California unemployment fraud 4 times worse than first reported; $8 billion paid to criminals

SAN FRANCISCO (KGO) -- The amount of unemployment funds stolen from California taxpayers in 2020 may total more than $8 billion -- four times higher than estimated just one month ago.

The numbers are staggering; the solutions elusive. As we found out, even states credited with cracking down on fraud have had issues.

Since the start of the pandemic, we've shared countless stories of struggling Californians desperate to get their unemployment benefits.

EXCLUSIVE: Insiders say California EDD unemployment benefit scam was get-rich-quick scheme
EMBED More News Videos

It's a story you'll only see on ABC7 News: More local charges are likely to be filed in an inmate unemployment benefits scam sweeping the country.



Legitimate claimants are being mistaken for scammers.

"They're trained to tell me absolutely zero information because I could be potentially a scammer," said Ben Chrimes of San Jose.

"They cut the card off. They didn't even allow me to get my money that they had already given to me on the card," Roxzan Macon of Hesperia told us.

Yet people who don't deserve the money are getting it.

Bank of America said last month $2 billion had been paid out in fraudulent unemployment claims.

RELATED: Bank of America asked why they're draining EDD accounts, leaves questions unanswered

But Robert Lapsley of the California Business Roundtable says the number is higher -- way higher.

The state revealed before the pandemic more than 8% of all jobless claims paid between 2016 to 2019 went to scammers.

Last year California paid out $106 billion in EDD benefits.

"If you take that same number, that puts you know, the total fraud, you know, at least eight-and-a-half billion dollars," said Lapsley.

Lapsley blasts the way the state handled the pandemic, saying it didn't do enough to prevent fraud early on.

RELATED: 'People need help': As many as 1 in every 3 EDD claims is fraudulent, security firm says

He credits Pennsylvania for cracking down on fraud early. That state tells us it kept in close contact with other states about new fraud methods to prevent them from entering their state.

Pennsylvania also implemented the ID verification system, ID.Me, the same month California did, in October.

Beyond that, it declined to disclose its anti-fraud methods for security reasons.

However, state officials acknowledge Pennsylvania's problems mirror California's.

"Just when we were feeling like we had a handle on it, the fraud epidemic started," said Jerry Oleksiak, the Pennsylvania Secretary of Labor and Industry.

Our sister station in Philadelphia tells us its unemployment department, like ours, has also been accused to denying benefits to the truly unemployed. Meanwhile California says it has cut the number of fraudulent claims by 30 percent.

Take a look at more stories and videos by Michael Finney and 7 On Your Side.

Have a question for Michael and the 7 On Your Side team? Fill out the form HERE!
7OYS's consumer hotline is a free consumer mediation service for those in the San Francisco Bay Area. We assist individuals with consumer-related issues; we cannot assist on cases between businesses, or cases involving family law, criminal matters, landlord/tenant disputes, labor issues, or medical issues. Please review our FAQ here. As a part of our process in assisting you, it is necessary that we contact the company / agency you are writing about. If you do not wish us to contact them, please let us know right away, as it will affect our ability to work on your case.
Copyright © 2021 KGO-TV. All Rights Reserved.