Concerns are growing about possible widespread fraud in California’s unemployment system following numerous reports of people receiving unsolicited letters, some with debit cards, from the state's jobless agency, and a suspicious number of claims involving independent contractors.
The California Employment Development Department has paid a staggering $76.9 billion in unemployment benefits since the start of the pandemic, processing more than 11.9 million claims, most the result of Gov. Gavin Newsom's decision to shut down much of the economy to slow the spread of the disease.
The U.S. Department of Labor reported Thursday that California had processed more than 405,000 Pandemic Unemployment Assistance claims last week, accounting for more than half of all such claims nationally. Congress authorized the program earlier this year to help 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.”
Get a weekly recap of the latest San Francisco Bay Area housing news. Sign up for NBC Bay Area’s Housing Deconstructed newsletter.
“This may be the potential fraud given the very, very outsized — ridiculously outsized — number of claims filed in California,” he said.
In recent weeks, several reports have emerged of people receiving dozens of letters from the Employment Development Department that include the personal information of others.
David Robertson said his son applied for unemployment benefits at the end of April. His son got a letter in August saying he was entitled to $167 per week, he said. But when they called the agency to ask more questions, they found that the contact information on his son's account had been changed and more than $14,000 in benefits had been issued to someone else.
“How did this happen? They can't answer any of these questions,” Robertson said during a news conference this week organized by Republican Assemblyman Jim Patterson of Fresno.
Amy Brooks said she was denied unemployment benefits months ago. But she has recently received 24 pieces of mail from the agency. The letters have her address but different names and Social Security numbers. At least three contained debit cards.
“There’s no way this is a clerical error,” said Brooks, who lives in Fresno. “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.
“It is a top priority for all of us,” Newsom said.
Employment Development Department spokesperson Aubrey Henry said the agency 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,” Henry said.
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 on Thursday approved 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.”
Before this, the biggest concern about unemployment benefits in California was the backlog of more than 1 million people still waiting on benefits. Last month, the agency told lawmakers it is unable to answer 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.”