The California Department of Employment Development’s office is located in Sacramento, California, Friday, December 18, 2020. Faced with a scam of up to $2 billion, EDD is near the top of our troubleshooting list. California lawmakers as they prepare to return to the state Capitol in the new year.
Rich Pedroncelli / AP
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Rich Pedroncelli / AP
The California Department of Employment Development’s office is located in Sacramento, California, Friday, December 18, 2020. Faced with a scam of up to $2 billion, EDD is near the top of our troubleshooting list. California lawmakers as they prepare to return to the state Capitol in the new year.
Rich Pedroncelli / AP
SAN FRANCISCO – California is gradually regaining an estimated $20 billion in unemployment benefits stolen by domestic and international criminals, money that was earmarked for unemployment relief during the height of the pandemic.
By far, it is the largest number of reports related fraud pandemic in any state.
But critics say recovery efforts in California are still weak, with too few people being kept and the true number of frauds could be much higher.
“It’s too late and too little, and even the systems they have in place are still in place,” said Jim Patterson, a Republican congressman and vice chair of the State Committee on Accountability and Administrative Review. can be deceived. “That’s not good enough.”
Nationwide, the total number of unemployment insurance frauds is staggering. US Department of Labor, Office of the Inspector General earlier this year tell Congress that “at least $163 billion in pandemic UI benefits may have been improperly paid, with a substantial portion attributable to fraud.”
Federal and state officials insist on getting that money out quickly — $5 trillion in total to help defuse the biggest economic crisis since the Great Depression. That speed also means many unverified claims.
In California alone, scammers use stolen and stolen social security numbers or fabricate fake names with what conservative state officials say estimated at 20 billion dollars. That’s about 11% of the $177 billion in unemployment benefits that went into COVID-19 relief.
And it’s not hard: Someone claiming to be US Senator Dianne Feinstein has been paid. Only one John Doe and even a pair of Mr. Poopy pants.. They all have money.
“The key to the unemployment insurance fraud benefits is the Social Security number,” said McGregor Scott, former U.S. Attorney for the Eastern District of California.
The state has hired Scott as a special counsel for its Fraud Task Force to help coordinate the investigation and prosecution of pandemic-related unemployment fraud targeting the Employment Development Department or EDD.
“And with the dark web and the black market for Social Security numbers, these transnational criminal organizations have a very large number of Social Security numbers, thus allowing them to submit applications,” says Scott. cheat – and get money.
Investigators have identified specific fraud groups
To date, working with federal and local law enforcement and Bank of America – which administers California’s unemployment benefits program – the state has recovered more than a billion mainly by freezing EDD bank debit cards obtained through fraud.
“There’s balances on all of these debit cards that Bank of America has recovered. And to date, they’ve returned $1.1 billion to the state,” Scott told NPR.
He said that the California task force learned that most of the perpetrators of this scam were domestic and international organized crime rings, as well as inmates and out-of-state. Then he said that there are what you might call mass millers. “People who don’t belong to really sophisticated or organized criminal groups, but just make a living stealing from government programs in various forms over the years. And this has become the version. latest of that.”
To date, the Anti-Fraud Task Force has also helped with law enforcement arrested more than 500 people and secured 203 convictions, including a case where a former EDD employee stole more than $4 million in COVID-19-related unemployment claims. Gabriela Llerenas, who also uses the name “Maria G. Sandoval,” is sentenced earlier this year to more than five years in prison and ordered to pay nearly $4.3 million in restitution.
“Our job is to make sure the FBI is talking to the local DA either they get the documents they need from the EDD or we get what we need from the US Central Bank,” Scott said.
Nationwide, the U.S. Department of Labor’s Inspector General says their investigations have resulted in more than 1,000 people are charged with unemployment insurance fraud since the start of the pandemic.
Dozens of people was arrested. But thousands of criminals have not faced the consequences and billions remain unaccounted for.
Outside experts say the true number of unemployment fraud in California is much higher than $20 billion.
“I believe the number is closer to 32.6 billion,” said Haywood Talcove, CEO of the government division of LexisNexis Risk Solutions.
Talcove achieves that higher number, in part, by considering Audit of the Ministry of Labor that shows California had a high unemployment fraud and “improper payment” rate in the three years before the pandemic. “And it didn’t decrease during the pandemic, it just increased,” Talcove said. “So you easily hit that $32.6 billion figure.”
Indeed, the latest US Department of Labor Audit report in September shows that the California EDD’s “improper payment” rate for only the first six months of the pandemic was 36.6%. The percentage of that is either fraud or a mistake is not entirely clear but most believe the majority is the former.
Watchdog calls for more to be done, including forensic examination
Talcove argues that what is the true number of the stolen funds, the bigger problem is that the state has yet to put in place strong controls like those used on a daily basis in banking transactions. America and other private sectors.
California has added a driver’s license validation system called ID.me, which the state says is a “highly secure” identity verification process. They also hire an outside data analytics company, among other moves.
But the state has yet to conduct a forensic examination of the fraud. And Talcove says the added protections are simply not enough.
“They’re still being pickpocketed,” he said. “We go to the dark web every day and track these criminal groups that are stealing from unemployment insurance agencies. And we see that.”
In just the past few weeks, he says he’s seen outside of criminal groups from Russia and elsewhere bragging that they can still cheat the state unemployment program. These groups, Talcove said, are promoting their sauce to get into California, including buying fake driver’s licenses to get through their system.
Some California lawmakers are frustrated and outraged by what they see as slow recovery and limited accountability.
“California has to stop patting itself on the back saying they’re up to something. This is patchwork,” said Patterson, a Republican. “We only got back a billion out of maybe 30 or 35 billion. That’s a terrible average. We have to do a lot better than that.”
Patterson said his office is still inundated today with calls from voters struggling to get their legitimate unemployment claims while there are so few convicted fraudsters.
Haywood Talcove says the extent of the nationwide fraud pandemic shows that every state should do more to lock down their systems against fraud.
“Not just for their unemployment insurance, for their tax departments, for their SNAP, for their TANF benefits, make sure there’s a corporate approach to identity,” he said. “What makes people think that those criminals are no longer involved in other schemes after they just robbed $250 billion of the US Treasury?”
In California, law enforcement and others point to a bill recently signed by Governor Gavin Newsom that makes it easier for prosecutors and police to appropriation of propertyincluding cars and property, from those who cheat the unemployment program.
“We’ve got a case going on right now where he bought a motorcycle and we know he did it with EDD money,” said special counsel Scott. “So we went on motorbikes.”
He said the state hopes to recover another large one soon from an unemployment debit card that still has money in it but has been frozen because of fraudulent indicators.
Ultimately, Scott admits, there are likely to be billions of people unrecovered.
“Without a doubt, there will be a certain amount of money that will have to be written off at the end of the period,” he said. “What that number is, I still don’t know.”
