California EDD on Fed Hotseat

California’s Employment Development Department is in the crosshairs of Congress’ Committee on Oversight and Accountability for its poor handling of its pandemic benefit programs.

It is estimated that $191 billion was lost to “improper payments” across the country by various unemployment agencies; California’s share of that is estimated to be about $40 billion, or about 22% of the total loss while having only 12% of the nation’s population. – https://californiaglobe.com/articles/california-edd-blamed-fed-program-for-fraud-new-numbers-show-that-is-impossible/ .

In January, Committee Chair James Comer (R-Kentucky) – citing the massive amount of money the department appears to have lost to fraud and otherwise –  demanded the EDD provide:

1. All processes and procedures related to the disbursement of unemployment insurance benefits during the pandemic, including policies and procedures intended to ensure payments are made to the proper individual, and to ensure that the individual is a qualified recipient of unemployment insurance;

2. All documents and communications between employees of the California EDD and employees of the U.S. Department of Labor regarding the state’s UI benefit program;

3. All documents and communications related to efforts to prevent payment of fraudulent UI claims;

4. All documents and communications related to efforts to recoup UI claims paid improperly; and

5. All documents and communications related to identifying the total number of improperly paid UI benefits and documents sufficient to show whether those funds remain in the United States or were transferred to entities outside the United States.

While the detailed EDD responses are not due until Wednesday, department chief Nancy Farias did send an initial response in which she blamed the Trump administration for the massive fraud, stating, in part, “… we object to the Chair’s mischaracterization of California’s response to the UI fraud attacks and the Chair’s failure to acknowledge the inadequate response by the Trump Administration, which left neglected state UI systems fighting domestic and international criminal enterprises effectively on their own.”

This claim appears to fly in the face of a California State Auditor’s report that states flatly that the feds “warned the state at least three times in the early months of the pandemic to beef up its fraud protections,” as the Globe recently reported.

Farias also claimed the EDD implemented security programs – which it did, but only months after the start of the pandemic – and went out of her way to praise the Biden administration for establishing “interagency strike forces” to address unemployment fraud.  Whether or not this obviously political tack by Farias is appropriate is unclear, but it is clear that the EDD could have added anti-fraud “friction” to its system on its own – no matter the feds – at minimal cost very early in the pandemic.

The EDD – as per usual – did not respond to a request for comment.

Interestingly, both Comer and Farias cite international fraud gangs as a major driver of the problem, though Comer added that the stolen money has been used to directly harm the United States. “In other words,” Comer wrote, “California is funding criminal organizations by failing to adequately prevent UI fraud.”

A committee staffer said they will review the expected documents to determine if they are “responsive” upon their arrival.

When that review will be completed and if/when Farias and the rest of the EDD team will be called to testify under oath in front of Congress is not yet finalized.

Finally, as of midnight Feb. 13, the EDD owed the feds $18,554,020,487.93 in principal and $110,558,136.17 in interest.  That is $49,504,572.60 million more than the last time these figures were noted in the Globe, on Saturday.

Note – Both letters can be seen at the bottom of this article.