On Thursday, Republican members of the House Oversight Committee demanded that they begin an investigation into California’s Employment Development Department $11.4 billion fraud case.
Fraud cases began to show up in the early days of the COVID-19 pandemic in March and April of 2020. The skyrocketing number of new claims quickly overwhelmed the system, causing many claims to be approved quickly. As the pandemic continued on, the vast majority of fraudsters began to concentrate around the Pandemic Unemployment Assistance Program, which focused on giving benefits to those who would otherwise not receive them, such as independent contractors and gig workers. Due to the looser restrictions and the EDD not doing complete due diligence, claim numbers began to rise dramatically.
While there were many early warning signs that fraudsters were severely abusing the program, such as a large number of arrests in the Los Angeles area in September of 2020, total figures didn’t begin to be released until December. That month, Bank of America estimated that $2 billion of the $110 billion that had been given out as unemployment benefits on issued debit cards had been given to fraudsters. Estimates quickly rose in subsequent weeks, shooting up to $8 billion, and then $11.4 billion by late January, with some estimates now putting it as high as $31 billion. Subsequent audits in January and February even found that beneficiaries of the fraudulent accounts included criminals in China and Russia.
California Labor and Workforce Development Agency Secretary Julie Su admitted last month that the state had been unprepared for such fraud.
“There is no sugarcoating the reality,” explained Secretary Su. “California did not have sufficient security measures in place to prevent this level of fraud, and criminals took advantage of the situation.
“It should be no surprise that EDD was overwhelmed, just like the rest of the nation’s unemployment agencies. As millions of Californians applied for help, international and national criminal rings were at work behind the scenes working relentlessly to steal unemployment benefits using sophisticated methods of identity theft.”
While the EDD began to make corrective measures, including temporarily suspending 1.4 million accounts, some of whom had legitimate claims, others, including Governor Gavin Newsom, didn’t give any additional assistance. With Su now confirmed as the Undersecretary of Labor in the Biden Administration and Newsom now facing an all but certain recall election due in part to his EDD fraud inaction, the U.S. House began pulling for an investigation over the fraud on Thursday.
House Oversight Committee members want federal investigation into fraud
Oversight Committee Member James Comer (R-KY) wrote a letter in conjunction with Congressmen Darrell Issa (R-CA) and Gary Palmer (R-AL) to Committee Chairwoman Carolyn Maloney (D-NY) asking for a public hearing on how possibly over a quarter of all unemployment benefits given in California turned out to be fraudulent, how claimants were given funds despite suspicious information such as dead individuals applying for funds and dozens of claims going to the same address, and how EDD fraud is still continuing today.
“The evidence of unprecedented fraud, waste, mismanagement and incompetence is too voluminous to briefly reference,” wrote Congressman Comer on Thursday. “By any objective measure, we believe this Committee is obligated to schedule a public hearing to comprehensively examine what went wrong in California, the steps being taken to recover the improper payments, and the steps being taken to prevent it from happening again.
“Therefore, there is every reason to be concerned that this unprecedented fraud may be ongoing even today. The oversight California conducted was by all accounts too late and wholly insufficient. As a result, unsuspecting law abiding Californians, locked at home by Governor Newsom, were no doubt put through additional stress.”
In a Fox News interview on Thursday, Comer explained his letter in more detail and chastised Secretary Su for not doing enough to stop the fraud.
“If Ms. Su cannot effectively root out rampant waste, fraud and abuse at the state level, how can she be entrusted to be second in command at the Department of Labor?” added Congressman Comer on Thursday. “The House Committee on Oversight and Reform needs to get to the bottom of this massive unemployment fraud scheme and the Senate must also take this into account during Ms. Su’s confirmation hearing.”
Financial experts noted that the figures themselves spoke for themselves.
“More and more people are becoming upset with this,” noted Linda Ballard, a Los Angeles-based accountant who has been helping people affected by the COVID-19 recession. “I have clients who can barely afford to survive right now fighting for every cent they get from their unemployment benefits, and then you see California just throw over $11 billion into a money pit. That’s a shocking amount of money that could have, if anything, gone back to the unemployed for larger benefits or to help small businesses who are struggling or, really, anything like that. But the state took their eye off the ball for literal months with no one doing anything to stop it for a long time despite warning signs.
“We need that federal investigation. When the feds come, it becomes really hard to hide or withhold information from them. We can fix the system, or at least come up with a way to better give out unemployment and then find out who exactly is to blame here and make sure it doesn’t happen again . That’s what we need.”
As of Friday, Congresswoman Maloney has yet to respond or take action on the letter from Committee Republicans.