A state auditor's report released Monday suggests that not only did the California Employment Development Department (EDD) mishandle hundreds of thousands of claims and leave legitimate unemployed claimants going hungry last year, but that possibly $30 billion was paid out to fraudsters because staffers did nothing to verify them.
A vast array of fraudsters took advantage of a deeply broken system during the pandemic, as we first learned in November, many of them either filing claims from California jails or filing claims on behalf of inmates or even United States senators. The fraud, committed by legions of disconnected suspected and driven perhaps just by word of mouth, was initially talked about at the scale of hundreds of millions of dollars. As of earlier this month, the estimated total bilked from the state was up to $8 billion, and now the number is looking to be three or four times that amount.
"Although it would be unreasonable to have expected a flawless response to such an historic event, EDD’s inefficient processes and lack of advanced planning led to significant delays in its payment of UI claims," says the report from state auditor Elaine Howle. "EDD was unable to automatically process nearly half of the claims submitted online between March and September 2020; instead, many of these claims required manual intervention from staff. As a result, hundreds of thousands of claimants waited longer than 21 days — EDD’s measure of how quickly it should process a claim — to receive their first benefit payments."
The title of the 78-page audit report is "EDD’s poor planning and ineffective management left it unprepared to assist Californian’s unemployed by COVID-19 shutdowns," and it details a litany of failures on the agency's part in addressing a historic crisis it could have better prepared for. (And anyone who has filed for an unemployment claim in CA during normal, non-crisis times likely already knew this was not the state's strongest or most reliable department.)
The EDD call center, despite growing to more than 5,600 staffers after initially only being able to handle about 1 percent of calls it received last spring, still remained ill equipped to handle the call volume in 2020, the report says. And despite knowing for years that it was a weak spot, the agency still has not "adopted best practices for managing the call center."
The report also calls on the EDD to be more transparent in how many claims it pays out and gets refunded on a regular basis, and to greatly improve how claims can be processed through automation. Due to problems with its automated systems, it was the manual processing of claims by staffers that slowed down the entire system last year. And yet, remarkably, staffers did not catch on to the tens or hundreds of thousands of fraudulent claims entering the system due to its tossing out of "key eligibility determinations" in order to speed things up.
Also on Monday, as the Chronicle reports, California Labor Secretary Julie Su announced in a press call that 10 percent of unemployment claims in California last year had been confirmed to be fraudulent, and another 17 percent are deemed "suspicious." That means that of the $114 billion paid out by the EDD since the start of the pandemic, somewhere in the area of $30 billion could have been the result of fraud — and it's now up the EDD to try to recover that money by demanding repayment, which, good luck.
Some fraudsters will be made examples of in court, like the woman who filed and received $21,000 in claims made using the name and social security number of Senator Dianne Feinstein. And 36-year-old Sholanda Thomas, an inmate at the Central California Women’s Facility in Chowchilla, who's been accused by federal prosecutors of conspiring with former inmate 37-year-old Christina Smith to file fraudulent EDD claims in multiple peoples' names.
But prosecutors can't possibly go after everyone, given the scale of all this. And it's especially bruising for the hundreds of thousands of honest Californians who continue to struggle in this economy, and whose claims have either ended or been delayed — knowing how many billions of dollars are out there in fraudsters' hands.
Last month, the EDD froze millions of unemployment accounts, many of them legitimate, in an effort to verify all the remaining open claims it has in the system. And Su said Monday that about 300,000 of these accounts were being verified by claimants, and 1.1 million were being put through the ID.me system.
Top image: Job seekers look at job resource pamphlets during the "Put Your Talent to Work" job and resource expo December 17, 2008 in Concord, California. The California Employment Development Department hosted the job fair that was geared towards unemployed construction, real estate and mortgage workers. Over 1,200 people attended the event that had been expected to draw closer to 400. (Photo by Justin Sullivan/Getty Images)