California Unemployment Agency Loses $31 Billion in Fraudulent Claims, Then Says It’s Trump’s Fault

During his second State of the Union address last night, President Joe Biden visited a long list of working-class economic issues that he then wrapped up with a renewed promise to America’s taxpayers for fiscal accountability.

“Before I came to office,” he proclaimed, “fraud was rampant…Last year, I told you the watchdogs are back. Since then, we’ve recovered billions of taxpayer dollars. For every dollar we put into fighting fraud, taxpayers get back at least ten times as much.”

The President obviously wasn’t thinking about California, where exercising greater accountability apparently means blaming former President Donald Trump for the way the state’s unemployment agency, otherwise known as the Employment Development Department, lost about $31 billion in fraudulent benefit claims — many to convicted felons in the state prison system.
Nancy Farias, the EDD’s fearless leader, accused the Trump administration of not focusing on California’s efforts to combat unemployment fraud, according a report by the Sacramento Bee. She explained the previous president and his officials “neglected” the Golden State’s attempts to fight domestic and foreign criminals collecting billions of dollars fraudulently from overwhelmed unemployment systems.

Farias’ take on the agency’s astronomical loss is contradicted by the results of an extensive examination by California’s state auditor, which concluded the level of fraud and failures discovered at the EDD were not the result of anything Trump did, but could be directly  traced back to Julie Su, California’s then-Labor Secretary, and her highly questionable decision to suspended eligibility requirements for EDD claimants.

Released in 2021, the EDD audit noted officials within the agency had been aware of internal problems for more than 10 years and meanwhile — throughout Democrat Gov. Jerry Brown’s second time in the top office and the current tenure of fellow Democrat Gov. Gavin Newsom — failed to prepare for anticipated economic downturns in the state. “EDD had no comprehensive plan for how it would respond if California experienced a recession and UI [unemployment insurance] claims increased correspondingly,” the audit reported.

“The economic shutdowns in early 2020 led to historically high numbers of UI claims in a very short time (claim surge), and further shutdowns began in December 2020, raising the potential for additional spikes in unemployment,” the auditor’s office said. “This audit reviewed EDD’s response to the claim surge, its handling of the resulting backlog of unpaid claims, and the assistance it has provided to individuals through its call center.”

Su, who was responsible for overseeing the EDD, confirmed in 2020 at least $11.4 billion was stolen through fraudulent state unemployment benefits, reported the California Globe, and 800,000 unemployment claims were paid late while there were also 12.7 million delayed eligibility determinations.

The fraudulent claims ballooned to the $31 billion mark  after Su suspended most EDD eligibility requirements, according to the audit. It turns out that federal officials were the ones who ended up finding the mounting fraud claims and informed the EDD it could not suspend eligibility requirements.

The Audit discovered that in March 2020, “the secretary of the Labor and Workforce Development Agency (agency secretary) directed EDD to pay claimants UI benefits before determining whether they met key program eligibility requirements. The EDD expanded the directive to include most program eligibility determinations. In April 2020, the agency secretary further directed EDD to temporarily stop collecting the certifications” claimants must regularly submit to prove they remain eligible for benefits.

The EDD is an executive branch agency, with oversight provided by the Governor.

Instead of being held accountable for her decision-making with the EDD, Su was awarded an appointment by President Biden to serve as the deputy secretary of labor at the U.S. Department of Labor.

Prior to being appointed California’s Employment Development Director by Gov. Newsom,  Farias was Director of Government Relations at labor union SEIU’s Local 1000 from 2017 to 2020.