California Lost $30 Billion to Unemployment Fraud. Federal Review Still Underway.

California lost more than $30 billion to unemployment insurance fraud during the pandemic. Six years later, the state is still under federal review.

The Employment Development Department — the state agency that runs unemployment insurance — suspended eligibility checks and waived identity verification on claims for four months through August 2020. State audits in late 2020 and early 2021 said the department wasn’t prepared for the pandemic. Billions went out to fake identities.

$11.1 billion in fraud was confirmed by January 2021, according to the EDD’s own fact sheet. Another $19.4 billion was still under investigation as potentially fraudulent at that time. It’s one of the largest known unemployment fraud cases in U.S. history.

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Valley residents had their identities stolen and their benefits taken. Criminal organizations filed mass claims using fake identities while the state’s verification systems were turned off.

The EDD eventually implemented ID.me verification, which the department says stopped another $125 billion in fraud attempts. State and federal investigators have since busted multiple fraud rings. This year, the U.S. Department of Labor announced a federal team to review California’s unemployment program and fraud prevention tools.

The Breakdown

• The EDD temporarily suspended eligibility reviews to speed up payments during the pandemic.
• The department waived payment blocks on claims with unresolved identity concerns for roughly four months, continuing into August 2020.
• Two state audit reports (November 2020 and January 2021) found the EDD was not prepared for the pandemic, leading to billions in improper payments.
• $11.1 billion in confirmed fraud and $19.4 billion in suspected fraud by January 2021, according to the department and State Auditor.

What This Means for You

The EDD suspended verification and waived identity checks during the pandemic. Those decisions led to $30 billion in documented losses. The federal review announced this year means the oversight didn’t end when the headlines did.

What to Watch

The U.S. Department of Labor announced a federal review team to examine California’s unemployment program and fraud prevention tools. The material doesn’t state a timeline or public reporting schedule for that review.

The material describes arrests and prosecutions of fraud rings — the criminals who filed fake claims. It does not describe any consequences for the state officials who made the decision to suspend verification systems, or for the agency leadership that two state audits said was unprepared.