Surging California unemployment claims suggest widespread fraud, state says
Claims for money from a new federal unemployment benefit program jumped suddenly and dramatically last month in California and state investigators are concerned that the surge is evidence of an increase in fraudulent activity.
The red flags center on claims for Pandemic Unemployment Assistance, the program created by Congress in March so that people who historically do not qualify for jobless benefits, such as business owners, independent contractors and gig workers, can receive help.
“We certainly have legitimate PUA claims in California but we do suspect that a big part of the unusual recent rise in PUA claims is linked to fraud,” said Loree Levy, spokeswoman for the state’s Employment Development Department, which is investigating allegations of fraud in the unemployment system.
The increase in such claims was detailed in a report from the independent California Policy Lab study released Tuesday. During the week ending Aug. 15, there were 140,314 initial pandemic unemployment assistance claims, the group found. Two weeks later, that number had jumped to 377,294.
“The large rise in the number of new (unemployment) claims and steep increases in continuing claims are likely affected by fraud,” said Till von Wachter, the Policy Lab’s faculty director, though he said he had no direct evidence of fraud.
The lab offered alternative explanations for the sudden jump in claims, but found them largely unconvincing.
The has been investigating widespread reports of suspicious mailings regarding unemployment benefits. People all over California have reported getting multiple mailings purportedly from the unemployment department when they have not sought jobless benefits.
The agency has in recent days suspended or closed claims that match suspicious patterns. It’s also stopped the automatic backdating of Pandemic Unemployment Assistance claims to “to keep scammers from trying to capitalize on federal stimulus payments available then,” Levy said.
The policy lab report found that California “saw a surge in initial claims for PUA in August” that was the largest number since the program began.
During the week of Aug. 29, the policy group found the number of initial claims nearly doubled.
The state has spotted other unusual trends.
Between January and June, legitimate unemployment benefit claimants responded to 60% of the department’s notices seeking additional information.
In July, that rate dropped to 15% and in August, 9%. The department has said the plunge indicated “a strong suspicion of recent fraud that will go unpaid since the EDD will not receive the necessary documents on these claims to prove identity.”
Von Wachter said the huge increase in pandemic unemployment claims implies that the state is not necessarily seeing an increase in new layoffs.
His group found that the increase is driven by “older, increasingly white individuals who reported being previously self-employed now filing for benefits.” Von Wachter also reported many are claiming benefits for several weeks at a time.
If these are not evidence of fraud, he said, there could be two other explanations.
One is that people have been trying to file for benefits for months but because of the state’s processing glitches, their claims are just now being processed.
Von Wachter said, though, “While we’ve heard many stories of processing delays over the course of the crisis, there’s not much evidence to support a sudden, recent increase in these older claims being processed, so it’s difficult to put much confidence in this explanation.”
The second possible explanation for the jump is that while these people have been eligible for benefits, they did not try to file for payments until recently. One reason for the demographic change is that parents may need the financial help this fall as they stay home to help care for children.
This story was originally published September 16, 2020 at 5:00 AM with the headline "Surging California unemployment claims suggest widespread fraud, state says."
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