SACRAMENTO — Concerns are growing of possible fraud at California’s unemployment agency after multiple reports of unsolicited debit cards arriving in people’s mailboxes and a suspiciously high number of claims involving independent contractors.
The California Employment Development Department has paid more than $71 billion in unemployment benefits since the start of the pandemic, processing more than 11 million claims as the government ordered businesses to close to slow the spread of the disease and devastated the state’s economy.
Thursday, the U.S. Department of Labor reported California had more than 405,000 pandemic unemployment assistance claims last week, accounting for more than half of all such claims filed in the United States during that time. Congress authorized the pandemic unemployment assistance program earlier this year to allow people not normally eligible to receive unemployment benefits, including independent contractors.
Michael Bernick, former director of the Employment Development Department and now an attorney at the Duane Morris law firm, called that a “ridiculously high percentage.”
“This may be the potential fraud given the very, very outsized, ridiculously outsized number of claims filed in California,” he said.
In recent weeks, there have been multiple reports of people receiving dozens of letters from Employment Development Department that include the personal information of others. Some also included debit cards.
In Fresno, 45-year-old Amy Brooks said she was denied unemployment benefits months ago. But she has recently received 24 pieces of mail from the Employment Development Department. The letters all have her address but list a different name and Social Security number. At least three contain debit cards.
“There’s no way this is a clerical error,” she said. “How can my address be linked to all of these people?”
Gov. Gavin Newsom said Wednesday he is “concerned about fraud in this space.” He said the state is working with local and federal authorities “to weed that out.”
“It is a top priority for all of us,” Newsom said.
Responding to an inquiry from the Associated Press, the Employment Development Department said it is aware of the letters and is “developing methods to stop and prevent such claims from being paid.”
“It’s extraordinarily unfortunate that fraudsters tend to become much more active during emergency situations like the current COVID situation,” the agency said in an unattributed statement.
Until recently, the biggest concern about unemployment benefits in California was the backlog of more than 1 million people still waiting to receive their money. Last month, the agency told lawmakers it is not answering 60% of the calls it receives for help, pledging to hire more than 3,000 people for its call center to keep up with unprecedented demand.
The agency has been under enormous pressure from lawmakers and the public to work through that backlog. But one of the reasons it takes a while to process claims is because the agency has to screen for fraud, Bernick said.
“That’s the trade off,” he said. “You can reduce certain procedural checks, but what you risk is a potential increase in fraud.”
California Auditor Elaine Howle last month said the Employment Development Department was at high risk for waste and fraud, citing the large number of claims that have overwhelmed the agency. In the state Legislature, the Joint Legislative Audit Committee this week requested an emergency audit of the agency, including an analysis of the number and percentage of claims approved, denied, pending and backlogged.
“The auditor warned clearly for potential for waste fraud and abuse,” said Assemblyman Jim Patterson, a Republican from Fresno. “We are now seeing what that waste, fraud and abuse looks like.”
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