Home>Articles>CA Labor Secretary Julie Su is ‘Failing Up’ After Massive EDD Fraud and Failures

California Secretary of Labor Julie Su. (Photo: CA.Gov)

CA Labor Secretary Julie Su is ‘Failing Up’ After Massive EDD Fraud and Failures

Su suspended eligibility requirements for EDD claimants

By Katy Grimes, January 26, 2021 12:05 pm

California Globe has been reporting for months on the horrific fraud in California’s unemployment agency, the Orwellian-named “Employment Development Department.”

In July, Governor Gavin Newsom announced the formation of a “strike team” to solve numerous issues plaguing the Employment Development Department, including resolving the backlog of millions of unfulfilled unemployment claims, and fraudulent unemployment claims since the coronavirus pandemic lockdown was first ordered by Gov. Newsom in March.

We now know that upwards of $31 billion dollars in unemployment claims has been 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 have been stiffed for months, or received late payments.

Overseeing the EDD is California Labor and Workforce Development Agency Secretary Julie Su, who confirmed Monday 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.

The State Auditor just completed an audit of the EDD. They explain:

“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.”

The Auditor says 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.

Secretary Su said another $20 billion may have also been stolen by identity thieves and foreign criminals, possibly making as much as 27% of all EDD unemployment benefits being sent to fraudsters last year, the Globe reported.

The current confirmed number, $11.4 billion, or around 10% of all unemployment funds given out, dwarfs the previous released amount, which was at $2 billion in early January. While there were some concerns that it could go as high as $8 billion, no estimate had even come close to $11.4 billion until Su’s announcement Monday.

“There is no sugarcoating the reality,” Secretary Su said. “California did not have sufficient security measures in place to prevent this level of fraud, and criminals took advantage of the situation.”

For her efforts, California Labor Secretary Julie Su is “failing up,” and is being considered for a prominent position in President Joe Biden’s administration as Deputy Secretary of Labor. California often promotes terrible state employees, up and out to other agencies. This “promotion” would take Su out of the state entirely.

Assemblyman Jim Patterson. (Photo: Kevin Sanders for California Globe)

Assemblyman Jim Patterson (R-Fresno) held a Zoom press conference Tuesday to discuss the EDD audit.

“It was the pandemic that blew up the EDD,” Patterson said. He explained that because the EDD knew of these internal issues for more than a decade, they also knew they could not withstand an inevitable economic downturn or recession.

The audit found that the EDD call center is essentially worthless, Patterson said. “They weren’t even answering their calls,” he explained, saying EDD employees were not equipped to handle the calls, so they just didn’t answer the phones at the call center.

But what led to the $31 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.”

Consequently, the fraudulent payments that have been paid are gone. It will be legitimate claimants who will be contacted by the EDD to repay overpayments because of the suspension of eligibility requirements. “They will be held to a higher standard and forced to repay,” Patterson said.

“The real come-away for me was the eligibility suspensions, and now those legitimate claimants will be part of a claw-back when they can least afford it,” Patterson added.

“EDD suspended the work necessary to make most eligibility determinations in order to better manage its workload,” the audit reported, ostensibly to make claims processing go more quickly.

Assemblyman Patterson has long advocated for private sector involvement from Silicon Valley experts, whether it is within the EDD or the DMV and their long histories of gross IT mismanagement and failures.

“The way you get out of the catastrophe is to not make the same mistakes and not appoint the same people,” Patterson said. He said the state needs to “ask qualified people from the private sector to get this thing fixed.”

Most notably, Assemblyman Patterson said the EDD is an executive branch agency, with oversight done by the Governor.

The Globe contacted the Governor’s Press Office 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 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.”

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27 thoughts on “CA Labor Secretary Julie Su is ‘Failing Up’ After Massive EDD Fraud and Failures

  1. Thanks for the yeoman’s work you do to try and provide some transparency, Katy.
    As you may be aware, it is common for State technology contracts to contain provisions that tell providers they may not propose or implement solutions that might create efficiencies that would promote a reduction in State staffing. In other words, our State government prohibits firms from providing the efficiencies that private sector companies and employees, have been subjected to for decades – doing more with less. Newsom has legal authority to invalidate every one of those provisions.
    Fundamentally, the State recognizes no floor in the level of services it provides for the ample treasure it collects. Prisons and schools have both been found to not provide a Constitutionally required minimal level of service. Rather than return to the practices in place when California was the national standard of excellence (without the benefits of todays technology), Newsom vows that we will “never go back” (to when we had a high functioning government at lower levels of cost). More lawsuits will be necessary to force government to implement even the most basic improvements.

