State recovers more than $1B in fraudulently paid unemployment claims

The California Employment Development Department has recovered $1.1 billion in fraudulent payments from federal COVID-19 relief programs, Gov. Gavin Newsom's office announced.

The funds were found on about 780,000 inactivated benefit cards. Most of the money belongs to the Pandemic Unemployment

Assistance program, the primary target of fraud nationwide, according to a statement from Newsom's office.

EDD is responsible for processing unemployment claims, as well as disability insurance and paid family leave claims. During the pandemic, the agency was overwhelmed with unemployment applications, resulting in many fraudulent payments going out.

The state has been dealing with extensive unemployment fraud since the COVID-19 pandemic began in March 2020. Pandemic Unemployment Assistance was intended for those who did not qualify for traditional unemployment, such as independent contractors.

An estimated $20 billion has been lost to fraudulent California claims, according to EDD estimates. All but $1.3 billion of that total involved claims from Pandemic Unemployment Assistance and other federally funded COVID-19 relief programs, which ended last year.

Nearly a year ago, California hired former federal prosecutor McGregor Scott to serve as EDD fraud special counsel, where he would oversee the state's work with law enforcement in prosecuting fraudulent claimants.

“We will continue working with law enforcement to put fraudsters behind bars and recover every stolen dollar that we can,” Scott said in a statement.

According to Newsom's office, within the past 15 months, there have been more than 1,500 investigations, leading to 467 arrests, 162 convictions and the seizure of more than $3.4 million.

More than 20 million people filed more than 60 million unemployment, disability insurance and paid family leave claims over the past decade, according to Newsom's office.

“EDD prepared, printed and mailed 45 million documents to customers through the most recent fiscal quarters. EDD was mailing nearly 600,000 documents a day during the height of the pandemic,” the statement said.