California Employment Development Department Flooded With More Fraud Attempts

By Emily Hoeven – CalMatters

Two years into the pandemic, fraudsters continue to target California’s unemployment department.

The Employment Development Department, which last month froze about 345,000 disability insurance claims it flagged as suspicious, announced Thursday that it suspects that a whopping 98 percent of the 27,000 medical providers associated with those claims are fraudulent. So far, EDD said, only 485 providers have managed to verify their identity. The agency couldn’t say how much money it might have paid for those scam claims.

Although EDD has made progress on key reforms after paying at least $20 billion worth of fraudulent claims amid the pandemic, challenges remain.

The agency noted Thursday that some legitimate providers and claimants were ensnared in the mass freeze and will have to go through additional verification procedures before payments can resume.

One such claimant is Erick Robles, 35, a Hollister resident and contractor who went on disability this fall. His payments were stopped in December, he told the San Francisco Chronicle, and he said that EDD told him “there’s nothing we can do.”

Robles said, “This is like an unfair science experiment.”

EDD is also requiring 1.4 million recipients of federal pandemic unemployment benefits to retroactively prove their eligibility or repay the money plus a hefty fine — but 1.1 million cases remain unresolved.

And Daniela Urban, executive director of the Center for Workers’ Rights, told the Chronicle that “it’s clear EDD does not have a standardized process of reviewing these documents.”

In one case, she said, husband-and-wife street vendors submitted identical eligibility information to EDD, which accepted the wife’s documents but rejected the husband’s.

Friday, Gov. Gavin Newsom announced that Rita Saenz, EDD director since 2020, is stepping down and that he is appointing Nancy Farias, the chief deputy director of external affairs, legislation and policy since 2020, to take over. Saenz “spearheaded important reforms at the Department to better serve working Californians, prevent fraud and hold bad actors to account,” the governor said in a statement.

Another looming challenge for the state: Its growing unemployment insurance debt. As of Jan. 25, California had borrowed nearly $20 billion from the federal government to pay jobless claims, accounting for 49 percent of all outstanding debt owed by states, according to the California Budget and Policy Center. Though Gov. Gavin Newsom has proposed paying down $3 billion of that debt, business groups, which finance the state’s unemployment insurance fund, say it’s not enough. Other advocates say it’s time to overhaul how the fund is structured.