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Fraudsters Steal Billions in California Unemployment Payments

Fraudsters Steal Billions in California Unemployment Payments

by John Clore

6 months ago


 

 

 

Officials in California say criminals stole over $11 billion in unemployment benefits last year. But that amount could grow far larger as billions more in payments are investigated.

California Labor Secretary Julie Su told reporters recently that the state paid about $114 billion in unemployment claims in 2020. Of that amount, about 10 percent — or $11.4 billion — was confirmed to have been fraud.

Fraud is the crime of using dishonest methods, such as using a false identity, to take something valuable. Su said nearly $20 billion more — another 17 percent — is considered suspicious. A large part of that money could also have been fraud.

Su said California did not have the correct “security measures in place to prevent this level of fraud, and criminals took advantage of the situation.”

Nearly all of the fraudulent claims were made through the federally supported Pandemic Unemployment Assistance program. The program, approved by Congress, provides unemployment benefits to people who are usually not able to receive them, such as independent contractors.

But, officials say, the program’s wide eligibility requirements make it an easy target of criminals, including individuals from Nigeria and Russia.

Su admitted that the state was unprepared for such criminal activity. She also blamed the Trump administration for failing to give the state the support needed to stop experienced fraud groups. She said a series of measures put in place last year had blocked billions of dollars in possible fraud plans.

The state also has been trying to clear a large number of unemployment claims — more than 940,000 as of January 20.

Officials noted that similar fraud problems were widespread in other parts of the U.S. as well. Washington state was among the first hit with fraudulent unemployment claims believed to be tied to a West African fraud group. The group uses identities stolen in past data attacks, such as the 2017 Equifax incident.

In Washington, more than $600 million dollars were lost from around 122,000 false claims. The state was able to get back around $357 million of that money by cooperating with federal law enforcement and financial companies across the country.

Investigators across California have been targeting unemployment fraud in recent months.

On Monday, Orange County District Attorney Todd Spitzer announced charges against two business owners who opened up a store in order to file false unemployment claims. Spitzer also announced the prosecution of eight people, including six state prisoners, in two other unemployment fraud operations.

This week, U.S. House Speaker Nancy Pelosi and California Senators Dianne Feinstein and Alex Padilla urged President Joe Biden to create a federal group to help states stop organized criminal fraud in unemployment claims.

“California and many other states are experiencing fraud at a much greater rate than previously understood,” they wrote.

 

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