As state officials frantically work to review hundreds of thousands of frozen unemployment accounts for fraud, a new report from the California state auditor found that the state unemployment department’s inefficiency and lack of advanced planning continue to create delays — and the department is still not doing all it needs to in order to correct the issue. But reports from the Employment Development Department indicate this figure has already increased with more fraud being verified.
The report is a response to a request for an emergency audit from the state’s Joint Legislative Audit Committee. State legislators responded Tuesday by asking for an oversight hearing focused on ensuring the Employment Development Department implements the auditor’s recommendations.
The audit comes one day after EDD confirmed it has paid out at least $11 billion worth of fraudulent unemployment benefits since the beginning of the pandemic. A good chunk of claims are still being reviewed, and Labor Secretary Julie Su says the agency expects the number of fraudulent claims will continue to increase.
“There is no sugarcoating the reality," Su said at a press event Monday. "California did not have sufficient security measures in place to prevent this level of fraud, and criminals took advantage of the situation."
In November, California district attorneys announced that a scam ring centered out of state and county correctional facilities had bilked the state out of hundreds of millions in fake benefits. The figure reported Monday exceeds earlier, already staggering estimates.
At the end of 2020, as part of an effort to prevent future hacks, EDD froze 1.4 million accounts in what one advocate called “the New Year’s Eve freeze.”
On Monday, EDD spokesperson Loree Levy said she could not confirm how many of those frozen accounts have since been verified as legitimate. But she could confirm that a little over 300,000 applicants had provided the requested verification information to reactivate their accounts. This does not necessarily mean they have gotten their money yet, but they should be much closer to getting paid.
It also means the accounts and benefits of more than 1 million people are still in limbo.
Frozen but Not a Fraudster
Though EDD is unable to confirm how many legitimate applicants have been impacted by its attempts to fight fraud, advocates say the numbers are significant. And some applicants have been both victims of fraud and victims of the unemployment agency’s efforts to prevent it.
Gregory Collins of Redwood City is one of them.
Before the pandemic, Collins worked as a tech contractor. He’s been trying to hustle and find work since he got laid off last spring. But Collins, in his early 50s, says his age creates an additional barrier in the already anemic job market.
And he hasn’t just confined his search to his field. Several months ago, he applied at In-N-Out.
“I’m a vegetarian and there’s nothing there that I actually eat, so not even a free meal there would appeal to me, but it was close and I thought, until things get better,” he said.
He didn’t get the job.
At the end of last year, Collins was one of those 1.4 million accounts EDD froze to fight future fraud. In mid-January, he was able to verify his claim and restart his payments.
Despite that, Collins said it feels like two steps forward, 5,000 steps back. Because every benefit check he gets goes towards paying off the debt that fraudsters racked up when they hacked his benefits account last fall.
At the beginning of September, Collins’ Bank of America debit card — through which he receives his benefits — got breached.
The irony, he says, is that Collins himself had triggered freezes on his own account for everyday purchases. But when hackers used his card to make more than 50 fraudulent transactions in Southern California, there was no alert from Bank of America.
In the middle of all this, his mom passed away. And because of the fraud, Collins couldn’t afford to get back to Ohio, where she lived.
“There was just no way I could do it without the funds,” he said.
The claims process took months, countless hours on the phone and required filing police reports. By mid-November, Collins thought he was finally in the clear, but he wasn’t. A month later, Bank of America sent him a letter saying, after a review, the bank had decided that there were no fraudulent charges on his account.
When Collins called the bank for clarification, he didn’t get much.
“They just said, ‘Oh, well, just resubmit your claim for reconsideration.’ But I'm like, what was the problem with the first, you know, submission?’ ” he said. The representative said they were unable to provide Collins with more context for his denial and that bank staff would get to his submission as soon as they could.
Bank of America spokesman Bill Halldin said the bank has beefed up the call center team that handles inquiries on EDD cards to expedite processing times. But, as of late January, Collins is still waiting to hear back on the reconsideration request he submitted.
And he’s not the only unemployment recipient who’s exasperated as a result of his experience.
In mid-January, a new lawsuit filed out of the U.S. District Court in San Francisco alleged Bank of America didn’t do enough to protect EDD account holders. Like Collins, the plaintiff in the case says she has yet to be reimbursed for unauthorized transactions on her EDD debit card.
There’s also a chance that the hacking of Collins’ debit card, and the freezing of his EDD account last year, are linked, said Daniela Urban, founder of the Center for Workers’ Rights in Sacramento.
“We've been hearing more and more about problems like this, where ... the claimant themselves have reported the fraud and all that did was make it more difficult for that claimant to receive the payments," she said.
