Republicans demand investigation into California’s unemployment scandal
Republicans on the House Oversight Committee demanded Thursday, that Chairwoman Carolyn Maloney, D-N.Y. call a hearing to investigate California’s colossal fraud that occurred with state's unemployment benefit program.
California officials reported last month that at least $11.4 billion in unemployment benefits have been mistakenly paid out under fraudulent cases since March 2020 – though some estimates say scammers could have received as much as $31 billion in fraudulent payments.
"The evidence of unprecedented fraud, waste, mismanagement and incompetence is too voluminous to briefly reference," Ranking Member James Comer, R-Ky., said in a letter Thursday.
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"By any objective measure, we believe this Committee is obligated to schedule a public hearing to comprehensively examine what went wrong in California, the steps being taken to recover the improper payments, and the steps being taken to prevent it from happening again," the letter continued.
A state audit late last month revealed that roughly 10 percent of all unemployment claims paid out by the Employment Development Department (EDD) over the last year, involved fraud. While an additional 17% of unemployment benefit claims are under investigation.
In total, California has paid $114 billion in 19 million unemployment claims, since the onslaught of the pandemic.
GOP Congressmen Darrell Issa of California, and Gary Palmer of Alabama, joined Comer in outlining their concerns that Congress has approved nearly $130 billion in Coronavirus relief aid to the Golden State – a sum that does not include the most recent economic funding provided through stimulus checks approved by congress in December.
The state audit found that the EDD was unprepared for the massive amounts of fraudulent cases filed, in particular when it came to incarcerated individuals – who have mistakenly received $810 million.
But apart from the fraudulent payments, the review of the department -- which falls under California’s Labor and Workforce Development Agency – found that as late as December 2020, claimants were able to continue to collect benefits even with "suspicious addresses," because the state had not established any payment block system.
"Therefore, there is every reason to be concerned that this unprecedented fraud may be ongoing even today," the congressmen wrote in their letter Thursday.
The audit also found that prisoners on death row received $421,000 in unemployment benefits and larger schemes conducted by organized crime groups in Russia and China were found to have cashed in.
"There is no sugarcoating the reality," Biden’s nominee for deputy Labor secretary and the current secretary of California's Labor and Workforce Development Agency, Julie Su said during a press conference last month.
Su also noted that "California has not had sufficient security measures in place to prevent this level of fraud, and criminals took advantage of the situation."
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California’s unemployment claims system, the Pandemic Unemployment Assistance Program, allows individuals to apply for assistance who would not normally qualify for unemployment benefits, like independent contractors – though as the system sought to expand its benefits for Californians, taxpayers paid the price.
"It should be no surprise that EDD was overwhelmed, just like the rest of the nation’s unemployment agencies," Su said when explaining the extent of fraud that occurred. "As millions of Californians applied for help, international and national criminal rings were at work behind the scenes working relentlessly to steal unemployment benefits using sophisticated methods of identity theft."
But in response to the evidence of massive fraud, the state froze roughly 1.5 million claims in late December – 1.2 million of which were still frozen by the end of January.
"The oversight California conducted was by all accounts too late and wholly insufficient," House Republicans said Thursday. "As a result, unsuspecting law abiding Californians, locked at home by Governor Newsom, were no doubt put through additional stress."
Su is expected to face tough questioning regarding California’s unemployment benefit scandal during her Senate confirmation hearings.
"If Ms. Su cannot effectively root out rampant waste, fraud and abuse at the state level, how can she be entrusted to be second in command at the Department of Labor?" Comer said to Fox News Thursday. "The House Committee on Oversight and Reform needs to get to the bottom of this massive unemployment fraud scheme and the Senate must also take this into account during Ms. Su’s confirmation hearing.”
But Su isn’t the only Democrat facing a rocky road as the coronavirus pandemic continues.
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Newsom has faced surmounting pressure as a recall election appears imminent, with more than 1.4 million signatures already collected, in support of the recall – just shy of the nearly 1.5 million signatures needed to force a mid-year election.