Home>Articles>California EDD Blamed Fed Program for Fraud – New Numbers Show That is Impossible

EDD returned mail. (Photo: CA State Auditor)

California EDD Blamed Fed Program for Fraud – New Numbers Show That is Impossible

Nearly $40 Billion Was Lost by the EDD

By Thomas Buckley, February 11, 2023 10:53 am

New federal Department of Labor figures regarding the massive looting of the nation’s unemployment insurance systems during the pandemic show that California’s improper payment figure has climbed again and is now estimated to be nearly $40 billion.

Labor Department Inspector General Larry Turner testified in front of Congress Wednesday that an estimated 21.5% of the $888 billion paid out in unemployment benefits across the country were improper.  That means $191 billion dollars were lost to fraud and other more typical bureaucratic incompetencies.

What that means for California is that nearly $40 billion – or about $1,000 per state resident – was lost in the wind.

The state Employment Development Department was contacted multiple times to elicit comment.  As has been typical in the past, the EDD did not avail themselves of the opportunity. 

In the past, the EDD has claimed that “95%” of the fraud losses were directly related to the federal PUA (pandemic unemployment assistance) program. The new figures show that could not possibly be true.

PUA – which offered assistance to those who would not normally qualify for benefits like independent contractors, freelancers, etc. –  was only one of the federal unemployment programs created at the start of the pandemic and accounted for about 15% of the overall national (state and federal) payment total of $888 billion. Regular state funds, the FPUC (the $600 then $300 weekly supplement that was available for about a year during the pandemic,) and other programs made up the rest.

Turner added the fraud estimate percentage for the PUA itself – unlike all of the other programs – has not yet been determined though he expects it to be higher than the 21.5 % averaged by all other payment types.

The PUA program has been considered the easiest target for fraudsters as some states, like California, required virtually no identity conformation to qualify for the benefits, hence claims made in Sen. Dianne Feinstein’s name sailed through the system (as did claims made by thousands of prisoners, out-of-state residents, and foreign nationals.)

Eventually the EDD did bring in an outside identity verification firm – ID.me – which reportedly did staunch the fraud flow, though EDD also caused legitimate claimants to have their benefits halted for up to two months in the process.

The EDD still claims only $20 billion total was lost, of which 95% was PUA related.  However, California’s share of PUA spending is most likely to be in the $25 billion range (akin to the national 15% percent of the total state spending) meaning that 76% of all PUA expenditures would have had to be fraudulent and/or improper.

And if the national estimate of 21.5% is correct (it may be slightly lower at 20%, though as the PUA percentage has yet to be determined it may be higher) the EDD lost between $37 and $40 billion.  If the EDD’s 95% claim is to be believed, that would mean that the PUA program would have had to somehow manage to lose about $36 billion of the estimated $25 billion it spent  – a mathematical impossibility.

As noted above, attempts to have the EDD clarify the figures – and to explain the impossible estimate they have been touting for more than a year –  were met with silence.

It should also be noted the EDD has ludicrously claimed that their non-PUA fraud rate actually went down during the pandemic

The new figures also show that, while having only 12% percent of the nation’s residents, California accounted for about 21% of all unemployment expenditures during the pandemic and about 22% of the fraud and other improper payments made nationwide.

This raises the specter of international gangs specifically targeting the state because they quickly became aware of how lax the system was, a system the EDD took more than seven months to put in even the most basic safeguards. Identity experts have said previously that the EDD, even with its antiquated tech systems, could have added a “bolt on” security program for a few million dollars in about a week’s time very early in the pandemic.

Exactly how much California received – and lost – as part of the PUA system should become clearer when the Department of Labor completes its PUA audit in the coming months.

At the end of January, new EDD chief Nancy Farias – formerly a labor union “government relations” human – told the Sacramento Bee that she blamed the problem on the Trump administration for neglecting “state efforts to combat domestic and foreign criminals collecting billions of dollars fraudulently from overwhelmed unemployment systems.”

Exactly how the Trump administration could have been at fault remains unclear – for example, when the EDD finally added some security “friction” to the system, Trump was still president and his administration clearly did not stop them from hiring ID.me and, therefore, undoubtedly would not have stopped them from doing so earlier on in the pandemic.

It should also be noted the Trump administration provided the EDD with an additional $788 million just to cover the department’s additional administrative costs caused by the pandemic.  With a typical annual administration/operations budget estimated to be in the one billion dollar range, that amounts to an annual budget bump of about 40% during the pandemic.

A Department of Labor spokeswoman said they will be spending about $1.6 billion around the nation in the coming months in an attempt to modernize and secure unemployment benefit systems.

Oh, and as of midnight, February 9, the EDD owes the feds $18,507,914,539.74 in principal and  $107,155,511.76 in interest, money that will be paid back by increasing the unemployment insurance taxes state businesses pay.


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29 thoughts on “California EDD Blamed Fed Program for Fraud – New Numbers Show That is Impossible

  1. I don’t understand the fraud. If you didn’t turn in a tax return, whether you owed taxes or not (child tax credit), you don’t get a check. The same for the high cost of gasoline check. If you don’t have a registered car with DMV, you don’t get a check.

  2. Thank you for your work on this UNBELIEVABLE fraud, Thomas Buckley. It’s almost as though the parties were shooting for it to be the BIGGEST and BEST California scandal in its story. My first suspicions of EDD employees handing out payments to their friends and relatives and ignoring those who actually NEEDED the unemployment funds seems like Amateur Hour in Crooksville compared to what we are seeing as this story unfolds. The chaos is overwhelming. The EDD head blaming Trump is the icing on the cake. That and what we now owe the Feds.(!!!) Let’s blame Newsom entirely, okay? And as a feel-good gesture I’ll ask that he serve a very long prison term. But will we ever see consequences for something as outrageous as this?
    Saw a somewhat-related headline earlier today that “burglary tourism” is becoming a problem in Southern California. They’re traveling from other countries to do it! Then traveling back home! Gaaahhh!

    1. Always “Orange Man Bad!” when they don’t want to be accountable for something. He has lived rent-free in their heads at high rental prices for years. It would be utterly laughable if it weren’t so sickening. And the Dims wonder why people can’t wait to leave California. As a small business owner, I can’t stand giving the leaders of this poorly run state any more opportunities to abuse the taxpayers. They do it with panache and utter nonchalance, as if they are entitled to squader the fruits of our labor and lives in any manner they wish. Their utter contempt for us, lack of respect, and lack of regard stinks to high heaven.

  3. EDD is rife with fraud? Along with bogus claims made by thousands of prisoners, out-of-state residents, and foreign nationals, maybe the Democrat cabal is also siphoning off some of the money? New EDD chief Nancy Farias is as much of a dimwit as Gov. Newsom who installed her? How much confidence should we have in the Department of Labor’s PUA audit with the Biden regime in control?

  4. Here is a small snapshot as part of the big picture of the ENORMITY of the California EDD fraud:
    KABC 790 radio host John Phillips tells the story of visiting high-end Fleming’s Steakhouse in Las Vegas for his birthday at the height of the pandemic. Upon entering the restaurant John, who is in his early 40s, noticed the place was PACKED, and that everyone there appeared to be at least 15 years younger than he was. The waiter who came to take their order seemed harried and distracted and had to take a steadying breath. John asked him if anything was wrong. The waiter proceeded to tell him that every single person in the packed restaurant that evening was paying for dinner with a California EDD card. What’s more, when customers were asked for I.D. to confirm age for alcohol, the waiter discovered that every single one of them was from out of state. And, as John notes, because they were criminals, they were all ill-mannered and behaving badly, which explained the waiter’s distress.

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