On Monday, Bank of America, the bank selected by the Employment Development Department (EDD) to be behind their unemployment benefit debit cards, announced that fraudulent cases could be as much as $2 billion.
The EDD estimate of the fraudulent cases, which had previously been only calculated in the millions of dollars, also expanded the number of suspicious accounts to roughly 640,000 in California. As $110 billion has already been paid out among all accounts since March due to a record high of new COVID-19 cases, about $1 out of every $55 given out has been fraudulent.
Many cards have now been red-flagged, especially those in the name of children, people over 100 years old, those living outside of California, and those that have had more than a few sent to the same address. 76,000 cards alone were sent to people living out of the state, with some addresses getting as many as over 100 EDD cards in the mail. And the $2 billion was just the latest as $400 million had been reported to have been sent to prisoners and others in jails only a few weeks ago.
“The bank has worked with EDD to establish fraud prevention measures including a series of filters and flags that indicate suspected fraudulent activity,” said the Bank of America director of California Government relations Brian Putler in a letter to the state legislature on Monday. “As a result of these efforts, we have identified more than 640,000 accounts for EDD to evaluate as to whether they are fraudulent and the associated card should be frozen or account closed.
“Our assessment is that there is activity consistent with fraud in those accounts on the order of approximately $2 billion. The scale of program fraud in California is unique.”
As of Tuesday, the state has yet to confirm Bank of America’s findings and will take a more delicate approach as they don’t want to cut any legitimate unemployed beneficiaries off due to the heightened need during COVID-19 and the economic downturn.
“At this time, we are unable to confirm the estimate that Bank of America provides because EDD is verifying identities on claims the department has separately identified as non-fraudulent,” noted deputy secretary for the California Labor and Workforce Development Agency Crystal Page. “The Governor has made it clear we must weed out all abuse of our unemployment system.
“We know how critically important these unemployment benefits are during this challenging time.”
Taxpayer outrage over the missing $2 billion
However, the news of $2 billion being taken from the state and taxpayers led to many groups and organizations denouncing how the Bank had let this happen without noticing for so long.
“It is outrageous,” said the Howard Jarvis Taxpayers Association in a statement. “We understand that there was an effort to push as much money into the economy as possible but there has got to be some controls. Here it is like they have opened up a bag of cash in the middle of a tornado and hoped that it ends up someplace where it is supposed to be.”
Many other citizens groups and taxpayer watchdogs were equally upset at Monday’s announcement.
“This is $2 billion of the taxpayers money that they won’t see again,” exclaimed Linda Ballard, a Los Angeles-based accountant who has worked exclusively with clients who have been unemployed because of COVID-19 since March. “That could have gone to build schools. That could have been broken down into relief for shops and restaurants. It could have been made into a $50 check for every Californian. But no. A bank didn’t realize for most a year that there was nothing suspicious about hundreds of EDD cards being sent to the same address. Or that babies were getting them.
“This is genuinely upsetting. California, in many cases, took months to even begin sending out payments for people, has been backlogged for months, and now, all this time, a large percentage of the money that did go out went to scammers. At we still don’t know the full extent still. They’re just estimating $2 billion right now. It could be higher.
“If it is, California would have been better off just dumping $2 billion in cash onto neighborhoods from planes. It’s that ridiculous.
“The state just lost $2 billion to a scam and no one seems to be angry about this. It’s really upsetting.
“Actually over that if you count the prisoner losses that just happened. So really it’s been $2.4 billion.”
Bank of America also noted on Monday that much of the fraudulent money likely went to criminals supporting everything from arms deals to possible terrorism.
“We share with you and with EDD the objective of ensuring that legitimate claimants get the benefits they deserve while mitigating the impact of the unprecedented fraud being experienced,” added Putler on Monday.
Bank of America and the state of California are currently working to rectify the situation and to figure out the total amount taken by fraudsters since the pandemic began in March.