Court filing
RJN 12 — In re Bank of America California Unemployment Benefits Litigation (Dkt. 590-14, S.D. Cal. No. 3:21-md-02992)
Filed October 17, 2025 in In re Bank of America California Unemployment Benefits Litigation; one of 1415 filings from this case.
Record facts
| Court | U.S. District Court for the Southern District of California |
|---|---|
| Filed | 2025-10-17 |
U.S. District Court for the Southern District of California · No. 3:21-md-02992-GPC-MSB · Doc. 590-14 · 2025-10-17 · Docket on CourtListener
Full text
RJN 12
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Examining Widespread Fraud in Pandemic
Unemployment Relief Programs
Report Prepared by the House Committee on Oversight and Account ability Majority Staff
September 10, 2024
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Table of Contents
Table of Contents ......................................................................................................................... 2
Useful Acronyms .......................................................................................................................... 3
I.
Executive Summary............................................................................................................. 4
II.
Findings ................................................................................................................................. 6
III.
Recommendations .......................................................................................................... 9
IV.
Background on Unemployment Insurance Program ............................................. 12
V.
Congress and Executive Branch Actions Created Problems for States and the
Economy ...................................................................................................................................... 14
A.
Temporary Pandemic UI Programs Bring Relief, but Create Permanent Problems for States and
Employers ..................................................................................................................................................................... 14
B.
Time to Return to Work, But Beneϐits Still Available ............................................................................. 17
C.
Lasting Repercussions and Attempts to make Pandemic UI Permanent .......................................... 18
VI.
Ofϐice of Inspector General, Law Enforcement, and Preventing Future
Improper Payments and Fraud .............................................................................................. 23
A.
State Preparedness .......................................................................................................................................... 23
B.
Anti-Fraud Measures and High-Risk Individuals .................................................................................... 24
VII.
California ........................................................................................................................ 28
A.
Former LWDA Secretary Julie Su.................................................................................................................. 28
B.
Hiding the Truth ............................................................................................................................................... 31
C.
Beneϐits Not Being Paid Out in a Timely Manner .................................................................................... 34
D.
Issues Unique to CA ......................................................................................................................................... 44
VIII.
Pennsylvania .................................................................................................................. 46
A.
Unprepared for the Increase in Pandemic UI Claims ............................................................................. 46
B.
Failure to Cross-reference Claims to Prevent Fraud ............................................................................... 47
C.
No Transparency or Accountability ............................................................................................................ 50
IX.
New York ......................................................................................................................... 52
A.
Disaster in New York ....................................................................................................................................... 52
B.
Lack of Urgency and Missed Deadlines ...................................................................................................... 54
X.
Organized Crime and Insider Threats........................................................................... 69
A.
California ............................................................................................................................................................ 69
B.
New York ............................................................................................................................................................ 70
C.
Wisconsin ........................................................................................................................................................... 72
D.
Michigan ............................................................................................................................................................. 73
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E.
There’s More ..................................................................................................................................................... 73
XI.
Conclusion ...................................................................................................................... 75
Useful Acronyms
ALP – Acceptable Level of Performance
ARPA – American Rescue Plan Act
BLS – Bureau of Labor Statistics
CAA – Continued Assistance Act
CARES Act – Coronavirus Aid, Relief, and Economic Security Act
CRF – Coronavirus Relief Fund
DOL – U.S. Department of Labor
DHS – New York City Department of Homeless Services
DUA – Massachusetts Department of Unemployment Assistance
EB – Extended Benefit program
EDD – California Employment Development Department
ETA – Employment and Training Administration, U.S. Department of Labor
EUISAA – Emergency Unemployment Insurance Stabilization and Access Act of 2020
FFCRA – Families First Coronavirus Response Act
FPUC – Federally Pandemic Unemployment Compensation
FUA – Federal Unemployment Account
FUTA – Federal Unemployment Tax Act
GAO – U.S. Government Accountability Office
LWA – Lost Wages Assistance
MEUC – Mixed Earner Unemployment Compensation
NDNH – National Directory of New Hires
NYSDOL – New York State Department of Labor
OIG – Office of Inspector General, U.S. Department of Labor
OUI – Office of Unemployment Insurance
PADLI – Pennsylvania Department of Labor & Industry
PEUC – Pandemic Emergency Unemployment Compensation
PII – Personally Identifiable Information
PIIA – Payment Integrity Information Act of 2019
PUA – Pandemic Unemployment Assistance
RESEA – Reemployment Services and Eligibility Assessment
RJM – Resource Justification Model
SWA –State Workforce Agencies
UC - Unemployment Compensation
UIA – Unemployment Insurance Agency
UIPL – Unemployment Insurance Program Letter
USPS – United States Postal Service
UTF – Unemployment Trust Fund
WBA – Weekly Benefit Amounts
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I.
Executive Summary
While unemployment insurance (UI) compensation programs in the United States have a
long history of improper payments, new temporary pandemic UI programs created by Congress
and administered by states and territories in response to the COVID-19 pandemic led to an
unprecedented amount of fraud and improper payments. Although the full extent of this fraud
and the money lost may never be fully known, the U.S. Government Accountability Office
(GAO) estimates that about 11 to 15 percent of total benefits paid during the pandemic were
fraudulent, totaling between $100 to $135 billion.1 The Department of Labor (DOL) Office of
Inspector General (OIG) estimated that at least $191 billion in pandemic UI payments could have
been improperly paid, with a significant portion attributable to fraud.2 As of March 2023, states
reported recoveries of improper payments in an amount of only $6.8 billion.3
Early in the COVID-19 pandemic, Congress created the pandemic relief programs,
including expanded unemployment benefits, to provide quick disbursement of benefits to
displaced workers and allowed flexibility for states to prioritize speed over eligibility. However,
Congress did not intend for quick payments to allow states to avoid verifying eligibility in the
long-term. Several states neglected to implement basic identity verification services until several
months into the pandemic, even though a large percentage of the benefits had already been paid.
States, many understaffed and with outdated information technology (IT) systems, saw record
numbers of claims. Instead of heeding warnings from OIG aimed at preventing fraud, states
deployed ‘pay and chase’ models and allowed billions to flood to criminal organizations and
fraudsters around the globe.
The House Committee on Oversight and Accountability held its very first hearing in the
118th Congress on February 1, 2023, on pandemic spending, hearing from witnesses about the
massive fraud and improper payments in several pandemic relief programs, including pandemic
unemployment programs. Prior to the hearing, on January 13, 2023, Chairman Comer wrote the
U.S. Secretary of Labor, U.S. Department of Labor Inspector General, the Director of the
California Employment Development Department (EDD), the Commissioner of the New York
State Department of Labor (NYSDOL), and the Secretary of the Pennsylvania Department of
Labor & Industry (PADLI) to request documents and communications relating to rampant fraud
and improper payments in pandemic unemployment programs.
In addition to reviewing document productions responsive to those requests, Committee
staff spoke with officials from the California State Auditor, the Office of the New York State
Comptroller, the Pennsylvania Department of the Auditor General, and other stakeholders
including the Department of Labor Office of Inspector General. The following report includes
the Committee staff’s findings and recommendations to prevent improper payments and fraud in
unemployment insurance programs in the future. As the Biden-Harris Administration proposes
legislation to make some of the “temporary” pandemic UI programs permanent, it is important
1 U.S GOV’T ACCOUNTABILITY OFF., GAO-23-106696, UNEMPLOYMENT INSURANCE: ESTIMATED AMOUNT OF FRAUD
DURING PANDEMIC LIKELY BETWEEN $100 BILLION AND $135 BILLION (Sep. 12, 2023).
2 U.S. Dep’t of Lab. Off. of Inspector Gen., OIG Oversight of the Unemployment Insurance Program (last updated
Dec. 15, 2023), available at https://www.oig.dol.gov/doloiguioversightwork.htm.
3 Supra, n.1.
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that Congress, states, employers, and taxpayers learn from the catastrophic failure of the
pandemic unemployment programs to ensure history does not repeat itself.
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II.
Findings
Congress quickly enacted a series of new pandemic response packages intended to
provide stability to employers, employees, the recently unemployed, and the U.S.
economy. DOL OIG estimated that at least $191 billion in pandemic UI payments could
have been improperly paid, with a significant portion attributed to fraud. As of March
2023, states have reported recoveries in an amount of only $6.8 billion.
Congress initially created three new temporary federal UI benefits programs: FPUC,
PEUC, and PUA. While Congress, Governors, and state legislators wanted state
workforce agencies to distribute the benefits quickly, many states chose to ‘pay and chase’
by sacrificing program integrity to get benefit payments out without delay.
Pandemic UI benefits, combined with FPUC, a ‘plus-up’ payment of $600 (and later
$300), led to 69 percent of unemployed workers being eligible to receive benefits
exceeding 100 percent of their wages and non-wage compensation. Additionally,
claimants did not have to provide evidence that they were actively seeking work to
continue receiving benefits.
The design of the PUA program led to massive fraud. During the program’s first nine
months, claimants did not have to provide any evidence of earnings which made the
program susceptible to fraud. Only when Congress reauthorized the PUA program in
December 2020, did states require applicants to provide proof of prior employment and
wages. In August 2023, DOL reported that the PUA program had a total improper
payment rate of 35.9 percent.
In March 2021, the Biden-Harris Administration extended pandemic UI programs and
benefits for an additional six months even though states and businesses were open, and the
vaccine rollout was underway. Citing labor shortages, 26 states chose to end federal
benefits early citing that the exorbitant federal benefits were leading to labor shortages in
those states.
Many states ignored DOL OIG’s warnings about modernizing IT and staffing concerns for
years and did nothing to address those problems until it was too late, and they were
overwhelmed by pandemic UI claims.
Due to outdated IT systems, staffing shortages, and new programs being implemented,
many states did not deploy any anti-fraud measures, leading to criminals being able to
successfully file fraudulent claims and avoid detection.
State workforce agencies failed to identify high-risk claims that led to more than $1.2
billion in potentially fraudulent benefits being paid to multistate claimants, deceased
persons, federal prisoners, individuals with suspicious emails, individuals under age 14,
and individuals ages 100 and older. It is likely that many of these funds went to identity
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thieves.
Organized crime played a major role in the proliferation of UI fraud by targeting pre-
existing system vulnerabilities. Foreign nations, organized criminal gangs, prison
inmates, and those acting on their behalf, filed fraudulent claims in multiple states.
Insiders, including those who worked for state workforce agencies, conspired with
organized crime factions and other individuals to defraud state UI programs and the states
did little to stop them. Some states even hired individuals convicted of identity theft to
process UI claims.
