California Says Unemployment Fraud During Pandemic Cost Taxpayers Up To $31 Billion

(Frederic J. Brown/AFP via Getty Images)

Varun Hukeri General Assignment & Analysis Reporter
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California’s Employment Development Department (EDD) confirmed Monday that $11.4 billion in unemployment benefits paid during the coronavirus pandemic involve fraud and an additional $19 billion in suspicious claims are under investigation.

EDD officials blamed hackers, identity thieves and overseas criminal rings for the fraudulent payments — accounting for nearly 10% of unemployment benefits from the state since the coronavirus outbreak began last year. Almost all of the fraudulent claims were made through the federally funded Pandemic Unemployment Assistance program, the Associated Press reported.

“There is no sugarcoating the reality,” state Labor Secretary Julie Su told reporters during a press conference Monday. “California has not had sufficient security measures in place to prevent this level of fraud, and criminals took advantage of the situation.”

California has offered $114 billion in unemployment benefits since March 2020 and roughly 19 million claims have been processed by the EDD, according to a statement from the department. The state’s lockdown policies and other restrictions also led to a spike in unemployment as businesses were forced to close or cut back on operations.

California’s unemployment rate rose 0.9% in December — the first monthly increase in unemployment since April 2020. The state also lost 52,200 non-farm payroll jobs, according to data released Friday by the EDD.

California ended last year with a 9% unemployment rate, notably higher than the 6.7% nationwide rate reported by the Bureau of Labor Statistics. (RELATED: Petition To Recall Gavin Newsom Reaches 1.2 Million Signatures)

“It should be no surprise that EDD was overwhelmed, just like the rest of the nation’s unemployment agencies,” Su told reporters Monday. “And we now know that 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.”

Officials noted the state is continuing to struggle with a backlog of claims that have not been approved roughly three weeks after being filed, according to the Los Angeles Times.

The EDD announced in a Dec. 31 statement that 1.4 million unemployment claims would be frozen pending an investigation into the widespread unemployment fraud.

The state’s Labor Department may also be losing its top official, potentially complicating efforts to address unemployment fraud and the backlog. President Joe Biden has reportedly picked Su to become deputy secretary at the U.S. Department of Labor, according to Bloomberg Law.