California lawmakers urge hearings over fraudulent unemployment claims

SAN FRANCISCO - A number of state lawmakers are calling for hearings on the latest mess at the Employment Development Department (EDD) this time over nearly a half billion dollars in payments to fraudsters.

It's a black eye that was bound to happen because Uncle Sam and the EDD never saw it coming.

So, far, investigators have found about 21,000 bogus claims that suckered, tricked and took the EDD out of some $400 million for claims; claims filed in the names of California prison inmates. Even though no inmates have been implicated as yet, this massive-scale scam involves regular unemployment claims as well as federal pandemic claims for freelancers, gig workers and independent contractors.

Super sophisticated organized thieves figured out a way to get the inmates' Social Security numbers, access EDD debit card accounts through ATMs and make off with the cash; no small or easy task.

"Nobody anticipated this," labor lawyer Michael Bernick said. He's a former EDD director who said EDD has had identity fraud programs in place for decades.

"What's been going on in the past, since the start of the pandemic is what makes what we were looking at in the 2000s, child's play," said Mr. Bernick.

The political emphasis placed on EDD was to get people paid as quickly as possible under the crush of weight from overwhelming claims.

"That's money that should be going out to rightful recipients," said  Adam Summers, a Research Fellow at the Independent Institute, a think tank and publisher of the Golden Fleece Awards that highlights government waste, fraud and abuse in state and local governments.

"When you do have fraud on this scale, it does cause you to wonder if they're devoting the right resources to try and to track it down," said Mr. Summers.

The Institute said, since too many state agencies are not really held accountable, more direct oversight would help. Another solution: contract for complex functions with competent companies that get incentives for good work or penalties and termination for bad work. Something better must be done.

"We see it over and over again," said Summers, San Francisco Assemblyman David Chiu has been on this and the EDD for many months and is resolved to get it fixed.

KTVU reached out to the EDD for a statement on Thursday, but has not heard back as of this report.