EDD, under the leadership of LWDA Secretary Julie Su, made the decision early in the
pandemic to ‘pay and chase’ after Su was informed that keeping integrity checks in place
would lead to backlog in processing claims largely due to EDD’s outdated IT.
EDD did not make any substantive changes to its fraud detection practices until July 2020
when it finally began automating stopping payment on suspicious claims. However, EDD
still delayed responding when there was clear evidence of fraudulent activity and even
when state auditors identified claims as suspicious. EDD made $10.4 billion in payments
to individuals with unconfirmed identities.
EDD directed Bank of America to freeze 344,000 accounts without any plan to selectively
unfreeze the accounts. After public outcry from legitimate claimants who could not
access their benefits, EDD chose to permit potentially fraudulent activity by requesting
that BOA unfreeze all of the accounts rather than verify each account before unfreezing.
EDD failed to cross reference applicants with databases of incarcerated individuals and
lost around $810 million to these fraudulent claims. EDD’s outdated IT did not have the
capacity to perform these basic checks.
While EDD seemed able to get benefits out to fraudsters and identity thieves without
delay, EDD unnecessarily delayed benefits for several million claimants, allegedly due to
missing documents, while there were piles of unopened mail in EDD’s building.
Additionally, EDD wrongly denied claims to at least one million eligible beneficiaries at
the same time they were paying billions of dollars to fraudsters. In one case, EDD
continued to garnish wages and to freeze the state tax return of a victim of identity theft
for six months after EDD had verified the individual’s identity.
Prior to, during, and even after the pandemic, EDD was unable to meet deadlines from
ETA and OIG for necessary reports and data relating to UI claims. EDD often asked for
deadline extensions and then failed to meet them or provided incomplete information to
ETA. This wasted valuable time within EDD requesting the extensions and submitting
incomplete or inaccurate reports and within ETA, constantly having to follow up with
EDD about missing deadlines and extended deadlines.
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California and New York still owe outstanding loan balances and accrued interest to the
Federal Unemployment Trust Fund totaling more than $26 billion and have taken no
measures to repay the loans or to provide relief to employers, including small businesses,
in those states.
Instead of repaying its federal loans, California attempted to seek loan forgiveness of its
debts from DOL Acting Secretary Julie Su who served as secretary of the California Labor
and Workforce Development Agency when the debt was accrued. Acting Secretary Su
and DOL have failed to provide Congress with information about this request.
DOL has not been transparent about the number of and amounts of waived overpayments
by state under the CARES Act and has not provided information the Committee requested
about these waivers.
ETA’s compliance review found that PADLI’s integrity procedures did not sufficiently
guard against fraud and that it issued many improper payments in PEUC, PUA, MEUC,
and EB programs.
Despite evidence from OIG and GAO that the PUA program suffered from a higher rate of
fraud and improper payments than other pandemic UI programs or regular UI, the White
House, Acting Secretary Su, and Congressional Democrats have released plans to expand
UI by increasing benefits and making PUA recipients permanently eligible for benefits.
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III. Recommendations
All future temporary UI benefits programs must require claimants to provide proof of
prior work before claims will be reviewed for eligibility. Unemployment insurance
should always be tied to work.
All future temporary UI benefits programs must require state workforce agencies to
cross-check claimant PII against all available databases, such as federal prisoner
databases, as recommended by OIG and law enforcement, prior to approving benefits.
All future temporary UI benefits programs should consider whether a one-size-fits-all
approach is necessary when 54 states and territories (as well as urban, suburban, and rural
areas within those jurisdictions), have vastly differing economic conditions and
occupations in those areas. Supplemental payments or “plus-ups” should be determined
by states depending on the individual’s prior income and occupation.
States and state workforce agencies should prioritize modernizing IT systems to process
UI claims, while also considering partnering with employers in the state to fund the
necessary investment for these initiatives.
States should consider cross-training seasonal employees to prepare for temporary
increases in UI claims due to economic downturns.
States should conduct more extensive background checks on any temporary, seasonal, or
permanent employees who may have any contact with claimant or beneficiary PII, or who
may have any decision-making authority with approving benefits to prevent insider
threats. Individuals with convictions for identity theft, mail and wire fraud, and related
criminal convictions should not be hired to process government benefits. If necessary,
state laws should be amended to prevent the hiring of these individuals to combat
improper payments and fraud.
ETA should improve its oversight of improper payments and fraud by directly assessing
claims data from states, and creating a data analytics capability that regularly monitors
state UI claims data.
ETA/DOL should develop better methods to calculate improper payments.
ETA must implement OIG’s recommendations to use Social Security numbers and other
data analytics to detect high risk individuals, including those under age 14, those over age
100, multistate claimants, incarcerated individuals, and deceased persons, to prevent
fraudulent claims.
ETA should continue to explore ways for states to more easily share data to improve
program integrity.
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ETA should do more to remind states and large employers of their obligations to report
individuals who refuse offers to return to work, or decline suitable work, and must
require states to file these reports online.
ETA and the DOL Office of the Solicitor (DOL SOL) should report to Congress on
DOL’s progress in implementing regulations that provide OIG permanent access to UI
claimant data and wage records from state workforce agencies to ensure independent
oversight of the UI programs. If ETA and DOL SOL fail to make satisfactory progress in
issuing these regulations, Congress should consider legislation to permanently resolve
this impediment.
The Department of Labor should be led by a qualified Secretary able to be confirmed by
the Senate.
The Department of Labor should be transparent with Congress regarding its return-to-
work plan.
Congress should consider extending the statute of limitations for the fraud programs
associated with the pandemic UI programs, which are due to expire in March 2025, so
that criminals that defrauded taxpayers may be brought to justice.
Congress should strongly weigh the long-term implications of any proposal to expand
regular UI to include those groups of individuals eligible for PUA benefits, including the
self-employed, gig workers, and independent contractors, as it is simply too difficult to
verify that those individuals are unemployed through no fault of their own, are ready,
willing, and able to work, and are actively seeking work as required by federal UC
programs. Regular UI should continue to remain a re-employment program.
Likewise, Congress should weigh the cost benefit analysis of any proposal to expand
regular UI to include those groups of individuals who received PUA benefits since this
would transform the federal UC programs from solely an insurance program funded by
employer UI taxes, to include an entitlement requiring tax increases on all taxpayers.
Unless states, or future beneficiaries of the entitlement, want to fund such a program
through contributions—similar to some state paid leave or temporary disability
programs— taxpayers will be left with the bill for this group of individuals who have
chosen to drop out of the workforce. Regular UI should remain an insurance program
and not a universal basic income scheme disguised as an entitlement.
Congress should ensure that states with outstanding loans from the Federal
Unemployment Insurance Trust Fund are prohibited from borrowing any additional funds
until the outstanding loans and accrued interest are repaid. Additionally, employers and
small businesses in those states with outstanding loans will not face repercussions for the
states failing to practice fiscal responsibility by having to pay higher Federal
Unemployment Tax Act (FUTA) rates until the loans are repaid; instead, the states must
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balance their books and cut other programs and projects to repay these loans, without
putting the burden on blameless employers.4
4 Note that on May 23, 2024, Representatives Michelle Steel [R-CA-45] and Claudia Tenney [R-NY-24] introduced
the Protecting Small Businesses from Imposed Tax Hike Act. If enacted, the legislation would prevent further
unemployment tax hikes for small businesses in New York and California due to fiscal irresponsibility by governors.
“Small businesses in California face a suffocating business climate due to crippling inflation, rising taxes, and a
reckless state government that is addicted to borrowing and spending. My legislation would save our job creators
from repeated tax increases caused by Governor Newsom’s failure to responsibility pay back unemployment
insurance loans” said Rep. Steel upon introduction of the legislation. See H.R. 8559, 118th Cong. (2024), available
at https://www.congress.gov/bill/118th-congress/house-bill/8559. Press Release, Congresswoman Michelle Steel,
Steel, Tenney Introduce Legislation to Protect Small Businesses from Tax Hikes (May 23, 2024), available at
https://steel.house.gov/media/press-releases/steel-tenney-introduce-legislation-protect-small-businesses-tax-hikes.
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IV. Background on Unemployment Insurance Program
Unemployment insurance (UI) compensation as we know it today began in 1935 when
the Social Security Act was signed into law.5 With the New Deal providing a safety net for the
most vulnerable Americans, there was also a desire to aid the able-bodied working age
Americans experiencing extended periods of unemployment during the Great Depression. When
considering legislation for this new benefit, policymakers studied other unemployment schemes
in existence in Europe and a program Wisconsin started in 1932 to avoid potential pitfalls.6
Some aspects of those programs remain in effect today, including the “experience rating,”
emphasizing the responsibility of individual employers for unemployment rates in their
businesses: employers responsible for less unemployment may pay lower tax rates to fund UI
benefits than other employers.7
The federal-state partnership also remains in effect today. There are two types of UI
benefits, permanently authorized programs and temporary programs authorized by Congress
during recessions. Permanently authorized UI programs include Unemployment Compensation
(UC) and Extended Benefit (EB) programs. UC (or “regular” UI) provides temporary and partial
wage replacement to workers who are unemployed through no fault of their own. While the U.S.
Department of Labor’s Employment and Training Administration (ETA) provides oversight of
state UI programs and there are broad requirements under federal law regarding benefits and
financing that all states must follow, each of the 54 states and territories operates its own UI
program according to specific state laws. Most states provide up to 26 weeks of UI benefits to
eligible individuals. Eligibility varies by state, but claimants must have earned enough wages in
the 12 months prior to unemployment to receive benefits. The claimant must also be ready,
willing, and able to work and actively seeking work.8 Once a claimant is determined eligible to
receive benefits, he or she must produce records of his or her job search activities as often as the
state requires (usually weekly) and participate in the Reemployment Services and Eligibility
Assessment (RESEA) program9 and other return to work programs the state requires.
Beneficiaries generally must file weekly claims attesting that they are still unemployed and
eligible to continue receiving benefits.
Since 1970, federal law includes an automatic expansion of the regular UI benefit with
the EB program to augment the UC program.10 EB may provide an eligible individual up to 13
or 20 weeks of benefits once regular UI benefits are exhausted when a state is experiencing high
periods of unemployment. The EB program is funded 50 percent by the federal government and
50 percent by the states.11
5 Daniel Price, Unemployment Insurance, Then and Now, 1935-1985, Social Security Bulletin (October 1985).
6 Id.
7 Id.
8 Middle Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112-96, 126 Stat. 156 (2012).
9 Reemployment Services and Eligibility Assessment Grants, U.S. Dep’t of Lab. Emp’t and Training Admin.,
available at https://www.dol.gov/agencies/eta/american-job-centers/RESEA.
