Suspicious Surge In California Unemployment Claims Raises Concerns
SACRAMENTO, Calif. (CBS13/AP) — California is reporting a surge in coronavirus unemployment claims last week for independent contractors, gig workers and the self-employed, and the tens of thousands of claims are raising renewed concerns about widespread fraud.
The state received more than 77,000 additional claims compared with a week earlier, accounting for more than a quarter of all such claims nationally, according to numbers released Thursday by the U.S. Department of Labor.
The claims fall under a program Congress approved last year to give unemployment benefits to people during the pandemic who are usually ineligible to receive them.
The state Employment Development Department has been overwhelmed with unemployment claims since March when Gov. Gavin Newsom imposed the nation's first statewide stay-at-home order that shuttered many businesses. The state has processed more than 19 million claims and paid out more than $113 billion in benefits.
About 4 million claims and $43 billion in payments fall under the program for independent contractors. The program has helped a lot of people who are self-employed weather economic shutdowns from the virus. But its broad eligibility requirements have made it a target of criminals seeking easy paydays.
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Thursday's increase was in new claims, not those from people extending or renewing them under a Congressional extension.
That alarmed Michael Bernick, a former Employment Development Department director and attorney with the Duane Morris firm.
Most independent contractors in California should already have filed new claims in the previous nine months, he said.
"The (new) claims numbers make no sense, other than indicating the re-emergence of fraudulent claims," Bernick said.
The Employment Development Department, in an email to The Associated Press, said it "could not speculate" as to the cause of the surge. But Gov. Gavin Newsom and other officials have repeatedly blamed the program as the source of most of the fraudulent claims.
Overall, the state has acknowledged paying at least $400 million in phony claims, including thousands in the names of prison inmates, including some on death row. However, fraudulent claims have fallen significantly since last fall, when the state installed new safeguards, including contracting with the companies ID.me and Pondera Solutions to better verify claimants' identities.
California was flooded with claims in the early days of the pandemic after Newsom imposed stay-at-home orders in mid-March that closed most businesses. The department managed to resolve a backlog that peaked last year at 1.6 million claims. But the pile has grown again and now stands at more than 800,000 people.
Newsom imposed a new stay-at-home order on much of the state in December after a surge in new coronavirus cases, hospitalizations and deaths. Newsom extended those orders in many regions this month. But he lifted the order for the counties in and around the state capital.
Republican Assemblyman Jim Patterson, a frequent critic of Newsom's handling of the state's unemployment claims, said he his office has been inundated with calls from constituents in recent weeks seeking help obtaining unemployment benefits, an indication that many have again lost their jobs because of the lingering restrictions on businesses.
Patterson said he suspects the increase in claims is likely a mix of fraudulent and legitimate claims. But he added: "If the (Employment Development Department) doesn't know, how do I know?"
"That's the big problem," Patterson said. "The history of EDD has been they have not been able to differentiate between legitimate and fraudulent accounts."
The safeguards the department has put in place have made it much harder for people to file fraudulent claims, said El Dorado District Attorney Vern Pierson, president of the California District Attorneys Association and one of many prosecutors investigating fraudulent unemployment claims statewide.
Pierson said he believes the spike in claims is likely related to the recent surge in COVID-19 cases and accompanying business restrictions that have hurt the economy.
But no system is foolproof, he said.
"Criminals are still trying to defeat the system," Pierson said. "It can be defeated."
Blake Hall, founder and CEO of ID.me, told the Los Angeles Times last week that at least 10% of claims submitted to the state before controls were installed in October may have been fraudulent — which could result in nearly $10 billion in fraudulent payments.
The state has not said how many fraudulent claims it has paid. State Auditor Elaine Howle is scheduled to release two audits of the department next week.
Earlier in the month, the Employment Development Department announced it was suspending an unspecified number of accounts in an effort to weed out fraud, blindsiding many who say they are actually unemployed and have no way to prove their identity or unemployment.
The EDD suspended unemployment payments on claims it considered "high risk," alluding to "more details" in the days ahead, but did not say how or when people will be able to verify their identities and regain access to their benefits.
Some received notices from EDD first, promising answers by Wednesday then, Friday. But so far there has been no press release, not even a mention online, as many struggle to survive amid the lockdowns and the EDD backlog continues to grow.
(© Copyright 2021 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)
