Biden wants a chief fraud prosecutor. Will that help California combat unemployment scams?
The battle against unemployment insurance scams – fraud that’s meant an estimated $20 billion in suspect payments in California – got powerful new tools Tuesday from President Joe Biden in his State of the Union address.
“We’re going after the criminals who stole billions in relief money meant for small business and millions of Americans. And tonight, I’m announcing that the Justice Department will soon name a chief prosecutor for pandemic fraud.,” the president said. Members of Congress applauded the idea.
Nancy Farias, director of California’s Employment Development Department, enthusiastically welcomed the news. EDD manages the state’s unemployment program.
“California took aggressive and unprecedented action to block fraudsters who scammed the emergency federal benefit programs,” she told The Sacramento Bee. “The president’s move to boost fraud fighting will help states continue to hold criminals accountable.”
A White House fact sheet Tuesday explained how the already-existing Justice Fraud Enforcement Task Force would name the chief prosecutor. The prosecutor would focus on “the most egregious forms of pandemic fraud.”
The new appointee would “lead teams of specialized prosecutors and agents focusing on major targets of pandemic fraud, such as those committing large-scale identity theft, including foreign-based actors.”
These strike force teams, it said, would use analytics to “to connect the dots on identity theft and other complex fraud schemes committed across state lines or transnationally, as well as investigate major cases of criminal fraud in programs like the Paycheck Protection Program and Unemployment Insurance.”
The federal Paycheck Protection Program was created as the COVID pandemic sent the economy reeling two years ago. It was designed to provide immediate financial help to small businesses, and ended on May 31, 2021.
The White House plan will need Congress to approve more funds and increase penalties for criminals who commit pandemic-related fraud.
Biden also pledged an executive order to help prevent identity theft in public benefit programs.
The White House offered no details, saying the order would aim to “prevent and detect identity theft involving public benefits, while protecting privacy and civil liberties and preventing bias that results in disparate outcomes.”
Tackling fraud in California
In California, a team of state and local prosecutors has been working with the Justice Department and others to investigate unemployment insurance fraud. They’ve been eyeing suspected organized crime efforts in addition to individuals who are simply trying to deceive the government.
The investigations have centered largely on the federally-created and funded Pandemic Unemployment Assistance program, which ended last year.
The program, created two years ago, allowed people who did not qualify for traditional unemployment benefits, such as gig workers and independent business owners, to collect benefits. It lacked the same sort of checks and balances that the regular state unemployment insurance system has.
About 2.9 million Californians got benefits from the program. Initially, federal law said EDD only had to get documentation from PUA recipients when they wanted to get more in weekly benefits than the minimum of $167. People who didn’t seek an increase did not have to provide any documentation verifying their income or any other proof of work.
McGregor Scott, the former U.S. attorney for the Eastern District of California who became a special counsel for the state’s Employment Development Department last year to coordinate investigations, cited transnational organized crime as a player in the fraud in a December interview with The Bee..
He also noted that domestic organized crime, notably traditional street gangs, may be involved.
This story was originally published March 1, 2022 at 6:48 PM.
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