10 Federal-State Extended Unemployment Compensation Act of 1970, Pub. L. No. 91-373, 84 Stat. 695 (1970).
11 Id.
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Regular UI has always been tied to employment: federal law requires private sector
employers of covered workers to pay unemployment taxes for each covered worker they employ.
Self-employed workers and others who do not have an employer who pays unemployment taxes,
are not eligible for regular UI benefits, just as those workers who have not met work and payroll
tax contribution requirements, are not eligible to apply for Social Security Retirement benefits,
Social Security Disability Insurance, or Medicare benefits. Unemployment insurance, like other
types of insurance including life, health, and automobile, by design is a payment of a premium in
advance (in this case by the employer) for a guarantee of compensation when facing a specified
loss, in this case, a job loss.
While the federal UI programs have always been susceptible to improper payments, in
the years immediately prior to the pandemic, most of those improper payments were not directly
attributed to fraud.12 Since state workforce agencies have to corroborate the claimant’s prior
wages and separation information with their former employer, it is difficult to successfully
defraud the program, which has a low payoff compared to other criminal schemes. In the two
years before the pandemic, fraud—which was counted as a subset of “other eligibility issues” by
the OIG—accounted for less than three percent of improper UI payments. Also, prior to the
pandemic, numbers of UI claims were historically low with the Department of Labor reporting
282,000 initial claims nationwide on March 14, 2020.13
That would soon change: by August 2020, the Department reported more than 57 million
initial claims, the largest increase since the Department began tracking UI data in 1967.
12 Matt Weidinger and Amy Simon, Pandemic Unemployment Fraud in Context: Causes, Costs, and Solutions,
American Enterprise Institute (Jan. 2024).
13 Supra n.2.
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V.
Congress and Executive Branch Actions Created Problems
for States and the Economy
A. Temporary Pandemic UI Programs Bring Relief, but Create
Permanent Problems for States and Employers
In March 2020, due to the COVID-19 pandemic, businesses and schools abruptly closed,
and millions of American workers were furloughed or laid off and ordered to stay home
indefinitely. Some employers, including the federal government, voluntarily provided their
employees with telework options, and others provided employees with paid leave on a temporary
basis, as it was then unknown how long the closures would last. Still other employers, such as
healthcare providers, first responders, and other essential workers, never stopped reporting to
their usual place of work.
Congress quickly enacted a series of pandemic response packages intended to provide
stability to employers, employees, and the recently unemployed (and the U.S. economy) during a
time of uncertainty. The first relief package14 on March 12, 2020, allocated federal funds to help
stop the spread of the COVID-19 virus.
On March 18, 2020, the Families First Coronavirus Response Act (FFCRA)15 created
initial pandemic relief programs including emergency paid sick leave and expanded family and
medical leave for eligible employees under covered employers. FFCRA allocated nearly $1
billion in emergency administrative grants to state workforce agencies through Division D, the
Emergency Unemployment Insurance Stabilization and Access Act of 2020 (EUISAA).
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act),16 the largest relief package, provided cash stimulus payments to individuals and children
and created the Paycheck Protection Program.17 The CARES Act also created three new
temporary federal unemployment benefit programs—all fully federally funded and able to be
claimed retroactively beginning with the week ending January 27, 2020—which augmented
existing UI benefits, created additional weeks of temporary benefits, and expanded UI benefits to
groups traditionally not eligible to apply. The programs were:
• Federal Pandemic Unemployment Compensation (FPUC): a weekly $600 supplement
(or “plus-up”) on top of other state and federal UI benefit payments. This benefit
terminated the week ending July 25, 2020.
• Pandemic Emergency Unemployment Compensation (PEUC): an emergency program
offering 13 additional weeks of extended UI benefits for individuals who exhausted
state and federal UI benefits for weeks of unemployment beginning on March 29,
2020, and payable through weeks of unemployment ending on December 26, 2020.
(Extended through future legislation through September 6, 2021).
14 Coronavirus Preparedness and Response Supplemental Appropriations Act 2020, H.R. 6074, 116th Cong. (2020).
15 Families First Coronavirus Response Act, Pub. L. No. 116-127 (2020).
16 CARES Act, H.R. 748, 116th Cong. (2020).
17 Paycheck Protection Program (PPP) Information Sheet: Borrowers, U.S. Dep’t of the Treasury.
https://home.treasury.gov/system/files/136/PPP%20Borrower%20Information%20Fact%20Sheet.pdf.
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• Pandemic Unemployment Assistance (PUA): a temporary federal UI program for
individuals not otherwise eligible for UI benefits including the self-employed,
independent contractors, and gig workers, that provided up to 39 weeks of UI benefits
beginning on February 2, 2020, and ending on December 26, 2020. (Extended
through future legislation through September 6, 2021.)
Congress, Governors, and state legislators wanted state workforce agencies to distribute
the benefits quickly, so the legislation allowed state workforce agencies flexibility with many
aspects of processing claims. From April 2 through August 3, 2020, the Department of Labor’s
ETA issued 20 UIPLs relating to implementing the CARES Act.
On July 31, 2020, the CARES Act authorization for $600 weekly supplement expired.
On August 8, 2020, President Trump issued the Memorandum on Authorizing the Other Needs
Assistance Program18 which directed up to $44 billion to the Lost Wages Assistance (LWA)
program. For states that opted into the program, individuals receiving UI benefits of at least
$100 per week could receive an additional $300 in LWA weekly plus an additional $100 if the
state chose to contribute.19 These benefits began on July 26, 2020, and ended on September 6,
2020, due to the amount of available funds.20
Throughout the pandemic, ETA would issue more than 50 UIPLs21 to states with
guidance regarding implementing the four new pandemic UI programs authorized by Congress,
and the Lost Wages Assistance (LWA) program including eligibility, flexibility, and funding.
The UIPLs also covered program integrity issues such as reporting of improper payments,
identity verification, efforts to prevent and detect fraud and imposter claims, recovery of fraud
overpayments, and the obligation to refer allegations of fraud, waste, abuse, mismanagement, or
misconduct relating to unemployment compensation to DOL OIG.
On December 27, 2020, a fourth pandemic relief package, the Continued Assistance Act
(CAA), a provision of the Consolidated Appropriations Act, 2021, provided another stimulus
payment to individuals, reauthorized existing pandemic UI programs and created a fourth new UI
program. FPUC was restarted as a weekly $300 supplement for all UI benefits, on top of other
state and federal UI benefit payments ending after March 13, 2021. (Extended through future
legislation through September 6, 2021.)
CAA reauthorized PEUC and PUA for 11 additional weeks of extended UI benefits (and
extended through future legislation through September 6, 2021). CAA created a new temporary
18 President Donald J. Trump, Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster
Declarations Related to Coronavirus Disease 2019 (August 8, 2020), available at
https://trumpwhitehouse.archives.gov/presidential-actions/memorandum-authorizing-needs-assistance-program-
major-disaster-declarations-related-coronavirus-disease-2019/.
19 Lost Wages Supplemental Payment Assistance Guidelines, FEMA (May 15, 2023), available at
https://www.fema.gov/disaster/historic/coronavirus/governments/supplemental-payments-lost-wages-guidelines.
20 Cong. Research Serv., Unemployment Insurance (UI) Benefits: Permanent-Law Programs and The COVID-19
Pandemic Response (Jan. 31, 2022), available at, https://crsreports.congress.gov/product/pdf/R/R46687.
21 ETA Advisories, U.S. Dep’t of Lab. Emp’t and Training Admin., available at
https://www.dol.gov/agencies/eta/advisories.
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UI program: Mixed Earner Unemployment Compensation (MEUC). In states that elected to
participate, a claimant who received at least $5,000 in self-employment income in the most
recent tax year, and received a UI benefit other than PUA, could receive an additional $100
payment.
CAA also enacted new integrity measures. PUA claimants filing for benefits after
January 31, 2021, had to provide documentation of employment or self-employment within 21
days (or state deadline if later). States had to verify the identity of PUA applicants. CAA also
included a statutory requirement for weekly self-certification for those unable to who cannot
work or seek work due to COVID-19 reasons. Additionally, beginning January 26, 2021, per a
new return-to-work reporting requirement, states had to have a process to address work refusals,
a method for employers to report work refusals, and provide notifications to individuals related
to work refusals.
On March 11, 2021, the newly installed Biden-Harris Administration and the Democratic
Majority in the House and Senate, enacted a fifth stimulus relief package, the American Rescue
Plan Act (ARPA),22 that allowed additional stimulus payments to individuals and further
extended pandemic UI programs for an additional six months—even though by this point most
states had been fully open for business for more than six months and the roll-out of COVID-19
vaccines was well underway. One hundred million vaccine doses had been administered to
Americans by March 19, 2021, and 200 million vaccine doses had been administered to
Americans by April 21, 2021. By July 4, 2021, 67 percent of the adult working population had
received at least one dose of a COVID-19 vaccine. The FPUC weekly $300 supplement for all
UI benefits, on top of other state and federal UI benefit payments, was extended through weeks
of unemployment ending on or before September 6, 2021. PEUC and PUA were extended for 29
additional weeks through weeks of unemployment ending on or before September 6, 2021. The
combination of being able to backdate certain claims, in addition to the various legislative
extensions, meant that claimants could potentially receive up to 79 weeks of pandemic-related UI
payments in total.23
***Appendix B contains a more complete documentation of legislative and executive
branch actions taken during the pandemic related to the unemployment insurance
program.***
22 American Rescue Plan Act of 2021, Pub. L. No. 117-2, Stat. 4 (2021).
23 Supra n.2.
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B. Time to Return to Work, But Beneϐits Still Available
It was shortsighted to extend the UI benefits, including the $300 plus-up, for six full
months in March 2021. It was already evident in the summer of 2020 that providing large UI
benefits payments without requiring evidence recipients were searching for work was a deterrent
for some individuals returning to work and may have contributed to worker shortages in some
industries. If the expectation was that much of the adult working population would be able to
return to work as soon as vaccines became widely available, then it would follow that benefits
did not need to be extended.
U.S. Secretary of Labor Eugene Scalia, testifying before the Senate Committee on
Finance on June 9, 2020, when urging Congress to allow the CARES Act authorization for the
$600 weekly supplement to expire, cited falling unemployment numbers.24 Additionally,
24 Unemployment Insurance During Covid-19: The Cares Act and the Role of Unemployment Insurance During the
Pandemic: Hearing Before Senate Comm. on Finance, 116th Cong. (June 9, 2020), available at
South Carolina’s businesses have borne the brunt of the financial
impact of the COVID-19 pandemic. Those businesses that have
survived—both large and small, and including those in the
hospitality, tourism, manufacturing, and healthcare sectors—now
face an unprecedented labor shortage.
