The good news out of California this week is that their unemployment numbers for at least the next couple of weeks are going to look really promising. In fact, there aren’t going to be any new unemployment claims filed at all. Sadly, it’s not because the state’s economy has suddenly rebounded to pre-plague levels, however. They shut down their unemployment claim system on Saturday night because of a “massive fraud” problem that had been discovered. People may still be losing their jobs, but they likely won’t be able to file a claim to begin receiving benefits. So how did this happen? Pretty much the same way it did in Washington, Illinois and other states. (CBS Los Angeles)
The state has shut down all new unemployment insurance claims as of Saturday night due to unemployment insurance fraud, sources tell KCAL 9.
People who are already in the process of receiving claims will not be impacted by the changes.
California’s Employment Development Department has shut down all new claims for the next two weeks, while they prepare an updated identity verification system to combat fraud within the state’s unemployment system.
The change is reportedly part of the governor’s strike team which has been looking into fraud for the past 50 days.
CBS Los Angeles has been investigating fraudulent unemployment claims for the past month or two and it’s been something of an embarrassment to the state. Their reporters have found claims being paid to individuals who don’t even live in the state or, in some cases, in the country. The total number of such cases is unknown for now, but given how easy they were to find, it’s probably quite a few.
All of the warning signs were there and the problems are hardly unique to California. In some cases, multiple benefits payments were being delivered to the same address. That’s the same situation we saw in Colorado, where one family with both homeowners still working began receiving benefits payments for 19 different people using the couple’s address. Washington state lost more than half a billion dollars to fraudulent claims this year. They’ve since managed to recover almost half of it, but the rest is probably out of the country and will prove difficult if not impossible to claw back. Chicago has been dealing with the same mess also.
The main problem is that none of these systems were equipped to handle hundreds of thousands of claims all coming in during a short period of time. Faced with a choice between making people wait for months while the claims were vetted in the normal fashion or just getting the checks in the mail, they opted to remove the human inspectors from the loop and just begin approving claims as they arrived. This worked out well for the newly unemployed, but it was also a ripe opportunity for scammers who were quick to take advantage of it.
So what will California do to address this when the system comes back online in two weeks? They claim to have a new system dubbed “ID.me” that’s supposed to cut down on fraud. But this is an untested system that neither the applicants nor most of the people processing the claims have had to use before. The odds of that rolling out relatively seamlessly on the first try are likely slim to none. So even if the system grinds back into gear in early October, it’s a safe bet that people will still be left unable to file their claims and at least some of the scammers will find a way around it.
