It’s Time Former ‘Acting’ Labor Secretary Julie Su Faces Heat For California’s Pandemic Fraud

In 2020 during Governor Gavin Newsom’s statewide Covid lockdown, he announced the formation of a “strike team” to solve numerous issues plaguing California’s unemployment agency, the Orwellian-named “Employment Development Department: long wait times for unemployment claims, delayed payments, phone delays, and the EDD’s struggles in dealing with a record number of unemployment insurance claimants.

But it only got worse.

In 2021, the California Globe reported for months on end about the horrific fraud in California’s unemployment agency: the backlog of millions of unfulfilled unemployment claims, and fraudulent unemployment claims following Governor Gavin Newsom’s pandemic lockdown was first ordered in March 2020.

While in charge of the EDD, California’s Secretary of Labor, Julie Su was informed very early on in the pandemic that the unemployment department was being looted by fraudsters but did nothing to stop it until months later – after $55 billion disappeared.

Under Su’s leadership, more than $55 billion was sent to prison inmates in California’s county jails, and state and federal prisons, out of state, and even out of the country, while legitimate claimants were stiffed for months, or received late payments.

The money was federal funding – Coronavirus Aid, Relief, and Economic Security (CARES) Act Funding – it was sent to the state and flowed through the EDD.

For her incompetence, California Labor Secretary Julie Su was not fired for negligence, nor was she brought up on charges or made an example of – she instead “failed up,” with a prominent position in President Joe Biden’s administration as Deputy Secretary of Labor. The State of California often promotes terrible state employees, up and out to other agencies. This “promotion” took Su out of the state entirely, and out of harms way.

Yet the Globe continued reporting on Julie Su’s wake of destruction because $55 billion disappeared, and she was then promoted to US Secretary of Labor – although she was never able to get through the confirmation process, and was “Acting” Secretary of Labor.

But even as “Acting” Secretary of Labor, Su forgave $32.6 billion of California’s debt.

Su was responsible for the state’s unemployment fraud, and then when she was Acting US Secretary of Labor, she forgave California’s debt to the federal government.

In addition to the $55 billion, the EDD owes the federal government more than $20 billion it borrowed during the pandemic just to cover regular state benefits.

Su’s move doesn’t just look dubious, it smells to high-heaven. Senators Bill Cassidy (R-LA) and Makie Crapo (R-IN) were very worried that Su was “making her own $55 billion mistake go away while doing a serious favor for potential Democratic presidential candidate Gavin Newsom,” the Globe reported.

Senators Cassidy and Carpo demanded that, by May 22, 2024, Su’s department answer the following:  

1. California’s 2022 Annual Comprehensive Financial Report notes “EDD is waiting on final federal approval of EDD’s request as indicated in the February 2024 letter before the event [applying finality laws to CARES Act claims] can be recognized in financial statements as a forgiveness of debt.”^[10] 

1. 1. What is the current status of DOL’s review of California’s request to apply finality laws to outstanding liabilities incurred to the federal government? 

1. 2. What steps is the DOL taking to ensure that California’s application of finality law is not being applied to suspected or confirmed benefit claims involving fraud, misrepresentation, or willful nondisclosure? 

2. Detail all actions of which DOL is aware that California’s EDD has taken to recover all fraudulently paid UI funds provided by the federal government through the CARES Act.  

1. 1. Does DOL believe such steps constitute all reasonably necessary actions to recover those funds?  

2. 2. If not, what additional steps does DOL believe EDD must undertake to recover the lost funds?  

3. Describe all retroactive actions DOL required the State of California to implement pursuant to DOL’s authority under the CARES Act.  

1. 1. Prior to issuing Unemployment Insurance Program Letter No. 05-24, did the State of California successfully implement all such retroactive requirements?  

3. 2. If not, which requirements did the State of California fail to implement?   

4. Describe any (1) modernization and (2) anti-fraud efforts or recommendations DOL has advised the State of California to implement using funds from the American Rescue Plan Act of 2021. 

1. 1. Prior to issuing Unemployment Insurance Program Letter No. 05-24, did the State of California successfully implement all such modernization efforts?  

4. 2. If not, which efforts did the State of California fail to implement?   

5. Since 2020, how much funding did the State of California receive from the DOL to recover UI fraud under the American Rescue Plan Act and the CARES Act?  

6. Have you discussed the funds lost to UI fraud administered by EDD with any California state government officials since becoming Deputy Secretary of Labor on July 13, 2021?  

1. 1. If so, please detail with whom you discussed UI fraud losses, when you had that discussion(s), and a general summary of what was discussed.  

6. 2. Provide all written correspondence or evidence of any scheduled conversations regarding funds lost to UI fraud in California since 2020.  

7. Please provide all correspondence between the DOL and California state government officials regarding Unemployment Insurance Program Letter No. 05-24. 

Back in 2021, the California State Auditor completed an audit of the EDD. “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,” the audit reported. “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.”

The Auditor said the EDD was 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 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.

So Julie Su knew about the inherent problems at the EDD but did nothing to fix the problems, or at the least, make improvements.

But what led to the $55 billion in fraudulent claims was when 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.

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.”

Now would be a good time for President Trump’s new Department of Justice to look into California’s $55 billion in fraudulent unemployment payments made during the Covid lockdowns, as well as “Acting” Secretary of Labor Julie Su’s decision to forgive California’s debt covering the fraud.

Throughout the country, approximately $215 billion of the $900 billion unemployment benefits paid was lost to fraud and other “overpayments.”  It now appears that California was responsible for about 30% of that $215 billion.

President Donald Trump named Oregon Rep. Lori Chavez-DeRemer to lead the US Department of Labor. We hope she’s no Julie Su.