Multiple reports from the Employment Development Department (EDD) Wednesday found that over 1.4 million unemployment claims in California have been frozen since the New Year due to concerns over fraud.
The EDD has been battling fraudulent cases all year, with California turning down EDD audits several times to help locate fraud in favor of ‘strike teams’ formed by the Governor. While some larger EDD fraud rings, using information from incarcerated people, those in nursing homes, and other citizens largely unable to combat their information being used, were found out in September and October, the EDD did not find the largest source of fraud until December.
That month, the EDD found that $2 billion of the $110 billion given out in the form of benefits from the EDD this year had been fraudulent. Many of the fraudulent claims were especially egregious, such as over 100 claims being sent to the same address or some being in the name of famous people such as Senator Dianne Feinstein (D-CA). Outrage was swift from both lawmakers and taxpayers. Governor Newsom immediately put fraud teams into action, with his approval rating failing to recover from the fallout and helping spur the growth of the recall campaign against him.
With an added emphasis on fraud, the EDD spent the remainder of December locating unemployment benefit cases that were ‘potentially fraudulent’, eventually find around 3.5 million cases that fit that description by late December. Two million of the cases were immediately disqualified, such as those sent to inmates and some registered to deceased people, leaving 1.4 million to be suspended in January while the EDD takes a closer look at them.
The suspension of the accounts led over a million unemployed Californians to learn of the situation in the last week. Many found out from communication with the EDD, being told that “Your claim is suspended because it may be tied to fraudulent activity.” Others received notices in the mail reading “You have been receiving unemployment benefits, but we have temporarily suspended your claim because it may be tied to fraudulent activity. You will receive further instruction from EDD on how to verify your identity beginning Jan. 6, 2021.”
While initially silent, the furor of unemployment beneficiaries, who rely on the money to tide them over during the pandemic while they find another job or wait until their business reopens, led the EDD to make a statement during the weekend, days before the full number of beneficiaries in limbo was known.
“As part of ongoing efforts to fight fraud, EDD has suspended payment on claims considered high risk and is informing those affected that their identity will need to be verified starting this week before payments can resume,” tweeted the EDD. “More details on the EDD website in the days ahead.”
As part of ongoing efforts to fight fraud, EDD has suspended payment on claims considered high risk and is informing those affected that their identity will need to be verified starting this week before payments can resume. More details on the EDD website in the days ahead.
— EDD (@CA_EDD) January 3, 2021
The 1.4 million claimants will now have to prove their identities with additional documentation or by other means with the EDD to continue receiving unemployment benefits.
Outrage over the suspension of benefits
Many taxpayer groups and lawmakers from both sides of the aisle have come out against the decision to shut off benefits to this many people at once, noting that, due to high unemployment and the pandemic, the benefits are needed now more than ever.
“You know, the EDD was so swamped earlier this year that they gave quick yeses without looking deeper into each of the claims and checking them against others and if the person listed really was open to getting them,” said Linda Ballard, a Los Angeles-based accountant who works closely with COVID-19 economically affected people, in a Globe interview. “We’re now paying the price for that. First it was billions in fraud, and now we are holding back money for hundreds of thousands of people who paid into the system.
“I have a few clients that this happened to, and they’re all very scared of what will happen in the coming weeks if they aren’t restored. Not months. Weeks. This isn’t ‘oh no, I won’t be able to afford Netflix’ money either. This is ‘oh no, I may not afford food this week money’. Many have dropped services, including me as their accountant, because they’re finding everything possible to cut if they don’t get those benefits back. In some cases, California is now failing people it had failed before by locking down their business or place of work. It’s a mess.”
Lawmakers also noted concern over holding back the 1.4 million people from benefits.
“It’s very frustrating that EDD did this and we still haven’t heard back three or four days later,” said Senator Scott Wiener (D-San Francisco) on Wednesday. “I get that there’s a fraud problem. But when you have people who have been receiving benefits for a number of months, you don’t just shut off their benefits. If EDD needs additional evidence that someone is who they say there are, then ask for that information and give them a deadline before they shut it off.”
The EDD is expected to send additional instructions and update the public as to developments on the situation during the next week.