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California unemployment agency investigating potential widespread fraud

"Sorry we are closed" sign board hangs on a door of a cafe.
(amstockphoto - stock.adobe.com)

California lawmakers said Wednesday that there is growing evidence of possible widespread fraud in the state’s unemployment benefits system, and the agency in charge confirmed it is investigating whether people have filed dozens of bogus claims during the COVID-19 pandemic.

The news comes as Californians across the state continue to report frustrating experiences with the state Employment Development Department that have left them without crucial jobless benefits needed to pay rent and support their families. Legislative leaders announced Thursday that they have approved an emergency audit to look into ongoing problems at the agency, including computer glitches, unanswered phone lines and bureaucratic tangles, which have stalled payments to about 1 million jobless Californians.

Concerns about potential fraud surfaced recently after numerous Californians who have not filed unemployment claims reported receiving dozens of letters from the EDD regarding claims filed in the names of other people. Lawmakers say they are concerned scammers are using their constituents’ addresses to file fraudulent claims.

State Sen. Melissa Melendez (R-Lake Elsinore) said one of her constituents received 116 letters from the EDD addressed to 33 people whom the resident does not know.

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“There were overpayments in there. There were debit cards in there,” Melendez told her Senate colleagues during a floor debate involving EDD legislation Monday.

Assemblyman Jim Patterson (R-Fresno) said during a news conference Wednesday that constituents who have gotten large numbers of letters have told him that scammers have contacted them offering money if they give them the debit cards.

“Something is going terribly wrong here with EDD,” Patterson said, calling for the state agency and U.S. Department of Labor inspector general to “start digging into what’s going on.”

Assemblyman Tom Lackey (R-Palmdale) went to the EDD offices Friday to hand over 74 EDD letters received by one constituent that were addressed to 24 people, none of whom the recipient knew. Lackey said he is concerned because his legislative staff was unable to track down any of the people to whom the letters were addressed.

“Many of these have activated ATM cards that are ready to cash,” Lackey said of the letters. “This at best could have been a blunder by EDD, but at worst could have been intentional fraud.”

Gov. Gavin Newsom said at a Wednesday news conference that the issue is on his radar.

“We are concerned about fraud in this space,” Newsom said when asked about the potential fraud. “We are working with local authorities as well as state agencies, and working with federal authorities across jurisdictions to weed that out, to call that out.”

EDD officials confirmed the agency is investigating the reports.

“The EDD’s investigation team is aware that people are receiving multiple pieces of EDD mail while asserting they have not filed an unemployment claim,” the agency said in a statement Wednesday. “Our investigators are working with local, state, and federal partners in exposing fraudulent schemes at the core of these multiple claims, developing methods to stop and prevent such claims from being paid, and prosecuting the unscrupulous offenders to the fullest extent of the law.”

When asked about the number of fraudulent cases being investigated, EDD officials declined to comment further.

Patterson said in an online news conference that he plans to call the Fresno Police Department with information on those who are believed to be involved in the scams.

His constituent, David Robertson, also spoke at the news conference to discuss his family’s experience of being victimized by fraud.

Robertson said his unemployed 19-year-old son’s EDD account was fraudulently accessed, his mailing address was changed and $14,876 was paid by the EDD to an unknown person who accessed the account using his son’s Social Security number.

“His identity has essentially been stolen,” Robertson said. “This system is completely and totally broken. There are criminals that are benefiting from this.”

Residents from as far away as Florida and Connecticut have reported to The Times that they too have received dozens of letters each from the California EDD that are addressed to multiple people they do not know.

Barry O’Brien said he was surprised to receive 13 letters at his West Palm Beach, Fla., home from the EDD addressed to four people he’s never met.

“I said, ‘What the hell is this?’” recalled O’Brien, 72. “I didn’t even know what the EDD was. Why would you send unemployment letters from the California EDD to another state? I thought it could be identity theft.”

Many of those who are receiving EDD letters for claims they did not file say they have tried to report the suspected fraud to the state agency but have been unable to reach anyone by phone or confirm that complaints filed online are being investigated.

Robert Douglas said he received four EDD letters on claims at his home in Connecticut even though he has not lived in California for two decades and did not apply for unemployment benefits.

“The receipt of this notice leads me to believe that someone is using my info for a fraudulent purpose,” he said. He has filed a fraud report with EDD but not heard anything back.

Jon Reeves said he received 13 letters from the EDD at his Studio City apartment that were addressed to 10 people he does not know. A day later, someone else in his apartment building received eight letters from the EDD in different names. The letters were lying on the floor in front of his mailbox, Reeves said.

“As I was taking pictures of them, another resident came by and said, ‘It’s happening to you, too?’ He had gotten around 10 letters as well,” Reeves said.

Last month, the EDD issued an alert for Californians to be on the lookout for possible fraud.

Three weeks ago, 21 people in Northern California were charged with being part of a fraud ring that stole $250,000 by submitting bogus claims on behalf of jail inmates.

California has paid out an unprecedented $71 billion in unemployment claims since the beginning of the pandemic in March as stay-at-home orders forced businesses to close and put millions out of work.

“It’s extraordinarily unfortunate that fraudsters tend to become much more active during emergency situations like the current COVID situation,” the EDD statement said Wednesday.

The emergency audit of the EDD was formally approved by the chairman and vice chairman of the Joint Legislative Audit Committee.

The audit will seek to discover why many claims have stalled in the system, EDD phone lines are jammed, and agency computers have not allowed some claims to be filed, said Assemblyman Rudy Salas (D-Bakersfield), the committee chairman.

“Californians are hurting and need immediate relief from EDD,” Salas said Wednesday. “An emergency audit of the EDD will shine light on the department’s shortcomings and help us chart a path forward to more effectively help thousands of families throughout the state who are struggling during this crisis.”


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