Where Did Over $20 Billion in Fraudulent Benefits Go and Why Don’t Californians Care?

May 10, 2022 Updated: May 10, 2022


California officials acknowledge that at least $20 billion dollars were stolen from the state by unemployment insurance fraud during the pandemic. However, it’s probably a lot more. Some experts believe it to be as high as $40 to $50 billion. This is more than the entire state budget of most states! It amounts to about $1,000 stolen from the pockets of every man, woman, and child in the state.

But in a state that recently reduced stealing less than a $950 to a misdemeanor, perhaps we should not be surprised that no one seems to care.

Governor Gavin Newsom faced a recall vote last year, but not because of the fraud. The recall was initiated by Californians fed up with the state’s COVID-19 mandates, which Newsom himself failed to follow. Barely a mention was made in the recall campaign about the astounding incompetence which led to billions being stolen.

The election was primarily about whether Californians supported the state’s mandates. His main challenger, talk show host Larry Elder, promised to end all mandates “on day one.” Newsom responded by telling Californians that the mandates are necessary to fight the pandemic, and if reversed, people would die. He defeated the recall effort by 24 points, which happened to be the same percentage by which he had been elected three years prior.

The message to Newsom? Keep doing what you are doing. Californians like the mandates and apparently do not pay enough attention to care about the billions squandered. The message to Republicans? You do not have a chance in this state.

No prominent Republican is in the governor’s race this year. It is quite likely that Newsom could get a majority of the vote in the open primary next month which result in his automatic reelection. Why are Californians not holding to account a governor who squandered so much of their hard earned money?

The director of California’ Employment Development Department (EDD), in charge of unemployment benefits, is appointed by the governor. There have been three different directors since this mess began.

Sharon Hilliard was appointed by Newsom in January 2020 but resigned months later in October 2020 at the height of the benefits fraud. She had been in the department for almost four decades. She was replaced by Rita Saenz, promoted from within, but she also resigned just a year later as the fraud continued. Newsom had nothing but praise for her.

“Director Saenz took the helm at EDD at a critical juncture of the pandemic,” he said. “With her steadfast leadership and dedication to public service, Director Saenz spearheaded important reforms at the Department to better serve working Californians, prevent fraud and hold bad actors to account.”

She was replaced by Nancy Farias, yet another promotion of a female from within the department. Upon her nomination Newsom said she “has played an invaluable role in the Department’s ongoing efforts to strengthen the state’s unemployment system and implement improvements to better support hardworking Californians when they need it most.”

The fraud was spurred on by the Pandemic Unemployment Assistance whereby the federal government added $600 per week to a person’s regular state unemployment benefits, which normally less than $300 per week. This created a program ripe for fraud. Nationally it is believed that about 35 percent of all claims were fraudulent. California was caught flat-footed. It did a terrible job catching them.

A state audit this month confirmed that the EDD failed to properly plan and modernize its technology and operations to accommodate a possible future spike in unemployment. California was inundated with claims. Rather than face backlash over delays in issuing benefits, it chose instead to rely on self-reported information, which contributed to funds sent to deceased individuals, prisoners, and other ineligible applicants. One expert reports that about 70 percent of the benefits lost to identity theft went to criminals in places like China, Nigeria, Romania, and Russia. That means it is highly unlikely any of it will be recovered.

State investigators have so far identified $400 million paid on some 21,000 unemployment benefit claims improperly filed in the names of California prison inmates. The California Task Force on Pandemic Unemployment Assistance Fraud has 1,400 active investigations.

California’s statewide offices are up for reelection this year. They are all held by Democrats, who also hold super-majorities in both legislative houses. If voters do not hold them to account for this massive fraud, the message to the Newsom gang will be clear: they are The Untouchables.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

James Breslo
James Breslo is a civil rights attorney and host of the "Hidden Truth Show" podcast. He was formerly a partner at the international law firm Seyfarth Shaw and public company president. He has appeared numerous times as a legal expert on Fox News and CNN.