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Unemployment benefits: California recovers over $1 billion in fraudulent benefits

The pandemic-era boost for unemployment support was seized upon by fraudsters, who stole billions of dollars intended for out-of-work Americans.

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Authorities in California have announced that they have recovered approximately $1.1 billion of falsely-claimed unemployment benefits as part of an ongoing investigation into fraud. The support program was rapidly expanded during the pandemic to provide support to out-of-work Americans but the more generous program quickly became a target for scammers.

The money reclaimed had been distributed across 780,000 benefit cards, which had not yet been activated. Although it was recovered by investigators for the state of California, most of the money will be returned to the federal government, because it was funded by the emergency Pandemic Unemployment Assistance program.

When unemployment soared in the early months of the pandemic the California Employment Development Department faced a massive influx of claims for benefits, one which it struggled to administrate with the stay-at-home order.

Gov. Gavin Newsom said of the breakthrough: “Fraudsters and criminal organizations ripped off California, along with every other state, during one of the worst crises in history – we’re taking aggressive action to return that money to the taxpayers.”

Billion-dollar recovery is just a drop in the ocean

While the headline figure of $1.1 billion may seem like a major victory on the part of law enforcement, it is actually only a small percentage of the total amount believed to have been stolen.

The Los Angeles Times reports that the California Employment Development Department received over 26 million unemployment claims during the pandemic, and paid out a shopping $180 billion in benefits payments. However approximately $20 billion of that is thought to have gone to scammers.

As part of the announcement on Tuesday, officials confirmed that there had been 1,525 cases investigated, 467 people arrested and 162 convictions secured as a result of the state-wide effort.

The anti-fraud effort employed by the state was taken up a level during the pandemic as state officials recognised the greater risk with various additional programs being introduced in a short period of time. Newsom’s office has claimed that an identity verification system introduced in 2020 has flagged and blocked more than $125 billion in attempted fraud.

The Fraud Task Force has worked closely with the state’s Office of Emergency Services to ensure that the money was reaching those who truly needed it. They worked with residents to introduce a suite of assistance programs to ensure that the public was protected. Frequent alerts were issued throughout the pandemic to educate recipients about the risks of phishing scams.