The billions in fraudulent unemployment benefits paid by California during the early days of the pandemic is one of the topics of a recent episode of National Review’s California Podcast. The headline theme of the episode is how the next presidential election is Governor Gavin Newsom’s to lose.
The thesis about Newsom is more debatable than the hosts’ observation, citing an auditor’s report, that the institutional problems which made the fraud possible still aren’t fixed. Massive bureaucratic ineptitude and bad faith and glaring institutional incentives to commit crime don’t get fixed in the state government of modern California.
$33 billion or so
Much of the $33 billion in fraud related to payment of unemployment benefits that occurred in the state around 2020 was collected by bad guys associated with foreign countries, including China.
In October 2022, KCRA3 reported that the amount of fraud that California’s Employment Development Department was willing to cop to was $20 billion. Lexis Nexis Risk Solution’s tally of the fraud that EDD had failed to prevent was then “at $32.6 billion and counting.” A company officer, Haywood Talcover, rejected EDD’s lower number. “I don’t believe it’s 20 billion.”
On Monday morning, we interviewed Haywood Talcove, the CEO of Lexis Nexis Risk Solutions, Government Division. He had checked the “dark web” for examples of fraud against EDD. He opened a laptop, pulled up a video file and hit play. The video showed a computer screen with an EDD login page along with a phone dialed to EDD’s customer line.
“You should get your card in three to five business days,” the woman on the phone says.
“This is one of my favorites,” Talcove said, pointing out that the woman is an EDD operator telling a scam artist that their EDD debit card—obtained using a stolen identity—would be sent.
The video is proof of performance that many bad actors and criminal syndicates require to show that the system they have developed works and that it is worth the time and effort….
“Seventy percent of that money left California. It left this country,” Talcove said. “It went to transnational criminal groups that have used that money for nefarious purposes to harm our democracy. Some of that money has been used in sex trafficking, child extortion. I’ve been actively involved with the National Center for Missing and Exploited Children. And we saw a huge uptick in child trafficking during the pandemic.”
Lexis Nexis Risk Solutions had warned California’s Employment Development Department and the federal government repeatedly about the fraud that it was permitting, proposed identity-checking ways to combat it, and had repeatedly gotten the brush-off.
Players on the field
Earlier, on January 15, 2021, a Los Angeles Time headline had alerted readers that “California unemployment fraud could top $9 billion, double previous estimate….” This was the conclusion of ID.me, a company hired by the EDD “to weed out fraud.” A little less than the “$32.6 billion and counting” that Lexis Nexis Risk Solutions would be attesting to by the end of 2022.
ID.me CEO Blake Hall also reported that much of the fraud “in California and other states” had been committed by “organized criminal gangs operating in some 20 foreign countries, including Russia, China, Nigeria, Ghana, Turkey and Bulgaria.”
He told the LA Times: “When the Russians and the Nigerians and the Chinese are the players on the field, they are going to put up some points.”
