UI fraud has spiked amid the pandemic, costing taxpayers tens of billions of dollars
Senator Collins: “There can be no excuse for the kind of rampant [unemployment] fraud that has been so prevalent in California.”
Washington, D.C. — Today, U.S. Senator Susan Collins, a member of the Senate Labor Committee, questioned Julie Su at a hearing to consider her nomination to serve as the U.S. Deputy Secretary of Labor. Ms. Su is currently the secretary of the California Labor and Workforce Development Agency, which oversees the Employment Development Department (EDD) and unemployment programs.
Senator Collins called on Ms. Su to explain rampant fraud in California’s Unemployment Insurance (UI) system, which has cost taxpayers at least $11.4 billion with another $20 billion in suspicious payments. Some of the most egregious cases of fraud include a con artist who collected $21,000 by claiming to be Senator Dianne Feinstein, $800 million in payments to prison inmates, and 1,700 claims that were filed from a single address yet were still paid.
“I believe that every member of this panel would agree with you that unemployment insurance is absolutely critical to individuals who have lost jobs through no fault of their own,” said Senator Collins. “I recognize that there has been UI fraud across the country, including in the State of Maine, but the sheer scale and scope of the fraud in California not only dwarfs that of every other state…but also seems to be directly related to directives that you issued.”
“You sent a memorandum to the Employment Development Department Director directing that department to temporarily suspend unemployment eligibility certifications,” Senator Collins continued. “So in other words, they're paying UI benefits before determining if the applicants are eligible. You also directed the agency to temporarily stop collecting eligibility certifications from claimants. Now the U.S. Department of Labor did not waive those requirements, and a California state audit found that your directives jeopardize the integrity of the system. So do you disagree with the state auditor and with the federal requirements? Why did you take those actions? Why did you jeopardize the integrity of the system?”
“I think transparency is very, very important in government,” Ms. Su responded. “It has raised more attention on what we're doing in California, but it also then allows us to talk about the early and aggressive steps that we took, as I mentioned, to stop the fraud. The Pandemic Unemployment Assistance Program was more vulnerable to fraud. I say it's one of the fronts in the war… it was a balance there of wanting to get money out quickly because we needed to. And then once we saw the fraud, we took immediate steps, those steps led to the same steps being taken by the Department of Labor, instructing other states to do that.”
Approximately 10 percent of the $114 billion in claims EDD sent out between March 2020 and January 2021, have been sent to fraudulent claims in California. A further 17 percent of claims, nearly $19.4 billion, are marked as suspicious and pending review. Up to $31 billion of all claims may have been lost to fraud. Earlier this year, EDD confirmed that the backlog of Californians who are still waiting for their benefit claims to be processed was an estimated 900,000 individuals.
Last year, Senator Collins wrote to the Department of Labor Office of the Inspector General (DOL OIG) requesting information on the efforts being taken to combat unemployment fraud schemes.