California: Highest Unemployment Fraud and Unemployment Rate

Employment Development Department paperwork in Irvine, Calif., on April 2, 2021. (John Fredricks/The Epoch Times)

Commentary

The California Employment Development Department (EDD) recently reported that its best estimate of fraudulent unemployment payments totals at least $20 billion. That makes it easily the largest case of fraud in U.S. history, and it totals more than the entire state budget of about half of U.S. states.\

None of the money has been reported as recovered.

As the investigation into the fraudulent payments continues, California sits with the highest unemployment rate in the country at 7.5 percent. Might the two be related?

From the outset of the pandemic, it was obvious that there was a big risk of EDD fraud. It has historically been a problem, just like fraud in other government programs, such as Medicare. The government has always been an easy mark.

Second, for the first time, benefits were handed out to independent contractors, such as Uber drivers, rather than just employees. The state maintains good records of prior employment; it doesn’t do so regarding contract work.

Third, also for the first time, the federal government got involved in unemployment, adding $600 per week to state benefits that normally only total about $300 per week. This increased temptation, with $900 per week now at stake, was the equivalent of full-time employment at $22.50 per hour.

Finally, the EDD maintained no requirement that recipients show proof that they were searching for work.

As a result, California has paid out at least $179 billion in unemployment benefits since the start of the pandemic, processing more than 25.8 million claims. More claims were handled than the total pre-pandemic workforce of about 19.5 million. About 2 million jobs were lost due to the pandemic, meaning that the state has paid out about $89,000 per lost job.

The fraud, therefore, should have been obvious, yet it went on for months. Recent investigations have revealed that there were employees within the department that were involved in the fraud. In one case, $2 million in benefits were sent to a single address. Another $1 billion was sent out in the names of about 20,000 current prison inmates. Fraudulent benefits even went out under the Social Security number of U.S. Sen. Dianne Feinstein (D-Calif.).

The Beverly Hills Police Department (BHPD) noticed the trend early on. They reported to the state hundreds of people using multiple EDD cards to purchase designer goods on Rodeo Drive.

I personally saw the lines outside of retailers such as Louis Vuitton and Prada, and I can report that those in line often didn’t look like the usual customers. These retailers were great places to launder fraudulent benefits. Designer handbags, sunglasses, wallets, and jewelry are easy to resell on the internet.

After months of this phenomenon, retailers began requiring ID matching the cards. The lines quickly disappeared. For its efforts to stop the fraud, the BHPD was hit with a lawsuit alleging that it was using racial profiling in making arrests.

The California EDD fraud was so extensive that investigators believe that Russia and China were involved. Yet, no leader has been fired over it. On Oct. 30, 2020, at the height of the fraud, EDD Director Sharon Hilliard announced that she planned to retire at the end of the year; a press release provided nothing but praise for her.

“She has helped pave the path for EDD to reset its culture and modernize the system at this critical time,” California Labor and Workforce Development Agency Secretary Julie Su said.

Incredibly, Hilliard is quoted as saying, “I retire knowing that EDD is on a great path to success.”

California Gov. Gavin Newsom faced a recall campaign due to his overreaching pandemic lockdown orders. But he never faced tough questions about the unprecedented fraud and sailed to an easy victory.

Of course, Newsom and other state leaders are attempting to cover up the extent of the gross negligence. But they don’t really care. The fraud served as an easy method of redistributing wealth. This was socialism at work, taking money from taxpayers and giving it to nontaxpayers. Besides, the theft was only about $900 per week, which isn’t a big deal in California. Because of a recent proposition pushed by Democrats, the shoplifting of less than $950 is now treated as a misdemeanor.

So much money flooding into the hands of both legitimate and illegitimate recipients is a likely explanation for why California’s unemployment rate remains the highest in the country, despite an abundance of available jobs.