July 1, 2024
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State ups unemployment fraud estimate into tens of billions


At least 10% and perhaps as much as 27% of the unemployment benefits paid by the state of California during the pandemic were fraudulent, according to new report from the California Economic Development Department.

The department processed 19.5 million claims and paid $114 billion in benefits between March 2020 and Jan. 16, 2021, according to a Jan. 25 news release. The EDD has confirmed that 9.7% of those payments were fraudulent, and is investigating another 17% as potentially fraudulent.

In 2019, before the pandemic, about 6% of unemployment benefit payments were fraudulent.

The new figures are billions more than the state’s initial estimates in November, when it first disclosed its problems with fraud in the benefits system. The fraud includes tens of thousands of claims paid to people who were imprisoned at the time they filed for unemployment.

The EDD says it has a handle on the problem now. New screening measures and security protections put in place in the fall “prevented up to $60 billion in payments to fraudulent claims,” the department said in its Jan. 25 statement.d

Most of the fraud—around 95%, the EDD said—came from the new, federally funded Pandemic Unemployment Assistance Program. Unlike traditional unemployment, it allowed self-employed people to file for benefits if they had reduced income, it did not require income verification and it allowed applications to back-date their claims.

Fraud has been a problem in other states, too, as the volume of claims overwhelmed states’ capacity to police them. California saw a record number of unemployment claims in 2020, the EDD said—more than five times as many as in 2010, the worst year of the Great Recession.

“EDD was clearly under-prepared for the type and magnitude of criminal attacks and the sheer quantity of claims,” EDD Director Rita Saenz said in the news release. “We are focused on making the changes necessary to provide benefits to eligible Californians as quickly as possible and stopping fraud before it enters the system.”