California Multimillion-Dollar EDD Unemployment Benefits Scam

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The California Department of Employment Development has uncovered and foiled a new scheme to defraud the state’s unemployment program.

Case

The state unemployment agency said Thursday it had shut down an elaborate scheme to steal hundreds of millions of dollars in unemployment benefits.

The Employment Development Department (EDD), which has been battling widespread fraud since the COVID-19 pandemic began more than two years ago, said it found scammers engaged in a new ruse.

They flooded the agency with suspicious claims – around 47,000 were filed in early May, officials said.

EDD would normally receive around 7,000 unemployment claims during this period. Most applicants submit their application electronically.

EDD failed to pay the suspicious claims, which could have totaled up to $560 million. The agency paid out $115 million in benefits on claims established during the week of May 7, according to the latest available data.

The scheme, however, is expected to make it harder for legitimate claimants and possibly slow down the payment of their benefits.

The agency is sending notices to people who have applied for verification of their status and identity, as EDD continues to try to identify fraudulent applications. There was no word Thursday on who might be responsible for the fraud.

The claims process could get complicated. If a scammer tries to file multiple claims on someone else’s behalf, which is not unusual, legitimate claimants might receive multiple EDD notices asking for verification.

Those who receive these notices are asked to respond immediately so that EDD can resolve their complaint as quickly as possible.

Unemployment scams

The state has been battling mass unemployment fraud since the start of the COVID-19 pandemic in March 2020.

The biggest abuses have occurred under the federally funded Pandemic Unemployment Assistance (PUA) program, created at the start of the pandemic by Congress and President Donald Trump. He was destined to help those who were not eligible for traditional unemployment, such as independent contractors.

According to EDD estimates, approximately $20 billion has been lost to fraudulent claims in California. All but $1.3 billion of that total was for PUA claims and other federally funded COVID relief. programs, which ended last year.

Other losses came from the regular state unemployment insurance program.

Special Counsel McGregor Scott, appointed by EDD last year to coordinate investigations into the fraud, cited multiple sources for the scams, including transnational and domestic organized crime, inmates and scammers, or people seeking constantly finding ways to rob the government and others.

Scott said Thursday he was proud of the latest action. “These criminals tried to break through the Department’s defenses again but we stopped them in their tracks,” he said.

EDD said scammers today seek out victims by impersonating banks, stores and government agencies, and communicate with potential candidates through phone calls, text messages, regular mail and other devices.

The current scheme involved the state’s remaining unemployment program, a program that pays benefits to people who lost their jobs and worked for employers who contributed to the unemployment system.

This story was originally published May 26, 2022 4:22 p.m.

David Lightman is McClatchy’s chief congressional correspondent. He has been writing, editing, and teaching for nearly 50 years, with stops in Hagerstown, Riverside, California, Annapolis, Baltimore, and since 1981, Washington.


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