California’s unemployment agency involved in hundreds more investigations than usual
California’s unemployment agency is involved in 255 active criminal investigations into suspicious activity in the state’s battered jobless system.
Last year at this time it had 14 open cases.
About 75 investigations are proceeding jointly with the U.S. Labor Department’s inspector general, while another 180 are in partnership with federal, state and local law enforcement agencies, according to Loree Levy, spokeswoman for the state’s Employment Development Department.
Last week, federal prosecutors charged four women, including a former EDD employee who allegedly filed 100 claims, including one in the name of a U.S. senator.
The case resulted from an ongoing fraud investigation into a largely prison-based scheme that prosecutors have said involves inmates seeking jobless benefits using false identities.
Levy could not provide specifics about the investigations. But the new numbers are further evidence that the unemployment system in California and elsewhere has been riddled with potential fraud.
“Benefits fraud is not a California specific issue, it has been a widespread problem across the country since the launch of the Pandemic Unemployment Assistance program,” she said. “To identify and stop fraud and hold offenders accountable, EDD is working closely with federal, state, and local law enforcement.”
Warnings
The U.S. Labor Department has been warning California officials for months about potential fraud..
On Sept. 29, Labor Secretary Eugene Scalia sent Gov. Gavin Newsom a letter asking pointed questions about what the state was doing to tackle the problem. The Bee obtained the letter through a Public Records Act request. Identical letters were sent to other governors.
Among the questions Scalia posed: “How does the agency ensure that incarcerated populations (state and federal) are not receiving UI benefits?”
In late November, California prosecutors revealed they were investigating the prison schemes, and estimates are the fraud-related costs could reach at least $1 billion.
A Labor spokesman, who asked not to be named, said while the department “has not received a specific response from California, we have been engaged with California on efforts it has taken and is continuing to implement to prevent, detect, and recover fraudulent payments.”
Asked for a response to the letter, Levy said that since the CARES Act created new federally funded unemployment programs in March, agency officials have “had several discussions regarding the nationwide criminal schemes attacking UI systems across the country, particularly in the PUA programs.”
PUA is Pandemic Unemployment Assistance, one of the law’s new programs, aimed at providing benefits for people who usually cannot qualify for unemployment benefits.
The PUA program, “and the burden of high claims volumes on unemployment insurance staff and systems, have made the unemployment insurance program a target for criminal enterprises and other bad actors…” Scalia said in the September letter.
The scammers, Scalia wrote, could be”deploying advanced technologies, stolen or synthetic identities, and other sophisticated tactics.”
He warned that “The criminal enterprises preying on the UI system include complex, multi-state networks that necessitate a coordinated national response.”
CARES Act rush
Levy told The Sacramento Bee that EDD has long recognized that the CARES Act was implemented quickly so that people could get badly needed help quickly.
She said the agency acknowledges that that the “substantial flat-rate supplemental benefit payments, self-certification for the PUA program, and the multiple weeks of retroactive benefits...have made the UI program a target for criminal enterprises and other bad actors deploying advanced technologies, stolen or synthetic identities, and other sophisticated tactics.”
“As the fifth largest economy in the world, California was not immune to these attacks on the safety net for many in need,” she said, and EDD has taken strong steps to slow and stop organized crime and “the international scammers that have plagued the UI systems since implementation of the CARES Act.”
Evidence of widespread fraud in the unemployment system became public in late summer. At that time, The Bee and others reported some Californians reported receiving several mailings to their address with unknown names. EDD at the time said it had “a strong suspicion of recent fraud.”
It said it was actively investigating reports of suspicious mailings regarding unemployment benefits that people all over the state had received.
Later in September, California stopped accepting new unemployment claims for two weeks while EDD began using new identity verification technology and tried to reduce a claims backlog.
In the September letter, Scalia posed 10 questions to Newsom. The secretary wanted to know how EDD was “identifying and preventing impostor fraud in the UI system” and what tools it was using to verify a claimant’s identity.
He asked about the system’s effectiveness, and whether it had sufficient resources.
And, Scalia wanted to know, “Given the incentive for fraud associated with large, retroactive payments, what steps has your state taken to ensure that these benefit payments are made properly?”
He also asked if EDD reviews the volume of initial and continuing claims for “indications of a sudden influx of potentially fraudulent claims.”
Levy said that when EDD noticed a large spike of PUA claims in early September, the agency shut down automatic backdating of these claims, leading to a quick drop in suspect claims.
It also began using ID.me, a federally certified identity verification platform, in early October. Levy said ID.me estimates up to 30% of attempts to get through the platform in California are suspected scammers who are blocked from filing a claim.
This story was originally published December 23, 2020 at 5:00 AM.
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