  2. Wait til CA installs SINGLE PAYER its coming – Democrats are really pushing for larger more controlling gov by the minute and EOs

  3. So is anyone working on solving the issues? Or is everyone getting a promotion? This is outrageous! Heads should roll!

    1. Barbara Ferrer and the LA County BOS engage in the same phony behavior congratulating each other for great leadership which is nonexistent as evidenced by the incredibly high number of COVISD19 deaths in their county. Leadership? Where? She needs her ass kicked out the door!

    2. You’re lucky they’re not handing each other wall plaques in appreciation of their excellent work.
      I’ve actually seen that before. Then they posed for a group photo.

  4. Sad this is happening in the hi tech Capitol of the World. The resources are here, people, hardware, software, etc. This shouldn’t have happened and it most certainly can’t continue. When the Bleep will folks wake up!

  5. This is what happens when you have a numbnut Governor with no real world management experience or understanding of oversight…
    Recall his greasy hide!!! BILLIONS (WITH A “B”) of OUR tax dollars have been WASTED by this dipsh#t Governor and his crew of incompetents!!!
    SO frustrating!!!

  6. Female and a minority so she ticks off two boxes with one hire. That’s all that really matters in Leftist California 2021. Thank goodness she isn’t one of those old white males…

  7. The News outlets are broadcasting information on California’s claim for: EDD UI, PUA, PEUC, FED-ED for those about claimants that are living inside California, but nothing about those that are now residents to other States. Why is there a lack of attention to these groups of applicants? I myself is in this group. I was laid-off from my last employer in 2018. I filed a claim for California UI benefit after lay-off notice but was redirected to DI (disability insurance) part of the CA EDD UI benefit system because I was subsequently diagnosed with cancer that had to be treated and therefore can not work and was available to work until my doctor clear me to go back to work. I was qualified for DI benefits and was paid in October 2018 through 2019. My last DI payment in May 2019 was for April 2019. At this time my DI benefit has been exhausted, but my “regular UI benefits” still carried a balance because I haven’t claimed for it. I was in recovery from April 2019 and moved out of California from a rental home I lived in for more than 10 years. I had to move because my landlord passed away and his family took over the property, and can not afford the rent increases being imposed in order to stay there. Subsequently, I moved to AZ in November 2019 then settled in as AZ resident by February 2020. At his time, the pandemic started and jobs availability for me weren’t there. In May 2020 I applied for unemployment benefits and Maricopa County directed me to apply UI benefits at the county/State where my last employment was located. This was at Santa Clara County, California. So I applied on-line for CA EDD UI benefits. EDD responded that they will automatically apply PEUC on my behalf if my claim has been exhausted for the 2018 base period. I received a notice of determination indicating I am eligible for it as noted in the letter January 2, 2021. My UI claim was filed on May 2020 and it is now just a couple of days before February 2021 and as of today; Although, I received EDD’s determination of eligibility, and news has indicated EDD has distributed benefits for backlogs at 99.9%, I have yet received benefit payment for my claims. Is my move to out-of-state have anything to do with my situation? No one is covering news or information on how out-of-state claimant should proceed if payment aren’t received or how to get a status for their claim. Can some there assist?

    1. My understanding is state disability is only for one year then Federal eligibility is determined and it sounds like you didn’t qualify. So back to UI and you hadn’t worked the eligible quarters but eligible for peuc. Does your letter have contact information and what do they respond? Sorry I don’t know how that system works.

  8. All of the problems which has been discovered within the EDD is just only the “tip of the iceberg”. This EDD situation is why I consider living in California “paradise lost”.

  9. It appears that many workers in the EDD actually enjoy making decent people SUFFER while helping criminals get benefits. This is sadism at its best.

  10. Thank you very much, EDD. You’ll are the reason why I am homeless (been living in 4 different homeless shelters since Feb. 2020) and I became homeless just ten days after having heart surgery. Oh, by the way, I am a 59 year old veteran with a honorable discharge (from the Marines in 1986).

  11. Wow, just like the EDD, It appears that I am being “frozen out” in here as well. I have post two comments and they both have been deleted. Maybe I have used the word “veteran”. This will my last comment.

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