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California’s fraudulent payments could exceed $ 20 billion. New security measures to prevent fraud are causing delays in payments that have sparked a further uproar.
By Wolf Richter for WOLF STREET.
The unemployment crisis in California continues to be huge. The state is still down by 1.4 million “salaried jobs”, not counting work for construction workers, as of December 2019. The amount the state paid in unemployment benefits is also huge : $ 114 billion between March 2020 and January 16, 2021. The state handled 19.5 million claims during this period, compared to 3.8 million claims in 2010, the peak unemployment of the Great Recession.
To top it off, a new federal unemployment program for construction workers was thrown into chaos with little guidance, no preparation, and no instant way to even verify the identity of claimants – and the fraud was also huge and growing. more difficult with each report.
Of California’s “confirmed fraudulent payments”, 95% were associated with the federal Pandemic Unemployment Assistance (PUA) program that covers on-demand workers. As in other states, this program has been “hit hard by fraud by international and domestic crime syndicates,” the Department for Employment Development (EDD) reported in its latest update on benefit fraud unemployment.
California, being the first to implement the PUA program, and being the largest state, with a population of nearly 40 million, has been hit hardest by PUA fraud.
In its new report, the EDD confirmed that 9.7% of all payments made during this period – or roughly $ 11 billion – were for “fraudulent claims.”
Additionally, 17% of all claims – or roughly $ 19 billion – were for “potentially fraudulent claims”. These payments are now under “investigation” and, according to officials, many of them will likely be confirmed as fraudulent.
Play it here: The stack of fraudulent payments made by California alone could exceed $ 20 billion once all is said and done.
By comparison, in 2019, before the PUA program arrived, about 6% of all payments under regular state UI claims were made for fraudulent claims.
But EDD was able to stop up to $ 60 billion in fraudulent claim payments through its existing methods and new methods implemented after the “two-week reset period” in September, when EDD halted the processing of new complaints to implement new security protections. As part of these measures, he hired ID.me to verify the identity of the applicants, which no one had verified before.
Unemployment fraud is “a national problem”: In the United States, 35% of all jobless claims are fraudulent, most under the PUA program, according to ID.me as cited by EDD. Today, 21 states have implemented or are in the process of implementing ID.me to prevent fraudulent PUA claims. Currently, in states that have implemented ID.me, the system blocks $ 1 billion in fraudulent claims per week, according to ID.me.
“The PUA program was particularly vulnerable to fraud according to the US Department of Labor because it did not require income or employment verification in advance and allowed applicants to escalate their claim to February,” said EDD.
“There is no sugar in reality,” Secretary of State for Labor Julie Su said at a press conference Monday. “California did not have sufficient security measures in place to prevent this level of fraud, and criminals took advantage of the situation.”
“And we now know that, as millions of Californians pleaded for help, international and national criminal networks were at work behind the scenes, working tirelessly to steal unemployment benefits using sophisticated methods of identity theft, ”she said.
The result of these security measures is a backlog of claims that have been suspended and still need to be verified before they are paid – 1.2 million claims last week are suspended, up from 1.6 million in December. As old claims are resolved, either found to be fraudulent and unpaid, or deemed OK and paid, new claims to be resolved are added to the stack.
This delay in paying claims due to verification procedures now in place to prevent unemployment fraud sparked another outcry in the Legislature, after outcry over the surge in fraudulent payments. over the previous months, which included mind-boggling stories of prisoners, some in the death row, receiving unemployment benefits under the PUA program with organized outside help.
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