This labor shortage is being created in large part by the
supplemental unemployment payments that the federal government
provides claimants on top of their state unemployment benefits. In
many instances, these payments are greater than the worker’s
previous pay checks. What was intended to be short-term financial
assistance for the vulnerable and displaced during the height of the
pandemic has turned into a dangerous federal entitlement,
incentivizing and paying workers to stay at home rather than
encouraging them to return to the workplace.
These federal entitlements pose a clear and present danger to the
health of our State’s businesses and to our economy. Since the
Biden administration and Congress appear to have little to no
comprehension of the damage being done and no appetite to
terminate the federal payments, the State of South Carolina must
take action.
Henry McMaster, Governor, State of South Carolina
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National Bureau of Economic Research (NBER) data showed then that with UI benefits
combined with FPUC, 69 percent of unemployed workers would receive unemployment benefits
exceeding 100 percent of their wages and non-wage compensation.25 Scalia argued that this
could be a deterrent to those individuals resuming work and could prevent health care systems
finding the workers needed to continue to combat COVID-19.
Between June 12, 2021, and July 31, 2021, 26 states announced their intention to
voluntarily terminate their agreements with the Department of Labor and to stop paying some or
all the pandemic UI benefits before their expiration dates.26 States cited various reasons for
ending benefits early including: increased job opportunities, fewer COVID-19 related barriers to
re-entering the workforce, decreased unemployment rates, and work deterrent effects based on
exorbitant UI benefits.27 Fundamentally, states’ goals for ending benefits were to stop paying
people to stay home and get people back to work. Some states, including Montana,28 chose to
replace pandemic UI benefits with back-to-work bonuses from the Coronavirus Relief Fund
(CRF).
On September 6, 2021, the authorization and funding for all temporary pandemic UI
programs (FPUC, PUA, PEUC, MEUC) expired.
C. Lasting Repercussions and Attempts to make Pandemic UI
Permanent
In March 2023, following Secretary of Labor Marty Walsh’s resignation, President Biden
nominated Deputy Secretary Julie Su, the former secretary of the California Labor and
Workforce Development Agency (LWDA) during the COVID-19 pandemic, to be Secretary of
Labor. Due to opposition to Su’s nomination from a majority of Senators,29 largely because of
her record while serving as LWDA secretary, Majority Leader Chuck Schumer did not schedule a
floor vote for Su in 2023. In January 2024, instead of choosing a different nominee who might
be confirmed, President Biden renominated Su to be Secretary of Labor. With a majority of
https://www.finance.senate.gov/hearings/unemployment-insurance-during-covid-19-the-cares-act-and-the-role-of-
unemployment-insurance-during-the-pandemic.
25 Peter Ganong, et al., US Unemployment Insurance Replacement Rates During the Pandemic, National Bureau of
Economic Research (May 2020), available at http://www.nber.org/papers/w27216.
26 Cong. Research Serv., States Opting Out of COVID-19 Unemployment Insurance (UI) Agreements (updated Aug.
20, 2021), available at https://crsreports.congress.gov/product/pdf/IN/IN11679.
27 Letter from Henry McMaster, Governor, State of South Carolina, to Daniel Ellzey, Director, Dep’t of Emp’t and
Workforce (May 6, 2021). See also Letter from Beth Townsend, Director, Iowa Workforce Dev., to Kim Reynolds,
Governor, State of Iowa (May 10, 2021). See also Press Release, The Office of Alabama Governor, Governor Kay
Ivey Announces End of Participation in All Federal Pandemic Unemployment Compensation Programs (May 10,
2021). See also Press Release, Office of the Texas Governor, Governor Abbott Announces End to Federal Pandemic-
Related Unemployment Benefits (May 17, 2021).
28 News Release, State of Montana Newsroom, Montana to Launch Return-to-Work Bonuses, Return to Pre-
pandemic Unemployment Program to Address Workforce Shortage (May 4, 2021).
29 Press Release, Office of Senator Joe Manchin, Manchin Opposes Julie Su for U.S. Secretary of Labor (July 13,
2023). See also, Press Release, Ranking Member Cassidy, Braun, Colleagues Call on President Biden to Withdraw
Julie Su Nomination for DOL Secretary (June 22, 2023).
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Senators still publicly opposing Su30, it is unlikely that Su will be confirmed during the 118th
Congress. Acting Secretary Su is now the longest-serving Cabinet nominee without a floor vote
when the same party controls the White House and the Senate since 1857.31 There are many
questions regarding the legality of Acting Secretary Su continuing to serve for so long in an
acting capacity32 as well as the White House’s attempt to go around the Constitution to install a
Cabinet officer who otherwise could not be confirmed.
Acting Department of Labor Secretary Julie Su is able to exert significant influence over
UI policies and repercussions. For example, the Social Security Act allows states to borrow
funds from the Federal Unemployment Account (FUA) within the Unemployment Trust Fund
(UTF), a single trust fund in the U.S. Treasury for transactions related to UI and EB.33 States
generally borrow from the FUA during a recession when state unemployment tax revenue is
insufficient to fund the UC benefits for eligible claimants.34 Federal law requires states to repay
the loans and if they do not, the state faces interest on the loan and the state’s employers will pay
increased Federal Unemployment Tax Act (FUTA) rates until the loans and interest are fully
repaid.35 FFCRA, CAA, and ARPA, temporarily waived interest payments and accrual of
interest on loans from FUA through September 6, 2021.
Most states who borrowed during the pandemic repaid the loans in due course. However,
as of December 22, 2022, California, Connecticut, Illinois, New York, and the U.S. Virgin
Islands still owed outstanding loan balances and accrued interest totaling nearly $28 billion
dollars, leading to employers in those jurisdictions having to pay higher FUTA rates.36 As of
August 29, 2024, the states of California and New York still owe outstanding loan balances and
accrued interest totaling more than $26 billion,37 and seem to have no urgency to repay the loans
they owe or to provide relief to employers (and small businesses) in their states. In fact, the
longer that the loans are outstanding, the more the FUTA rates will increase. By avoiding
repaying the loans, California and New York are ensuring that employers, with the increased
FUTA tax rates, will repay most of the outstanding loan principal and accrued interest the states
owe, even though the employers were not responsible for taking out the loans in the first place.
Underscoring the seriousness of the concern, an audit issued by the Office of the New York State
Comptroller noted:
30 Diego Areas Munhoz, Su’s Labor Nomination Advances With Senate Roadblock Ahead, BLOOMBERG LAW (Feb.
27, 2024), available at https://news.bloomberglaw.com/daily-labor-report/julie-sus-labor-nomination-advances-
with-senate-roadblock-ahead
31 Memorandum from Kathleen E. Marchsteiner, Cong. Res. Serv., on Longest Presidentially-Appointed,
Senate-Confirmed Cabinet Nominations in the Senate Since 1857 (Sept. 25, 2023), on file with Committee.
32 Letter from Virginia Foxx, Chairwoman of U.S. House Comm. on Educ. and the Workforce and Kevin Kiley,
Chairman of Subcomm. on Workforce Protections, U.S. House Comm. on Educ. and the Workforce to President Joe
Biden (Jan.4, 2024) available at
https://edworkforce.house.gov/uploadedfiles/01.04.24_letter_to_white_house_re_su_nomination.pdf.
33 Cong. Research Serv., The Unemployment Trust Fund: FY2024 Income, Outlays, and End-Of-Year Balances (May
08, 2024), available at https://crsreports.congress.gov/product/pdf/R/R48062/.
34 Id.
35 Cong. Research Serv., The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States (Jan.
13, 2023), available at https://crsreports.congress.gov/product/pdf/RS/RS22954.
36 Id.
37 Advances to State Unemployment Funds (Social Security Act Title XII), FISCAL DATA. TREASURY.GOV
(September 3, 2024).
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Borrowing from the federal UI trust fund has serious consequences for the
businesses operating in New York State…[u]nless the federal government
chooses to abate all or part of the interest incurred or the principal balance
amount is repaid with no more interest accrued, businesses will be required
to make annual IAS payments until all interest has been fully paid off.
Alternatively, states with outstanding loans could cut state UI benefits until the federal loans are
repaid. Surprisingly, the state of California passed legislation to increase UI benefits instead.
While the legislation failed to be enacted, California appears to continue looking for ways out of
repaying its obligations.
On December 29, 2023, ETA issued a UIPL38 announcing DOL’s interpretation of state
laws to temporary UI programs authorized under the CARES Act. The stated purpose of this
UIPL was to provide guidance to states with finality provisions in their state unemployment
compensation laws limiting reconsideration of prior decisions or determinations. Concerningly,
at least one state has interpreted this guidance as a free pass to “forgive” the billions of
fraudulent benefit payments the states issued to criminals and fraudsters. A recent financial
report39 from the California State Controller, stated that the California EDD, an agency under the
leadership40 of DOL Acting Secretary Su during the pandemic, “issued a letter to DOL in
February 2024 requesting that three groups of CARES Act UC claims be considered resolved
and no further work would be performed related to these claims.”41 Per the Controller’s report,
“EDD is waiting on final federal approval of EDD’s request as indicated in the February 2024
letter before the event can be recognized in the financial statements as a forgiveness of debt.
Once federal approval is received approximately $29.0 billion of potential federal liabilities will
be removed from future financial statements in addition to a portion of the remaining $26.0
billion in federal liabilities which would also be subject to state finality laws.”42
On May 1, 2024, DOL Acting Secretary Su testified43 before the House Committee on
Education and Workforce that it was “absolutely false that the guidance that the Department of
Labor put out would forgive any fraud.” It is likely that in today’s culture of loan “forgiveness”
that California Governor Newsom, then Secretary Su, and the State of California simply
expected to borrow billions of dollars from the federal government and expected their friends in
the White House and the Executive Branch (including Su again) to forgive the debt. After all,
the Biden-Harris Administration to date has “forgiven” more than $406 billion in student debt44
38 EMP. AND TRAINING ADMIN., UIPL 05-24, APPLICATION OF STATE FINALITY LAWS REGARDING TEMPORARY
UNEMPLOYMENT COMPENSATION (UC) PROGRAMS UNDER THE CORONAVIRUS AID, RELIEF, AND ECONOMIC
SECURITY (CARES) ACT (Dec. 29, 2023), available at
https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2024/UIPL%2005-24/UIPL%2005-24.pdf.
39 California State Controller, State of California Annual Comprehensive Financial Report FY Ended June 30, 2022
(March 15, 2024), available at https://www.sco.ca.gov/Files-ARD/ACFR/acfr22web.pdf.
