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Calif.: Criminals Raided Unemployment Funds to Tune of $11.4B

State's labor secretary says hackers, other criminals may have stolen an additional $20B
By Jenn Gidman,  Newser Staff
Posted Jan 25, 2021 10:42 PM CST
Updated Jan 26, 2021 2:45 AM CST

(Newser) – From March of last year to the middle of January, California paid out some $114 billion in unemployment benefits. Now, the state's labor secretary, Julie Su, has some alarming news on about $11.4 billion, or 10%, of that figure—those payments were fraudulent, stolen by hackers, identity thieves, and criminal rings from abroad, CBS Sacramento reports. And Su's Monday announcement might not even be the worst of it: She said that another 17% of the payments made during that time period, or around $20 billion, could also be fraudulent. "There is no sugarcoating the reality," she said, per the AP. "California did not have sufficient security measures in place to prevent this level of fraud, and criminals took advantage of the situation."

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Part of the issue was that eligibility requirements for people applying for unemployment benefits had been expanded under the Pandemic Unemployment Assistance program. That proved to be a boon to, say, independent contractors struggling as a result of the pandemic, but it also left vulnerabilities in the system that Su says criminals exploited from as far away as Russia and Nigeria. Last fall, California implemented an ID.me security system that was designed to streamline the unemployment benefits process and cut down on fraud, and it did stop $60 billion in fraudulent claims from going out, the state's Employment Development Department says, per CBS. But much of the damage had been done, and the backlog of initial claims that the system was also supposed to slash actually increased, from less than 200,000 in mid-November to 400,000-plus a month later. The backlog as of last week was around 940,000, per the AP. (Read more California stories.)

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