Fact check: Did Trump’s White House fail to prepare California for massive unemployment fraud?
Claim: California officials say the Trump administration made it difficult to deal with the widespread fraud that has shaken the state’s unemployment insurance system.
Rating: Partially true.
Details:
About $11 billion in fraudulent California unemployment claims have been paid so far, and the state’s Employment Development Department estimates that another $19 billion in claims are suspicious.
The Newsom administration is under fire for its handling of the fraud, with multiple legislative hearings and audits underway.
The state’s top unemployment agency officials — named to their positions by Democratic Gov. Gavin Newsom — recently targeted the Trump administration as a big obstacle to their efforts to combat fraud.
The Trump administration “did not provide adequate guidance or information to protect against fraudulent rings state by state,” California Labor Secretary Julie Su, whose department oversees EDD, told a news conference.
“The Trump administration provided insufficient support to states to address the aggressive attacks by domestic and international criminal syndicates,” EDD Director Rita Saenz wrote in response to a state audit critical of the state’s handing of fraud allegations.
California did receive warnings about the potential for fraud after Congress created a federal program to provide unemployment benefits to self-employed workers on March 27.
Six weeks after the new benefits began, the U.S. Labor Department sent states a detailed advisory warning of a “heightened need” to take steps to curb fraud. It periodically issued similar warnings throughout 2020.
A state audit released recently was critical of how EDD responded to federal advice.
California State auditor Elaine Howle found that in response to the COVID pandemic, the federal Labor Department specifically “advised states about how to determine whether an individual was able and available for work in light of the pandemic.
Labor said that if someone appears to be ineligible for benefits, “EDD staff must conduct additional work—such as an interview with the claimant—to make an eligibility determination.”
But, the audit said, “EDD suspended the work necessary to make most eligibility determinations in order to better manage its workload.”
California unemployment agency leaders say they did not get much useful direction from Washington about what organized crime rings were doing at both the domestic and international levels.
The program largely targeted by criminals has been the federally-funded Pandemic Unemployment Assistance, which allows self-employed people and others who usually do not qualify for traditional benefits to receive payments. Currently, unemployed Californians can receive up to $750 weekly in PUA.
EDD spokeswoman Loree Levy told The Bee that the warnings Labor issued last year “did not include specific information that would alert states to, and support them in, deterring the onslaught of sophisticated scammers sitting on a treasure trove of stolen identity information from the dark web.”
When EDD saw a big jump in PUA claims in August, she said, the agency requested and received approval from the U.S. Department of Labor to stop the automatic backdating of claims — a popular tool for criminals — and PUA claims plunged. The Labor Department then urged other states to do the same a few weeks later.
Experts agreed that while Labor did issue detailed warnings to state agencies around the country, neither it nor state departments foresaw the scale of the identity theft.
“It was something new across the board,” said Alexa Tapia, the National Employment Law Project’s unemployment insurance campaign coordinator. Tapia oversaw the Kansas Department of Labor’s COVID rapid response program last year.
In the pandemic’s early days, she said, “there was ever-changing guidance on who could receive benefits when the focus should have been on creating safeguards in entirely new programs that states had to stand up essentially overnight and increasing access for those who have been hit the hardest like Black and Indigenous People of Color in a nationwide crisis..”
The massive fraud identity theft, combined with state unemployment systems that were technologically antiquated, created unforeseen problems.
“At the end of the day the real villain is the lack of a modernized unemployment insurance system combined with policies that don’t center Black and Indigenous People of Color, like we’ve seen in Florida who has a modernized system,” Tapia said.
Washington’s fraud warnings
Among the federal guidance and advisories:
▪ May 11. Six weeks after the PUA program was created, the Labor Department sent a 13-page advisory to states saying it “strongly recommends” they use Social Security cross-checks and other strategies to combat potential fraud.
California was one of 15 states that did not cross-check Social Security numbers with prison inmate records at the time. State prosecutors said in December that prisoners got help from accomplices to apply for unemployment benefits on behalf of thousands of inmates.
The EDD has since instituted a cross-match process with prison records, as well as with state hospitals.
▪ August 31. As more reports of fraud surfaced, Labor issued a 17-page advisory to state officials around the country.
“As unemployment insurance claims are filed, states are strongly encouraged to employ multiple techniques to validate unemployment insurance claims and uncover suspicious or fraudulent characteristics, including: Identity Verification — to verify personal information supplied by individuals filing claims, using a variety of methods and resources, such as: Social Security Administration Cross-Match — to validate a Social Security Number supplied by a claimant,” it said.
The EDD has been cross-matching claimant records with the Social Security Administration for many years, along with conducting a cross-match of California Department of Motor Vehicles records.
▪ September 1. Labor provided additional funding to battle fraud. California received $2.4 million.
It urged states to work with its Employment and Training Administration and the Unemployment Insurance Integrity Center to “use these resources to address fraud aggressively in these programs.”
In September, EDD launched the ID.me system to more efficiently verify claimants’ identities, and officials estimate it’s helped stop hundreds of thousands of potentially fraudulent claims.
EDD wrote in a news release on September 3 that it was working aggressively to detect and investigate fraud.
“The EDD’s investigation team is working closely with local, state, and federal partners to expose, stop, and hold offenders accountable,” the agency said. “While specific details cannot be shared at this time at the risk of jeopardizing investigations, recent schemes have triggered multiple mail items with different names sent to addresses throughout the state.”
This story was originally published February 9, 2021 at 10:06 AM with the headline "Fact check: Did Trump’s White House fail to prepare California for massive unemployment fraud?."
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