40 Acting Secretary of Labor Julie A. Su, U.S. Dep’t Labor. https://www.dol.gov/agencies/osec.
41 Supra n.39.
42 Id.
43 Examining the Policies and Priorities of the Department of Labor: Hearing Before the H. Comm. on Education &
The Workforce, 118th Cong. (May 1, 2024), available at
https://edworkforce.house.gov/calendar/eventsingle.aspx?EventID=410483.
44 Nat Malkus, Biden’s Unending Student Loan Forgiveness Run, AEIdeas (May 23, 2024).
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with taxpayers footing the bill. However, members of the U.S. House of Representatives45 and
the U.S. Senate46 have written to Acting Secretary Su requesting clarification about EDD’s
request and for correspondence between the Department of Labor and California EDD officials,
including a copy of the February 2024 letter47, and to date have received no formal response
from Acting Secretary Su or the Department of Labor. DOL’s issuance of this guidance and lack
of transparency about potential backroom deals with California EDD are another reason why
both Julie Su’s leadership of the California Labor & Workforce Development Agency and her
acting leadership of the Department of Labor have been disastrous for the American taxpayers
and workers.
Additionally, on February 7, 2022, ETA issued a UIPL48 providing instructions to states
for processing waivers of recovery of overpayments under the CARES Act. ETA identified a
total of seven permissible scenarios for states to waive recovery of individual overpayments
under the CARES Act. Under these approved scenarios, states could waive overpayment without
the individuals submitting requests and ETA encouraged states to “proactively identity
individuals eligible for a blanket waiver.” ETA also included a form for states to propose
additional scenarios to be considered for blanket waivers. Starting in March 2024 the Committee
has repeatedly requested that ETA/DOL provide information about the number of and amounts
of waived overpayments by state under each of the seven scenarios and if ETA/DOL approved
any additional scenarios for blanket waivers (and the same data for those). As of the date of this
report, ETA/DOL has failed to provide this information to the Committee.49
Meanwhile, Acting Secretary Su, in a newly released Department of Labor plan,50 has
praised paying Americans not to work through the pandemic UI programs and has suggested
expanding “regular” UI by lengthening eligibility and boosting payments. The plan is critical
that not enough unemployed workers are eligible for “regular” UI benefits including those who
leave the workforce voluntarily (“job leavers”) as well as low-paid, part-time, self-employed,
and gig economy workers referred to as “non-standard” workers. However, as this Committee
report shows, the PUA program, which did not require applicants to verify their employment or
identity until the December 2020 reauthorization, suffered from a higher rate of fraud and
improper payments than other pandemic UI programs or regular UI. OIG estimated that the total
45 Letter from Jason Smith, Chairman of Comm. on Ways and Means & Michelle Steel, Member of Congress, to
Julie Su, Acting Sec’y, U.S. Dep’t of Lab. (May 16, 2024), available at https://gop-waysandmeans.house.gov/wp-
content/uploads/2024/05/Ways-and-Means-Letter-to-Acting-Secretary-Su-05.15.24.pdf.
46 Letter from Bill Cassidy, M.D., Ranking Member of U.S. Senate Comm. on Health, Education, Lab., and
Pensions, Michael D. Crapo of Ranking Member of U.S. Senate Comm. on Finance, to Julie Su, Acting Sec’y, U.S.
Dep’t of Lab. (May 8, 2024), available at https://www.help.senate.gov/imo/media/doc/2024-05-
08__ui_guidance_letterpdf.pdf.
47 Letter from Nancy Farias, Director, Calif. Emp’t. Development Dep’t to Tamika L. Ledbetter, Reg’l Admin.,
Emp’t and Training Admin., U.S. Dep’t of Lab. (Feb. 6, 2024), on file with the Committee.
48 EMP. AND TRAINING ADMIN., UIPL 20-21 CHANGE 1, ADDITIONAL STATE INSTRUCTIONS FOR PROCESSING
WAIVERS OF RECOVERY OF OVERPAYMENTS UNDER THE CORONAVIRUS AIDS, RELIEF, AND ECONOMIC SECURITY
(CARES) ACT, AS AMENDED (February 07, 2022), available at
https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2022/UIPL_20-21_Change_1.pdf.
49 Correspondence between COA staff and DOL OCIA staff, on file with the Committee.
50 U.S. Dep’t of Lab., Building Resilience: A plan for transforming unemployment insurance (April 2024), available
online at https://oui.doleta.gov/unemploy/transformation_plan.asp.
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improper payment rate in the PUA program was 35.9 percent.51 Evidence from OIG and others
shows that the improper payments from PUA were made to fraudsters and not to the self-
employed, independent contractors, and gig workers who were not eligible for “regular” UI.
The Biden-Harris Administration is supporting Democrat-led legislation extending UI
benefits to workers with limited work histories, those who left work for family related reasons,
and to domestic, agricultural, and seasonal workers.52 The plan also calls for increasing the
amounts of payments to all beneficiaries and for part-time workers to be eligible to collect UI
benefits while working. While any significant change to regular UI would have to be enacted by
Congress, it appears that funding Acting Secretary Su’s plan would likely lead to imposing UI
tax increases on employers.53 Acting Secretary Su’s plan also calls for benefits extensions such
as EB and pandemic UI to trigger automatically in a recession rather than being authorized by
Congress with specific start and end dates. Su also wants to increase the funding for the DOL
Wage and Hour Division and the Office of the Solicitor to further her mission of forcing all
independent contractors to be classified as employees and make even more individuals eligible
for UI benefits.54
51 Supra n.2.
52 Supra n.50.
53 See id.
54 Id.
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VI. Ofϐice of Inspector General, Law Enforcement, and
Preventing Future Improper Payments and Fraud
The U.S. Government Accountability Office (GAO) estimates that about 11 to 15 percent
of total benefits paid during the pandemic were fraudulent, totaling between $100 to $135
billion.55 As of March 2023, states reported recoveries of only $6.8 billion. The Department of
Labor Office of Inspector General estimated that at least $191 billion in pandemic UI payments
could have been improperly paid with a significant portion attributable to fraud.56 However,
much of these losses could have been avoided if Congress, ETA, and states had been better
prepared prior to the pandemic, made different choices, reacted more quickly during the
pandemic, and cooperated more closely with OIG and other law enforcement entities.
A. State Preparedness
OIG had been warning ETA and states for years that Information Technology (IT)
upgrades and staffing were deterrents to providing UI benefit payments properly. The American
Recovery and Reinvestment Act of 2009 set aside approximately $7 billion from the Federal
Unemployment Account for states to modernize legacy systems for processing UI claims.57
However, in 2010, an OIG audit found that states had not applied for (and were unlikely to apply
for) large portions of the funds available to them, and that $2 billion of the funds the states did
receive were used to pay UI benefits instead of modernizing IT.58 In 2023, the OIG’s contractor,
GenTech Associates, found that ETA had not evaluated the capability of state workforce
agencies’ IT systems to successfully administer UI benefits, nor did it know which state IT
systems posed the greatest risk of failing.59 GenTech reported that ETA did not require the states
to develop IT modernization plans that represented a “future-ready approach.”60 Even though
the funds were available, states did not prioritize it in some cases.61
Additionally, OIG warned ETA and states as early as April 2020, that the CARES act
required that states have sufficient staffing and system resources to manage increases in the
number of claims due to the pandemic. Yet, OIG’s prior work related to funding for emergency
staffing showed that hiring efforts were delayed, and that ETA did not provide sufficient
55 U.S GOV’T ACCOUNTABILITY OFF., GAO-23-106696, UNEMPLOYMENT INSURANCE: ESTIMATED
AMOUNT OF FRAUD DURING PANDEMIC LIKELY BETWEEN $100 BILLION AND $135 BILLION (Sep.
12, 2023).
56 U.S. Dep’t of Lab. Off. of Inspector Gen., OIG Oversight of the Unemployment Insurance Program (last updated
Dec. 15, 2023), available at https://www.oig.dol.gov/doloiguioversightwork.htm.
57 U.S. Dep’t of Lab., Off. of Inspector Gen., RECOVERY ACT: MORE THAN $1.3 BILLION IN UNEMPLOYMENT
INSURANCE MODERNIZATION INCENTIVE PAYMENTS ARE UNLIKELY TO BE CLAIMED BY STATES (Sept. 30, 2010),
available at https://www.oig.dol.gov/public/reports/oa/2010/18-10-012-03-315.pdf.
58 Id.
59 Memorandum from Carolyn R. Hantz, Assistant Inspector Gen. for Audit, to Brent Parton, Principal Deputy
Assistant Sec’y, U.S. Dept. of Lab., (Sept. 19, 2023), available at
https://www.oig.dol.gov/public/reports/oa/2023/19-23-008-03-315.pdf.
60 Id.
61 Id.
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monitoring and oversight to ensure states were able to hire quickly.62 In contrast, the state of
Missouri prioritized modernizing IT to process UI claims prior to the pandemic.63 The effort
was funded through a partnership between the state legislature and state employers. Since
regular UI was intended to serve as a reemployment program, it was valuable to employers
within the state of Missouri to invest in IT upgrades. Missouri also cross-trained its seasonal
state workforce so that the state had flexibility when certain departments or divisions were busier
than others. The seasonal workers could be assigned to assist with state tax returns during tax
season and with UI claims when the Division of Employment Security was processing a higher
number of claims due to economic conditions in the state.64 This enabled Missouri to have state
employees that were already trained to assist with regular UI, unlike other states that had to hire
new employees (during the pandemic), and train them under stressful and unusual circumstances.
Delays in receiving benefits can be devastating for the recently unemployed or
furloughed, especially during the pandemic, when it was uncertain when they would be able to
return to work or look for new work because of lockdowns and closures. Outdated IT systems
only exacerbated the delays with implementing entirely new programs. States without
modernized IT (49 states) took 50 days on average to implement the PEUC program, while states
with modernized IT implemented the program 15 days faster and implemented the PUA program
eight days faster.65 From April 1, 2020, to March 31, 2021, OIG found that only five of the state
workforce agencies were able to make timely payments, including the FPUC plus-up, to regular
UI beneficiaries. Post-pandemic, even with claims returning to a normal volume, only 34
percent of states are paying regular UI claimants on time compared with 75 percent timely
payments before the pandemic.66
B. Anti-Fraud Measures and High-Risk Individuals
Using Social Security numbers associated with the claims, DOL OIG identified that
$46.9 billion in potentially fraudulent UI benefits were paid from March 2020 to April 2022 to
4,595,295 “high-risk” individuals including multistate claimants, deceased persons, federal
prisoners, individuals with suspicious emails, individuals under age 14, and individuals ages 100
and older.67 Since the child labor provisions of the Fair Labor Standards Act of 1938 limits most
non-agricultural employment for children under 14, any such claim submitted for UI should have
raised a red flag, been denied, and reported to the appropriate federal and state authorities to
62U.S. Dep’t of Lab. Off. of Inspector Gen., CARES Act: Initial Areas of Concern Regarding Implementation of
Unemployment Insurance Provisions (Apr. 21, 2020), available at
https://www.oig.dol.gov/public/reports/oa/2020/19-20-001-03-315.pdf.
