Exhibit 90 — In re Bank of America California Unemployment Benefits Litigation (Dkt. 374-2, S.D. Cal. No. 3:21-md-02992)

Record facts

U.S. District Court for the Southern District of California · No. 3:21-md-02992-GPC-MSB · Doc. 374-2 · 2024-11-20 · Docket on CourtListener

Full text

EXHIBIT 90 
Case 3:21-md-02992-GPC-MSB     Document 374-2     Filed 11/20/24     PageID.13797 
Page 1 of 2

January 28, 2021 
2020-628.2 
The Governor of California 
President pro Tempore of the Senate 
Speaker of the Assembly 
State Capitol 
Sacramento, CA 95814 
Dear Governor and Legislative Leaders: 
Elaine M. Howle State Auditor 
As authorized by state law, my office presents the results of our high risk audit concerning the 
Employment Development Department's (EDD) management offederal funds related to the COVID-19 
pandemic. EDD administers California's unemployment insurance (UI) program and received a 
significant amount of federal funding in response to the COVID-19 pandemic and related federal 
expansion of UI benefits. The following report details our conclusion that significant weaknesses in 
ED D's approach to fraud prevention have led to billions of dollars in improper benefit payments. 
EDD did not take substantive action to bolster its fraud detection efforts for its UI program until 
months into the pandemic, resulting in payments of about $10.4 billion for claims that it has since 
determined may be fraudulent because it cannot verify the claimants' identities. Specifically, EDD 
waited about four months to automate a key anti-fraud measure, took incomplete action against claims 
filed from suspicious addresses, and removed a key safeguard against improper payments without 
fully understanding the significance of the safeguard. 
Further, EDD's lack of preparation left it unable to manage two important fraud-related situations 
that arose during its 2020 pandemic response. In September 2020, because of fraud concerns, EDD 
directed Bank of America to freeze 344,000 debit cards (accounts) that it used to provide benefit 
payments to claimants. However, EDD did not have a plan in place to ensure that it could unfreeze 
those accounts found to belong to legitimate claimants, and it has been slow to acknowledge its role 
in freezing these accounts. EDD was also unprepared to prevent payment of fraudulent claims filed 
under the names of incarcerated individuals, the total of which is an estimated $810 million. Because 
it had not developed the capacity to regularly match data from its claims system with data from state 
and local correctional facilities, EDD did not detect fraudulent claims until after it had paid them. 
EDD has put its UI program at higher risk for such fraudulent payments by relying on uninformed and 
disjointed techniques to prevent and detect impostor fraud. For example, EDD has not established a 
centralized unit that is responsible for managing its fraud prevention and detection efforts, and it does 
not monitor or assess its numerous fraud prevention and detection tools to determine whether they are 
successful. Consequently, EDD may be using ineffective fraud prevention and detection techniques, 
which can delay payments to legitimate claimants while it puts their claims through additional and 
unmerited review. 
Respectfully submitted, 
ELAINE M. HOWLE, CPA 
California State Auditor 
621 Capitol Mall, Suite 1200 I Sacramento, Cl\ 95814 
CONFIDENTIAL 
916.445.0.255 
916.327.0019 tax 
www.auditor.ca.gov 
BANA_EDD_MDL-00080296 
Case 3:21-md-02992-GPC-MSB     Document 374-2     Filed 11/20/24     PageID.13798 
Page 2 of 2

File and source

File

gov.uscourts.casd.709615.374.2.pdf

Size

93,428 bytes

SHA-256

bad0e14d527142082e892b38ef526d44df5f78dd1a0606d02de1d231dd8a3082

Our copy

gov.uscourts.casd.709615.374.2.pdf

Original

PACER (login required)