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California has lost about $20 billion in COVID-19 unemployment benefits to stolen identity fraud, most of which will never be recovered, according to estimates.
About $1.1 billion in 780,000 unused debit cards was recovered and returned to the state Tuesday, according to the state website. State officials worked with Bank of America to make sure the funds did not legitimately belong to people.
The fraud was created by Gov. Gavin Newsom’s (D) “significant missteps and inaction,” a 2021 state audit said. At the time, investigators hoped to retrieve the funds.
“Our review illustrates that [the state] continues to pay claims despite having evidence that they are very likely fraudulent,” the audit said.
After the stinging rebuke, Newsom hired McGregor Scott, a former U.S. attorney, as special counsel to ferret out fraud and bring criminal cases where possible. A new identity verification system was also created.
PRISON INMATES INDICTED IN $2M CALIFORNIA BANK FRAUD CASE
The state’s Employment Development Department says the $1.1 billion recovery comes after Scott and his team thwarted 47,000 fraudulent claims worth about $560 million. So far, they have conducted 1,525 investigations, made 467 arrests, and had 162 convictions.
Most of the fraud involved independent contractors who benefited from a new federal program to help them receive benefits, when, in the past, they were not eligible.
Fraud was made possible after the state relaxed some of its rules to dole out funds quickly to a rapidly rising group of unemployed Californians during the first year of the pandemic. Newsom’s strict stay-at-home order meant that many people lost their jobs.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Among the missing $20 billion are funds secured by a group of 13 prison inmates who created an elaborate identity theft scheme behind bars. A prison employee provided the fraudsters with the names, birth dates, and Social Security numbers of fellow inmates. The bank cards were then delivered to accomplices outside of prison, totaling more than $2 million, federal prosecutors said.