63 Anna S. Hui, Dir., Mo. Dep’t. of Lab. and Indus. Relations, at Pandemic Unemployment Fraud in Context Panel
Discussion, Am. Enter. Inst. (Feb. 13, 2024), available at https://www.aei.org/events/pandemic-unemployment-
fraud-in-context/.
64Press Release, Mo. Dep’t of Lab. & Indus. Relations, Cross-Training Leads to Faster Help for Missouri’s
Unemployed (Mar. 28, 2018), available at https://labor.mo.gov/news/press-releases/cross-training-leads-faster-help-
missouris-unemployed.
65 Supra n.56.
66 Based on OIG analysis of data on ETA’s public reporting on States’ UI Benefit Timeliness and Quality, available
at https://oui.doleta.gov/unemploy/btq.asp.
67 Supra n.56.
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investigate for potential violations of child labor laws and human trafficking.68 Instead, state
workforce agencies approved 45,594 claimants for more than $1.2 billion in potentially
fraudulent UI benefits during this time period. Likewise, while there is no limit to the age one
can continue to remain in the workforce, the labor force participation rate for workers aged 75
and older was 8.9 percent in 2020.69 Yet, OIG identified four states (Michigan, Rhode Island,
California, and Georgia) that paid UI claims to 18 percent or more of claimants aged 100 or
older.70 An average of only 1.2 percent of centenarians in the other 46 states received pandemic
UI benefits. Remarkably, the state of Michigan paid 58.5 percent of its centenarian population
during this period.71 It is likely that the majority of the under 14-year-olds and the over 100-
year-olds were not unemployed or furloughed workers, but victims of identity theft and the
benefits went to fraudsters. OIG shared the methodology and data about detecting high risk
individuals with the Department of Labor and issued four alerts on incorporating data analytics
in oversight of UI, to prevent such losses in the future.72
Another major flaw that led to massive fraud was the design of the PUA program.
During the program’s first nine months, claimants did not have to provide any evidence of
earnings even as states certified individuals’ eligibility for benefits. While this led to benefits
being delivered more quickly, as was the intent of Congress and the Administration, it also made
the program susceptible to fraud. With regular UI, initial claims were delayed subject to
employer verification that the claimant had, until recently, been employed by the employer. For
the PUA program, the state workforce agencies had no information to verify that the claimant
had any prior employment or self-employment, or the amount of wages earned, other than the
information provided on the claim. Only when Congress reauthorized the PUA program in
December 2020 did states require applicants to provide proof of prior employment and wages.
Additionally, due to outdated IT systems, staffing shortages, and new programs being
implemented, many states did not deploy adequate anti-fraud measures, leading to criminals and
fraudsters being able to successfully file fraudulent claims and avoid detection. States were not
cross-checking claims against databases to ensure whether the claimant was filing claims in
multiple states, was incarcerated, or otherwise of high risk to file a fraudulent claim. This led to
criminals receiving multiple payment cards, multiple payment cards being sent to the same
address, and payments being issued in the names of incarcerated individuals, in large part due to
failures in cross-matching applicant data with available databases until well into the
implementation of the program.73 Some victims of identity theft who had claims filed under
68 U.S. Dep’t of Lab., Off. of Inspector Gen., Alert Memorandum: ETA Needs to Incorporate Data Analytics
Capability to Improve Oversight of the Unemployment Insurance Program (Sept. 25, 2023), available at
https://www.oig.dol.gov/public/reports/oa/2023/19-23-012-03-315.pdf.
69 U.S. Dept. of Lab., U.S. Bureau of Lab. Statistics, Economics Daily, Number of people
75 and older in the labor force is expected to grow 96.5 percent by 2030 (Nov. 4, 2021), available at
https://www.bls.gov/opub/ted/2021/number-of-people-75-and-older-in-the-labor-force-is-expected-to-grow-96-5-
percent-by-2030.htm.
70 Supra n.56.
71 Supra n.56.
72 Supra n.49.
73 U.S. Dep’t of Lab., Off. of Inspector Gen., Testimony of Larry D. Turner, Inspector General before the U.S. Senate
Committee on Homeland Security and Governmental Affairs (Mar. 17, 2022), available at
https://www.oig.dol.gov/public/testimony/20220317.pdf.
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their names only discovered they had been victimized when they were issued erroneous 1099-G
forms for the benefits that were paid to criminals under their names.74
Some states performed better than others and were able to balance paying benefits
quickly without compromising program integrity. For example, the state of Maryland uncovered
a massive and sophisticated criminal enterprise involving more than 47,500 fraudulent
unemployment insurance claims using identity theft totaling over $501 million.75 With
heightened security measures in place, the Maryland Department of Labor quickly detected,
reported, and blocked this fraudulent claim activity. Maryland’s quick and decisive actions to
expose this illegal scheme helped shed light on related fraudulent criminal activity in other
states.76 In Oklahoma, the Oklahoma Employment Security Commission collaborated with the
DOL OIG to stop payment on nearly 3,800 fraudulently filed UI claims, including 1,300 that
were filed from IP address located in England. 2,450 of the claims were filed using the name of
one Oklahoma business that employed fewer than ten employees. The effort saved the state and
taxpayers more than $15.9 million.77
Meanwhile, Wyoming instituted a system where it would cross reference claims against
employer data and prison records, would randomly ask claimants to appear in person for auditing
purposes, and ended up minimizing its fraudulent payments to around $16.3 million.78
According to DOL, the unemployment insurance improper payment rate in Wyoming was 11.45
percent from July 1, 2019, through June 30, 2022.79
Nebraska organized and hired additional staff for fraud prevention and detection purposes
and introduced income and identity verification and would verify new applications from
74 U.S. Dep’t of Just., Nat’l Unemp’t. Ins. Fraud Task Force, Issuance of Erroneous Forms 1099-G due to
Fraudulent Unemployment Insurance Claims (Feb. 26, 2021), available at
https://www.justice.gov/opa/page/file/1375581/dl?inline.
75 Press Release, Md. Dep’t of Lab., Maryland Department of Labor Uncovers Massive Criminal Fraud Scheme:
47,500 Fraudulent Unemployment Claims Using Identity Theft Totaling Over $501 Million Alerted U.S. Attorney
and U.S. Department of Labor, Office of the Inspector General (July 15, 2020), available at
https://www.oig.dol.gov/public/Press%20Releases/Maryland%20Department%20of%20Labor%20Uncovers%20Ma
ssive%20Criminal%20Fraud%20Scheme.pdf.
76Id.
77Press Release, U.S. Attorney’s Off. N. Dist. of Okla., Nearly 3,800 Fraudulently Filed Unemployment Insurance
Claims Blocked by the U.S. Department of Labor (June 29, 2020), available at
https://www.oig.dol.gov/public/Press%20Releases/NDOK_UI.pdf.
78 See Unemployment Insurance Benefit Accuracy Measurement Program, WORKFORCE SERVICES (2024). See
also Unemployment Insurance Payment Accuracy by State, U.S. DEP’T OF LABOR EMPLOYMENT AND
TRAINING ADMINISTRATION. See also Unemployment Insurance Payment Accuracy Datasets, U.S. DEP’T OF
LABOR EMPLOYMENT AND TRAINING ADMINISTRATION.
79 U.S. DEP’T OF LABOR EMPLOYMENT AND TRAINING ADMINISTRATION, Unemployment Insurance Payment
Accuracy by State (July 1, 2019, through June 30, 2022).
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previously approved claimants.80 Nebraska’s system also resulted in fraudulent payments in the
millions rather than the billions.81
Missouri set up a special fraud investigation unit and would choose a random sample of
UI applicants to audit each week. Proof of identity would be required through an authentication
program that would entail a claimant showing up at a local Missouri Job Center to verify their
identity. Missouri also ended the pandemic with debt in the millions rather than the billions.82
The unemployment insurance improper payment rate in Missouri was 8.89 percent from July 1,
2019, through June 30, 2022.83
One of the key issues remaining is how to properly estimate improper payments and
fraud in the pandemic UI programs. GAO estimates that about 11 to 15 percent of total benefits
paid during the pandemic were fraudulent, totaling between $100 to $135 billion.84 Following a
recommendation from OIG,85 in December 2021, ETA reported an improper payment rate of
18.71 percent for two of the three pandemic UI programs: PEUC and FPUC. In December 2022,
ETA reported an updated improper payment rate estimate of 21.52 percent also regarding PEUC
and FPUC.86 OIG used this estimate, combined with the more than $888 billion in total federal
and state UI benefits paid during the UI pandemic period, to calculate that at least $191 billion in
pandemic UI payments could have been improperly paid, with a significant portion attributable
to fraud.87 OIG notes “[t]he potential loss of $191 billion of taxpayer money highlights the
urgent need for systemic improvements. For perspective, $191 billion could have provided more
than $3.5 billion to each SWA toward ensuring preparedness for emergencies, including
modernizing UI IT systems, enhancing staffing levels, and formulating robust contingency
plans.”88 However, OIG notes that the improper payment rate was likely higher since ETA’s
estimated improper payment rate did not include the PUA program. In August 2023, the
Department of Labor reported that the PUA program had a total improper payment rate of 35.9
percent. OIG has several recommendations for ETA to improve its oversight of improper
payments and fraud, and how it estimates these rates. They include directly accessing claims
data from the states and creating an integrity program with a data analytics capability that
80 Press Release, Ne. Dep’t of Lab., Unemployment fraud schemes continue during pandemic – NDOL continues to
increase prevention and detection efforts (March 23, 2021).
81 See Unemployment Insurance Payment Accuracy by State, U.S. DEP’T OF LABOR EMPLOYMENT AND TRAINING
ADMINISTRATION. See also Unemployment Insurance Payment Accuracy Datasets, U.S. DEP’T OF LABOR
EMPLOYMENT AND TRAINING ADMINISTRATION.
