Days after exiting the recommended two-week “burndown” plan from Governor Gavin Newsom’s unemployment insurance strike team, the Employment Development Department (EDD) was met October 7 with a news conference at its front door and a legislative oversight hearing at which state lawmakers vented their frustration about the department’s mishandling of claims filed by out-of-work Californians.

The governor’s strike team issued a September 16 report that described a backlog of claims so large that the agency was ordered to stop taking claims for two weeks so it could attempt to catch up – and also stop pervasive fraud within the system.

After months of news stories about unemployed Californians not being able to contact the EDD or receive unemployment checks since the pandemic began in March, Senator Jim Nielsen held a press conference in front of the EDD (photo, left). The event included several unemployed Californians who told their stories and cataloged the failures of the department to pay unemployment claims.

Nielsen displayed a poster board highlighting the strike team’s finding that of the 6.7 million calls per week to the EDD, only 167,000 (2.5 percent) were answered.

The senator said his staff resolved approximately 500 cases for constituents, with an average time of 35 days to resolve the case.

While the press conference focused on the department’s inability to process claims, the legislative hearing focused on the strike team’s report – and fraud in particular.

The EDD was targeted by out-of-state criminals who scammed the department for millions using stolen identities and false addresses. In one high-profile incident, the Beverley Hills Police Department confiscated stolen EDD debit cards, thousands of dollars in cash and multiple weapons (one police officer said the criminals involved in the EDD fraud had more weapons than he has confiscated on Rodeo Drive in his entire career). The scam was discovered after hundreds of constituents around the state reported receiving stacks of letters and loaded debit cards from the EDD, addressed to people who didn’t live where the letters were received.

When asked how much the EDD has sent out in fraudulent claims, Director Sharon Hilliard told members of the Assembly Budget Subcommittee No. 4 that she didn’t have a specific number.

Assembly Member Jim Cooper, chair of the subcommittee and a retired sheriff’s captain, estimated that the unemployment fraud is “conservatively in the hundreds of millions if not a billion dollars.”

The strike team report found that of the EDD’s 9,000 employees, only 27 were devoted to investigating fraud. After media reports described the piles of EDD letters and benefits being delivered to people who hadn’t filed claims, the EDD identified 30,000 addresses in California with at least 10 Social Security numbers each attached to them.

Assembly Member David Chiu asked how the EDD was handling fraudulent letters sent to his constituents. He said EDD staff advised his staff to tell constituents to throw away the mail if they don’t want to pay postage to send it back to the EDD.

Hilliard told the committee the EDD has been telling people who receive the letters to either return to the EDD (for envelopes) or Bank of America (for debit cards) or shred the mail and cards.

“I have never heard of a government agency suggesting that criminal evidence be shredded,” Chiu responded.

To combat fraud, the EDD rolled out the “ID.Me” verification program already used by the Department of Motor Vehicles. Recipients send a photo to the department to verify their identity. Initially, only 64 percent of claimants were able to verify their identity, the agency reported.

The new system won’t resolve issues with the 1.6 million-claim backlog, which isn’t expected to be cleared until January at the earliest. Legislators expressed interest in holding additional hearings until the EDD’s problems are resolved.