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Letter to Honorable Gavin Newsom, Governor of the State of California, Honorable Xavier Becerra, Attorney General of the State of California, Honorable Julie Su, Secretary of the California Labor and Workforce Development Agency, and Rita Saenz, Director of the California Employment Development Department - Steel, McCarthy and CA Republicans Condemn Newsom Administration for Mismanagement of $11.4B in Taxpayer Funds

Letter

Dear Governor Newsom, Attorney General Becerra, Secretary Su, and Director Saenz:
We are writing to express our strong concern regarding fraudulent COVID-related
unemployment assistance payments made by the State of California and uncovered in a recent
audit.
As you are aware, in response to the economic challenges presented by COVID, Congress has
provided federal funding to states to help support the availability of unemployment assistance to
individuals laid off as a result of this pandemic. Last year, Congress funded a new program
called Pandemic Unemployment Assistance (PUA), which was designed to provide
unemployment assistance to individuals who typically would not be eligible for unemployment
benefits, such as gig workers, independent contractors, or self-employed individuals.
The California Employment Development Department (EDD) recently confirmed that it has paid
out fraudulent unemployment assistance claims totaling over $11.4 billion, mostly through the
new PUA program, and an estimated $20 billion in unemployment assistance payments are still
under investigation. In an attempt to reduce fraud, on December 31, 2020, the EDD suspended
the processing of roughly 1.4 million unemployment assistance claims in order to verify the
identities of claim applicants. This action was taken with no warning and there has been little
follow-up clarification on which unemployment assistance claims were found to be fraudulent
and which were legitimate, nor how EDD is making such determinations. In addition, the EDD
has recently confirmed that the backlog of Californians who are still waiting for their
unemployment assistance claims to be processed remains at roughly 900,000 individuals Let us be clear - the mismanagement of taxpayer dollars in the amount of $11.4 billion is
absolutely unacceptable and the delay in processing Californians' legitimate COVID-related
unemployment assistance claims is also absolutely unacceptable.
This is all the more grievous given that the State of California received over $318 million for the
administration of all COVID-related unemployment assistance programs and an additional $2.4
million in emergency funding to help the State combat fraudulent COVID-related unemployment
assistance claims, in addition to the multiple guidance documents issued by the U.S. Department
of Labor to assist states with the administration of these programs. Adding insult to injury,
California State Auditor Elaine Howle reported last month in an audit that the federal
government warned California multiple times about the threat of fraud, but states California
continued "to pay claims despite having evidence that they are very likely fraudulent."
California had the resources to combat rampant fraud in these unemployment assistance
programs and appears to have been warned repeatedly about the possibility of fraudulent
unemployment assistance payments being made. So, it is unconscionable that Secretary Su
would claim that the federal government did not provide adequate resources or funding for the
administration of COVID-related unemployment assistance programs -- a clear attempt to deflect
blame and accountability for these failures from the Newsom Administration.
In addition to the implications that high levels of unemployment assistance fraud in California
has for all American taxpayers, we are also concerned about the impacts that this fraud will have
on many California taxpayers whose personal information has been stolen by criminals seeking
to collect COVID-related unemployment assistance with their identities. Many of these
Californians have received or will receive 1099-G tax forms from the IRS at the request of the
EDD and will suddenly be responsible for paying taxes on fraudulent unemployment assistance
taken out in their names that they never received.
The lack of awareness, or even deliberate ignoring of repeated warnings of fraud, while
administering the COVID-related unemployment assistance programs is gravely concerning.
This is compounded by the massive claims backlog and the State suddenly suspending
processing of many COVID-related unemployment assistance claims, especially given that this
aid is not currently in the hands of people who depend on it after being laid off or finding
themselves unemployed due to California's ever-changing lockdown and reopening metrics.
Accordingly, we request responses to the following questions:
1. How is the EDD assessing fraudulent COVID-related unemployment assistance claims
and what is the State doing to ensure this never happens again?
2. How many individuals falsified identities and illegally received COVID-related
unemployment assistance benefits?
3. How does California plan to recover the over $11 billion in fraudulent COVID-related
unemployment assistance benefit payments made by the EDD?
4. As Congress continues to debate additional pandemic relief, how is the State ensuring
that future COVID-related unemployment assistance benefits only go to qualified
individuals and not local bad actors, criminals, prisoners, or international criminal
enterprises?
5. What plan does California have in place to provide individuals who are victims of
identity theft and had unemployment assistance benefits fraudulently issued in their
names with the support and resources to obtain corrected 1099-G forms?
6. When will California citizens, who are legally entitled to legitimate COVID-related
unemployment assistance benefits but are still waiting to receive them, be issued said
payments?
As California faces daunting challenges due to COVID, it is critical that Californians can trust
their state government to effectively administer integral unemployment assistance programs,
including those created by the CARES Act, which are traditionally administered by the states.
Without any accountability mechanisms in place or plan to recover fraudulent COVID-related
unemployment assistance payments, we fear that there will be a continued decline in taxpayers'
faith in California's ability to administer other critical pandemic relief programs, such as vaccine
distribution. Federal and California taxpayers deserve answers to our questions, assurances that
their tax dollars will not continue to be wasted, and to be reimbursed for the $11.4 billion the
State of California has lost.
It is our hope the Newsom Administration will not continue to abuse American taxpayer dollars
-- our constituents' tax dollars -- through continued failure to administer COVID-related
unemployment assistance programs and failure to recoup fraudulent unemployment assistance
payments made by the EDD. If the Newsom Administration fails to act, you can be assured that
we will.
Thank you for your attention to this matter. We look forward to your timely response.
Sincerely,


Source
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