Comer, Issa, Palmer Demand Hearing on California’s Mismanagement of Billions in Unemployment Claims

California granted an estimated $11-$31 billion in fraudulent unemployment benefits

WASHINGTON—House Committee on Oversight and Reform Ranking Member James Comer (R-Ky.), Congressman Darrell Issa (R-Calif.), and Congressman Gary Palmer (R-Ala.) today called on Oversight Chairwoman Carolyn Maloney (D-N.Y.) to hold a hearing to investigate billions in fraudulent unemployment benefits granted by the California Employment Development Department.

“Governor Newsom grossly mismanaged this pandemic, forcing California residents into lockdown, shuttering small businesses and churches, and costing more than a million Californians their jobs. Now we’ve learned the state lost tens of billions in fraudulent unemployment claims. Congress must exercise our oversight duties and hold a hearing to learn how California failed their citizens by allowing murderers, people on death row, deceased individuals, and organized crime members in China and Russia fraudulently amass extraordinary amounts of money,” said Ranking Member Comer.

“This egregious mismanagement is a twin betrayal of both taxpayers and our fellow citizens who need and deserve these benefits. Despite repeated warnings of fraud and outright theft, the State hesitated when it should have acted, then panicked and paused legitimate benefits for millions of residents. Enough is enough. We need answers, accountability and immediate reform,” said Rep. Issa.

“I am very concerned about the lack of safeguards that exist to ensure unemployment assistance is actually going to those in need and not being squandered on fraud. That’s why I, along with Sen. John Thune, introduced legislation to put commonsense safeguards in place to ensure the integrity of the system. We now know that every state has been defrauded of tens of billions of dollars because states were pressured to remove safeguards that prevented fraudulent claims. Every dollar of fraudulent assistance is a dollar that won’t go to a person in need and has drained state unemployment funds. That’s unacceptable anytime, but especially during the pandemic,” said Rep. Palmer.

The letter to Chairwoman Maloney is available here and below.

February 11, 2021

The Honorable Carolyn Maloney
Chairwoman
Committee on Oversight and Reform
U.S. House of Representatives
Washington, D.C. 20515

Dear Chairwoman Maloney:

We write to urge you to immediately schedule a hearing before the House Oversight and Reform Committee to investigate recent reports and revelations of between $11 – $31 billion in fraudulent unemployment benefits granted by the California Employment Development Department (EDD), which administers California’s unemployment insurance (UI) program.

The federal government’s response to COVID-19 has included significant funding toward administering and enhancing unemployment benefits, including $117 billion from the Families First Coronavirus Relief Act and $12 billion in Coronavirus Aid, Relief, and Economic Security (CARES) Act. In December 2020, Congress further extended the Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensations by an additional 11 weeks, and Federal-State Extended Duration (FED-ED) for up to 20 weeks of benefits.

According to reports issued on January 26 and January 28, 2021, by California State Auditor Elaine Howle, EDD was unprepared to prevent payment for fraudulent claims filed under the names of incarcerated individuals—which the EDD estimated to total about $810 million. The reports also stated that “[e]ven as late as December 2020, EDD was allowing claimants to continue to collect benefits using suspicious addresses because it did not establish payment blocks for their claims.” Therefore, there is every reason to be concerned that this unprecedented fraud may be ongoing even today. Improper payments have long been a direct concern of this Committee, and identifying waste, fraud, and abuse of taxpayer money is at the core of this Committee’s mission.

Additional reports verify the state paid more than 35,000 claims under state prisoners’ names, with one inmate collecting nearly $49,000. California also paid more than $421,000 to 133 Death Row inmates—including Scott Peterson, a San Quentin prisoner found guilty of killing his wife and unborn child. Still more fraudulent payouts went to organized crime sources in Russia, China and other countries. The Sacramento County District Attorney called it “perhaps the biggest fraud of taxpayer dollars in California history.”

According to the Howle audit, “these payments happened despite warnings from the U.S. Department of Labor (DOL).” The DOL Inspector General cautioned EDD that California was likely to see at least $1.2 billion in potential fraud. The real amount of fraud, however, appears to be ten to twenty times that amount. The oversight California conducted was by all accounts too late and wholly insufficient. In fact, on New Year’s Day, the EDD paused benefits to 1.5 million claims, haphazardly looking to correct months of neglect. As a result, unsuspecting law-abiding Californians, locked at home by Governor Newsom, were no doubt put through additional stress.

Needless to say, the evidence of unprecedented fraud, waste, mismanagement and incompetence is too voluminous to briefly reference. By any objective measure, we believe this Committee is obligated to schedule a public hearing to comprehensively examine what went wrong in California, the steps being taken to recover the improper payments, and the steps being taken to prevent it from happening again.

We look forward to your prompt response.

Sincerely,

Darrell Issa
Member of Congress

James Comer
Ranking Member
Committee on Oversight and Reform

Gary Palmer
Member of Congress