who said she was including the EDD in the email for their response on behalf of the Newsom administration.

The Globe received this word salad response from the EDD:

“As mentioned in the audit response letter from Director Rita Saenz (attached), EDD appreciates the auditor’s review and acknowledgement of the immensity of the challenges EDD has faced in this COVID-19 pandemic.  We recognize the work that lies ahead and are committed to implementing all of the auditor’s recommendations.

The EDD did not have the current UI Online system in the last recession 10 years ago.  We’re very grateful that it was implemented since then which has allowed us to automatically process a large majority of the avalanche of claims that came at California and every other state at the onset of the COVID-19 pandemic.  This way EDD was able process more claims in the first 8 weeks of the pandemic than we did in the entire worst year of the recession in 2010.  (4.1 million claims processed in first 8 weeks of pandemic versus 3.8 million claims in all of 2010.)

In the midst of the Great Recession and scarce State funds, the EDD was only authorized to replace the Continued Claims functionality, roughly 25% of Unemployment Insurance (UI) program functionality.  But EDD looks forward to tackling the rest of the system needs in a holistic way with the support of the administration and our IT partners.”

Former California Labor and Workforce Development Agency Secretary Julie Su was never held accountable and instead failed up with an appointment by President Biden to serve as the deputy secretary of labor at the U.S. Department of Labor.

Prior to being appointed California’s Employment Development Director by Gov. Newsom, Nancy Farias was Director of Government Relations at SEIU Local 1000 from 2017 to 2020. She was Deputy Chief of Staff in the Office of Senator Henry Stern from 2016 to 2017 and District Director at the Office of Assemblymember Mike Gatto from 2015 to 2016.