EDD Fraudulent Accounts Now Total $20 Billion, Nearly Double Original Estimate

SACRAMENTO, Calif. —

An estimate of $11 billion paid out by California's Employment Development Department (EDD) to fraudsters has nearly doubled.

The fraud began in 2020 as stacks of envelopes started showing up in mailboxes across California and across the U.S. The addresses were correct but the names were for people who never lived there. Initially, EDD gave no estimate. In fact, during a previous legislative hearing, former director Sharon Hilliard told legislators they did not track that data.

By January, in the wake of two state audits into dysfunction inside the department, the EDD gave a first, very broad estimate. That was for $11.9 billion paid out, with a possibility it could rise as high as $30 billion.

At a Monday joint hearing of Assembly and Senate members, EDD's director answered questions along with the California state auditor.

Part of that questioning brought the new fraud amount. EDD Director Rita Saenz, answering questions from Irvine Assm. Cottie Petrie-Norris, said, "of the $177 billion that was paid out, $20 billion is estimated to be fraudulent."

Assemblymember Tom Lackey, R-Palmdale, began the hearing with a visual aid showing 11 dump trucks filled with cash. EDD put the blame, mostly, on criminal gangs and organized crime.

"I've spoken to a number of unemployment directors from across the country. There isn't one department that didn't face a large number of fraudulent claimants," Saenz said.

Lackey was not convinced.

Legislators also asked about another looming problem: the state's unemployment trust fund. With so many people unemployed due to COVID-19, the trust fund went into a deficit of nearly $20 billion.

That means the state of California took out loans from the federal government of that amount. Those loans will be required to be paid back, not by the state but by the state's businesses. Most of those businesses will see those taxes coming from the federal government in January of 2023.

Still, EDD has implemented roughly 60% of the auditor's recommendations, including phasing in new computer systems over time. This, however, drew a stark caution from state auditor Elaine Howle, who said we need to proceed with caution. Contractors often push for wish lists of other items to go with their programming, things that can balloon to the billions of dollars in costs, where the system needs severe upgrades right now.

The call centers have improved as well, with average wait times around 18 minutes, according to Saenz. She added that often robocalls and repeat calls overwhelm their system.

A number of those recommendations were also put into statute by the Legislature, meaning they are now law. That means if EDD does not implement the changes, including things like cross-referencing prisons and jails, better outreach to people of multiple languages and removing the social security number from EDD correspondence, the department will be in violation of state law.

As for the fraud, EDD says they are investigating 700 cases of fraud across the state. However, police departments KCRA 3 Investigates has spoken with across California say they have hundreds of cases of their own. The problem they have is prosecuting them for EDD fraud because, they say, EDD has not given them the cooperation or documentation to properly charge and prosecute these people for defrauding EDD.

---

Source: KCRA News

---