82 See Report Unemployment Fraud, MO.GOV DEP’T OF LABOR & INDUSTRIAL RELATIONS. See also Unemployment
Insurance Payment Accuracy by State, U.S. DEP’T OF LABOR EMPLOYMENT AND TRAINING ADMINISTRATION . See
also Unemployment Insurance Payment Accuracy Datasets, U.S. DEP’T OF LABOR EMPLOYMENT AND TRAINING
ADMINISTRATION.
83 U.S. DEP’T OF LABOR EMP’T. AND TRAINING ADMIN., Unemployment Insurance Payment Accuracy by State
(July 1, 2019 through June 30, 2022).
84 U.S GOV’T ACCOUNTABILITY OFF., GAO-23-106696, Unemployment Insurance: Estimated Amount Of Fraud
During Pandemic Likely Between $100 Billion And $135 Billion (Sep. 12, 2023).
85 U.S. Dep’t of Lab., Off. of Inspector Gen., COVID-19: More Can Be Done To Mitigate Risk to Unemployment
Compensation Under the CARES Act (Aug. 7, 2020), available at
https://www.oig.dol.gov/public/reports/oa/2020/19-20-008-03-315.pdf.
86 Supra n.49.
87 Id.
88 Id.
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regularly monitors state UI claims data and establishing effective controls to mitigate fraud
among high-risk areas.89
VII. California
A. Former LWDA Secretary Julie Su
Governor Gavin Newsom appointed Julie Su as the Secretary of the California Labor &
Workforce Development Agency (LWDA), the parent agency of EDD, where she served from
2019-2021 before being nominated by President Joe Biden to serve as Deputy Secretary of the
DOL. LWDA Secretary Su has stated that there was no way for California or any other state to
have anticipated how widespread the fraud would be during COVID-19.90 However,
California’s auditor had warned EDD for years about potential vulnerabilities within their IT
systems and their background checking abilities.91 EDD had problems for years with call center
performance, had been given recommendations by the Auditor for the best practices to overhaul
the call center, and EDD simply did not install them.92 The Auditor determined that this left the
EDD exposed to a backlog when the influx of applicants sought pandemic UI benefits.93
On March 18, 2020, then LWDA Secretary Julie Su wrote to then EDD Director Sharon
Hilliard and asked if EDD would be ready for the massive number of claims likely to come their
way. Hilliard wrote that the system was performing “fantastically.” On March 20, 2020, LWDA
Secretary Su emailed EDD director Hilliard to inquire about the pros and cons of expediting UI
approvals by waiving some eligibility requirements; she wanted to know what keeping the
checks in place would mean for processing times. “How long would it take to get payments out,”
Su asked, “and what would the backlog situation likely be?” EDD director Hillard responded
that “It would be months if not well into next year.”94 Clearly upon receiving this response, Su
made the decision to sacrifice preventing fraud for expeditious processing times.
EDD staff under Su’s leadership adopted a ‘pay and chase’ model and processed
incoming claims quickly; EDD staff understood that less time should be spent on checking
eligibility of claimants as this would slow down paying out benefits. This led to many bad actors
like international organized crime and individual criminals cashing in while eligible claimants
were unable to obtain their benefits. Initial reports about the amount of UI fraud being committed
in California were so extreme some industry experts wondered if hackers had gained control of
89 Id.
90 Will Swaim, Stalled Labor Pick Julie Su Lets Herself Off the Hook for California’s Missing Billions, NATIONAL
REVIEW (Mar. 30, 2024), available at https://www.nationalreview.com/2024/03/stalled-labor-pick-julie-su-lets-
herself-off-the-hook-for-californias-missing-billions/.
91 AUDITOR OF THE STATE OF CALIF., REPORT 2020-128/628.1, EDD’S POOR PLANNING AND INEFFECTIVE
MANAGEMENT LEFT IT UNPREPARED TO ASSIST CALIFORNIANS UNEMPLOYED BY COVID-19 SHUTDOWNS (Jan.
2021), available at https://information.auditor.ca.gov/pdfs/reports/2020-128and628.1.pdf.
92 Id.
93 Supra, n.91.
94 Lauren Hepler, Internal documents reveal the story behind California’s unemployment crash, CALMATTERS (Nov.
11, 2023), available at https://calmatters.org/economy/2023/11/california-unemployment-covid/?series=california-
unemployment-crash.
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EDD’s outdated IT; “instead, a more chaotic web of fraud carried out simultaneously by low-
level scammers, prison inmates and larger organized criminal groups, plus a few cases of people
with connections to the EDD or its contractors.”95
Despite repeated warnings from OIG and ETA, EDD did not make any substantive
changes to its fraud detection practices until late July 2020 when it finally began automating
stopping payment on suspicious claims. Additionally, EDD delayed responding when there was
clear evidence of fraudulent activity including a high number of claims under different names
filed from the same address and multiple claims filed from a vacant building or house. In one
instance, 80 claims were filed from the same address and EDD, even after identifying more than
70 of the claims as suspicious, actively continued to make payments on 12 of the claims through
December 2020 totaling more than $300,000. EDD was also slow to stop payments to other
claimants that the state auditors identified as suspicious. And for 24 percent of the claims filed
after enactment of the CARES Act, EDD could not confirm the identity of the claimant but
issued at least one payment anyway totaling $10.4 billion in payments to individuals with
unconfirmed identities.96
The California Auditor’s January 2021 report states that “EDD’s lack of preparation left
it unable to manage two important fraud-related situations that arose during its 2020 pandemic
response.”97 One of the few antifraud measures that EDD did employ in reaction to potential
fraud appeared to harm legitimate claimants more than it helped prevent fraud and improper
payments. In September 2020, after Bank of America (BOA), EDD’s debit card processor,
notified EDD of 309,000 potentially fraudulent accounts, EDD directed BOA to freeze 344,000
accounts including 73,000 accounts not identified by BOA.98 Those in possession of the frozen
cards could not access the benefit payments deposited into the UI accounts attached to the cards.
However, prior to directing BOA to take this action, EDD had no plan in plan to selectively
unfreeze the accounts belonging to legitimate claimants.99
The auditors found several aspects of this scheme troubling. EDD’s fraud detection and
prevention methods were not functioning, and they only initiated the request to freeze the
accounts after being notified of the potential fraud by BOA. Also, following public outcry in
early October 2020 from legitimate claimants who could not access their benefits, EDD
requested that BOA unfreeze all 344,000 accounts rather than verify each account before
unfreezing. As another example of ‘pay and chase,’ EDD chose to permit potentially fraudulent
activity to ensure that legitimate claimants could access their benefits. However, BOA
disregarded EDD’s request to unfreeze the accounts citing its obligation to prevent fraud under
federal law as its reason for freezing accounts without EDD’s approval. EDD has yet to fully
acknowledge that it had no plan or that it directed BOA to freeze the accounts in the first place.
In testimony before a state Assembly Subcommittee hearing, the EDD director identified BOA
as the party responsible for freezing constituent accounts. This appears to be another example of
95 Id.
96 AUDITOR OF THE STATE OF CALIF., REPORT 2020-628.1, SIGNIFICANT WEAKNESSES IN EDD’S APPROACH TO
FRAUD PREVENTION HAVE LED TO BILLIONS OF DOLLARS IN IMPROPER BENEFIT PAYMENTS (Jan. 2021), available at
https://information.auditor.ca.gov/pdfs/reports/2020-628.2.pdf.
97 Id.
98 Supra n.96.
99 Id.
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EDD being unwilling to take any action to prevent fraud at the risk of slowing down payments
going out and then failing to take accountability when another party undertook the actions EDD
should have been taking to prevent fraud and preserve taxpayer dollars.
California was also one of the states that failed to cross reference applicants with
incarcerated individuals, another poor decision that occurred under the leadership of LWDA
Secretary Su.100 The California Auditor estimates the state lost around $810 million dollars in
fraudulent claims to incarcerated individuals alone.101 California paid out claims to incarcerated
individuals because its IT systems did not have the capacity to cross reference with data from
state and local prisons, another IT system update that the auditors had previously
recommended.102
The Committee has examples of Californians who were victims of easily identifiable
identify theft who spent more than six months waiting for EDD to stopping garnishing their
wages and to unfreeze their state tax returns. EDD had acknowledged that they were victims of
identity theft but were slow to rectify the situation. Meanwhile the identity thieves had been able
to receive benefits under their names without facing such lengthy delays.103
Today, Julie Su is the acting Secretary for the Department of Labor and DOL recently
published a guidance memo called “Unemployment Insurance Program Letter 05-24.”104 The
DOL guidance states that the COVID-19 agreement between states and the federal government
dictated that states must use the CARES Act and its allocated funds “for the purpose for which
the money was paid to the state,” and “take such action as reasonably may be necessary to
recover for the account of the United States all benefit amounts erroneously paid and restore any
lost or misapplied funds paid to the state for benefits or the administration of the Agreement.”
The California EDD has now considered this memo to be a “financial statement [and] a
forgiveness of debt.”105 DOL also stated that “applying state finality laws to the CARES Act UC
programs means that, in many instances, the state will not need to take retroactive action to
resolve monitoring findings.”106
The DOL memo trusts that states have done all they can to track down fraudulent
payments yet has no mechanism to determine if this action has actually occurred.107 California’s
controller reported nonetheless that “Once federal approval is received approximately $29.0
billion in federal liabilities will be removed from future financial statements in addition to a
portion of the remaining $26.0 billion in federal liabilities, which would also be subject to state
finality laws.”108
100 Id.
101 Id.
102 Id.
103 California EDD 17 Production, on file with Committee.
104 Supra n.38.
105 Id.
106 Id.
107 Id.
108 Supra n.39.
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EDD under the supervision of Julie Su, in her capacity as LWDA Secretary, ignored
warnings from the state auditor about a lack of preparedness in a variety of areas of operation
within the EDD department. When COVID-19 hit and California was left scrambling, the
vulnerabilities that the auditor had warned about had a major impact.109 She made the decision
for EDD to pay and chase to pay benefits quickly and only months into the pandemic deployed
fraud measures that did little to prevent fraud and obstructed eligible beneficiaries from
accessing their benefits. When Julie Su became DOL acting Secretary, she moved to forgive
herself for the debt she could have prevented but failed to do so. Julie Su has been avoiding
accountability since before the COVID-19 pandemic and will continue to do so until she forced
to face consequences for her negligence.
