SACRAMENTO, Calif. - California’s Employment Development Department has been an easy target for fraud, but the agency keeps fighting to crack down on bogus claims.
According to the Sacramento Bee, a fraud ring in Moscow tried to scam EDD on the first day the agency implemented a new ID verification system last October. A spokesperson for ID.me tells KTVU the system is flagging $750 million a week in fraudulent claims across the 14 states it is working in, including California.
Robert Lapsley, President of the California Business Rountable, said their organization has been tracking the fraud because it impacts California workers and employers. The organization found that of the $112 billion in benefits EDD paid out between March 2020 and Jan. 2, 2021, roughly $8.9 billion went to scammers.
Lapsley said their organization used state reported data that showed the improper payment rate on claims between 2016 and 2019 was 8%. That percentage was applied to the benefits EDD paid out during to the pandemic to reach the $8.9 billion figure. The amount is more than four times higher than the $2 billion in fraudulent claims reported by the state.
Lapsley said part of the problem was that EDD did not have a fraud detection system in place until October 2020.
"They cancelled their fraud detection program five years ago and now it's back in place…but how do you execute such a critically important program during a pandemic," Lapsley said. "Now we see why the numbers are so big."
He added that fraud detection programs should have been in place a long time ago.
"Criminals around the world understand that California has the weakest security in our systems than practically any state in the country," he said.
Michael Bernick, an employment attorney with Duane Morris LLP and the former EDD Director, said the 8% improper payment rate that CBR cited traditionally include 2% to 3% of fraud cases and the rest are considered overpayment case, in which people who have returned to work continue to receive unemployment benefits either intentionally or unknowingly.
He said the majority of theft is happening in the Pandemic Unemployment Assistance program, but new unemployment figures released Thursday show signs of progress. The figures show new unemployment claims are at roughly 33,000. Bernick said that is still a high number, but a big drop from the 100,000 to 200,000 claims seen last summer.
"The amount of fraud seems to be decreasing sharply and these claims are being weeded out now," Bernick said.
He credits the anti-fraud actions implemented by EDD and the crackdown on fraud happening in California prisons in which inmates were accused of stealing identities to gain unemployment benefits.
The actions by EDD to root out scammers have left so many people with legitimate claims mixed up in the crackdown and many have been left waiting to receive benefits.
"I know they are moving as quickly as possible to unfreeze accounts...otherwise there's no good answer," Bernick said.
A spokesperson for EDD told KTVU they would not be able to meet our deadline given their "current media inquiry workload, which is massive." The spokesperson said staff was working to send us information as soon as they can.