B. Hiding the Truth
A common theme in addressing pandemic unemployment insurance fraud is coordination
between the states and the federal government to ensure accountability. Congress and the federal
government granted emergency funding at the onset of the COVID-19 pandemic and aimed to
quickly see such funds distributed to those in need. While the federal government wanted those
who needed the benefits to access such funds as quickly as possible, it did not intend for bad
actors, or those who were not eligible, to receive the benefits. DOL set varying deadlines for
reports on the adjudication of each state’s respective UI programs. However, if states did not
comply with the deadlines and failed to submit reports promptly and report accurate numbers, it
became more difficult to ensure that rules were being followed and states were being held
accountable. Whether EDD was stretched too thin or simply did not want to abide by its
deadlines or the deadlines set by DOL, deadlines were missed. EDD had a backlog of claims
that accrued in such great number that the EDD employees were unable to address these claims
in a timely manner, an outcome detrimental to taxpayers.
For example, each state is required by the Department of Labor to submit quarterly 227
FPUC (Federal Pandemic Unemployment Compensation) and 227 PEUC (Pandemic Emergency
Unemployment Compensation). Reports for the beginning of the 2nd quarter of 2020 were due
August 1, 2020. When California first submitted its 227 reports, it did so on July 28, 2020, a few
days before the August 1st deadline. However, according to the document below, California
submitted a report with all zeros, which typically indicates that there was no activity in the 2nd
quarter of the FPUC and PEUC programs, which is impossible for a state with as large a
population as California.
109 Supra n.91.
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Figure 1:110
No follow-up was included to ascertain how long it took for California to rectify its
inaccurate report and correct the record of the involvement in their FPUC and PEUC programs.
When staffing is limited, as California asserted throughout the COVID-19 pandemic, wasting
time submitting incorrect reports is a misallocation of resources that ultimately hurts the taxpayer
above all else. If eligible participants cannot get their claims processed expeditiously because
California state employees are spending extra time fixing a report that should have been
submitted in a timely and correct manner the first time, accountability, oversight, and a re-
evaluation of the day-to-day administration of the FPUC and PEUC programs should occur.
The COVID-19 pandemic was an unprecedented time every state had to face. In a novel
situation like COVID-19, administrative strain can occur, and it is understandable that issues
may crop up that typically would not. The Department of Labor understood the challenges
COVID-19 posed and gave leniency to state workforce agencies overseeing the administration of
COVID-19 emergency funding. In special cases, deadlines were extended, and pauses were
granted in the taking of initial applications of claims waiting to be processed. Yet, California
110 E-mail from Todd Swenson, UI Program Specialist, Emp’t and Training Admin., U.S. Dep’t of Lab., to Cathy
Barrett, California Emp’t Dev. Dep’t (Aug.18, 2020 8:52 am).
Document JD: 0.7.5154.226205
From:
Subject:
To:
Sent:
Hi, Cathy.
SWenson, Todd E - ETA
227 FPUC / 227 PEUC Report for QED 6/30/2020 (CA)
Cathy Barratt
August 18, 2020 8:52 AM (UTC-07:00)
As overpayments and fraud persist In the UI program, with an even greater increase with the implementation of CARES
Act programs, there is heightened focus on tracking and monitoring these activities. As you know, in addition to the ·
ETA 227 regular report, states are required to submit quarterly the 227 FPUC and 227 PEUC reporis beginning with the
2nd quarter, 2020 reports that were due August 1, 2020.
We received both your reports; however, the reports contained all zeros. To that end, please respond to the following:
•
Can you confirm there was no activity?.
•
If there was activity, please provide a reason for not reporting the activity Mi:! the date you expect the reports
to be amended.
Your response Is requested by cos Tuesday, August zs. 2020,
Additionally, we are planning to host a webinar on the 227 regular, FPUC and PEUC reports on September 29, 2020, at
1 pm, Eastern. Webinar details will be disseminat ed once they are finalized.
Thank you.
Todd Swenson
UI Program Specialist
USDO l-ETA-OUI-RO 6-DWS
90 seventh street, 17-300
San Francisco, CA 94103
0: 415-625-7925
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serves as an example of a pause being granted and the problem of backlogs only getting worse.
California could not even manage to apply the additional time it had been given by DOL to
manage and resolve its backlog it because the backlog had gotten so unmanageable with the
constant influx of applicants in addition to the already pre-existing backlog.
In October 2020, the Bureau of Labor Statistics (BLS) Commissioner reached out to the
EDD inquiring about questions stemming from the recently ended pause that was granted to
solve the problem of backlogs.111 BLS asked about concerns of significant fraud existing within
the currently submitted data and asked about the magnitude of the backlogged claims and
whether the two-week pause in the reporting of data had solved the back-log problem.
Figure 2:112
The expectation from EDD was that initial claims would be paused, leading to a
subsequent drop. However, California did not pause continued claims, and the expectation was
111 E-mail from William Beach, Comm’r of Lab. Statistics, Bureau of Lab. Statistics, U.S. Dep’t of Lab., to Amy
Faulkner, Calif. Emp’t Dev. Dep’t (Oct. 15, 2020 3:49 pm).
112 Id.
From: Beach, William - BLS •
>
Sent: Thursday, October 15, 2020 3:49 PM
To: Faulkner, Amy@EDD <
>
Cc: Pallasch, John P - ETA
>; Gilbert, Gay - ETA <'I!
>; Mondi, Rachel E - OSEC <
,; Simon, Amy E - ETA
Subject: California Data After the Reset
Dear Amy:
Many thanks for your information today about the resumption of UI data from California. We're looking forward to
seeing what the reset produces. To that end, I have a few questions that I wonder if you and your amazing colleagues
could research:
1.
The Governor's Strike team suggested that significant fraud exists in the current historical data. Will there be
an effort to restate California claims history to account for invalid claims and benefits data?
2.
What is the EDD plan for stating the claims and benefits data for the two weeks during which no actual
estimates were published?
3.
Part of the reset was designed to permit EDD to produce a plan for eliminating the claims backlog. If
backlogged claims have been cleared during the two-week reset period, will they be reported in a single week or
spread out over a certain time period?
4.
Related to this last question, will EDD announce the magnitude of backlogged claims? Such an announcement
would give economic analysts a chance to distinguish changes in UI that are driven by the changes in the
economy and those that stem from past but uncleared claims.
Thanks, again, for all of the help you've given us over the past seven months.
Bill
Wil liam W. Beach, Ph.D.
Commi sioncr of Labor Statistic
Bureau of Labor Sta ti tic
. . Department of Labor
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that since people could still access EDD’s online system and reopen claims and certify for
benefits, those numbers would remain stable. However, CA Regional ETA Office (California
Employment and Training Administration) reported a drop in continued claims data rather than
stable numbers.
Figure 3:113
When EDD asked how the drop in claims made sense/how it occurred, the Department of
Labor initiated the email thread and asked to understand how the drop in claims occurred and
requested clarification.114 The clarifying remarks from CA ETA were not provided to the
Committee.115
Unexplained drops in claims, pauses necessary to administer initial claims, incorrect
reports, and missed deadlines—all led to fraud and malfeasance, leaving California ripe for
opportunities for bad actors to steal and pilfer the taxpayer.
C. Beneϐits Not Being Paid Out in a Timely Manner
A common issue not unique to California throughout the COVID-19 pandemic was
eligible claimants who desperately needed emergency unemployment insurance benefits, yet
their claims we/re not being administered for months past the original submission date.
California EDD would infrequently reach out to California ETA to ask about the timeliness of
processing claims.
GAO was commissioned by DOL to produce a report regarding “first pay timeliness.”116
GAO asked for the reasoning behind why California’s performance was below the acceptable
level of performance (ALP) during the time mentioned.117 The ALP at the time was 87 percent
or above; California’s ALP was between 27.55 and 31.50 percent. California was simply not
adjudicating claims in a timely manner.
113 E-mail from Brian Tanimoto, Staff Services Manager, Unemp’t. Ins. Branch, Calif. Emp. Dev. Dep’t, to Kevin
Stapleton, Supervisory Actuary, Div. of Fiscal & Actuarial Serv.s, Off. of Unemp. Ins. (Sept. 29, 2020, 1:08 pm).
114 Id.
115 Email from Todd Swenson, UI Program Specialist, U.S. Dep’t of Lab., to Grecia Staton, Deputy Dir., Unemp’t.
Branch, Calif. Emp. Dev. Dep’t (Aug. 6, 2021, 08:44 am).
116 Id.
117 Supra n.113.
Document ID: 0-7.5154_ 192284-000001
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Page | 35
Understaffing and unpreparedness quickly began to be the norm with EDD, as DOL
began to question the financial reporting behind the adjudication of the reporting of Resource
Justification Model data (RJM). California, along with other states, submits its RJM data to
DOL. “The RJM is a data collection instrument that states use to report their Unemployment
Insurance (UI) administrative expenditures and staffing hours utilized for the most recently
completed fiscal year and to extrapolate that information to project administrative expenses for
the upcoming year.”118 DOL had concerns upon seeing the CA RJM data in which California
reported expenditures of $620 million for unemployment insurance fraud. The only problem: the
funding available to California for unemployment insurance fraud was less than $620 million at
the time. DOL questioned how California could be reporting expenditures of $620 million for
the UI program when the program did not have $620 million in funding.
California submitted this report to DOL and spent valuable time putting together incorrect
information. When DOL reached out to question the reporting, California spent more valuable
time trying to understand the mistake it had made, time that could have been spent adjudicating
claims for the taxpayer. After multiple days of deliberation, California figured out what had
occurred and reported it to DOL. California had taken money allocated to them for the regular
UI program and applied it to administrative costs for the PUA and PEUC programs. California
had to come to a “fair share” agreement with DOL to determine what funds would be allocated to
the administrative costs of PUA and PEUC and what would go back to the regular UI program.
Considering how understaffed California said they were, it would be imperative to spend as little
time as possible on things unrelated to the adjudication of UI fraud claims. According to
documents produced to the Committee, it required more than a week and several staff to these
errors and rectifying workbooks does nothing to help ease the workload and only adds to it.119
Another example of missed deadlines and mistakes on the part of California came in the
form of the upload of PUA transaction files requested by ETA. ETA asked for a sample of PUA
transaction files from EDD. EDD emailed ETA on August 26, 2022, and asked for confirmation
that the files met the ETA statistical acceptance level. On August 29, 2022, ETA responded that
the PUA samples were “good to go.”120 ETA reached out to CA again on August 30, 2022, and
asked for PUA’s case files and received no response.121 On September 6, 2022, DOL followed
up on the second request and asked for the status of the uploads.122
ETA wrote EDD again on September 7, 2022, and made a final request (see below figure)
implying that if the request could not be filled, a call from the National Office or potential
involvement from the Office of Unemployment Insurance (OUI) leadership would be
forthcoming. EDD, after ignoring ETA outreach for nearly two weeks, immediately responded
within four minutes of this final email from ETA and cited “access/software/provisioning issues”
for the delay in uploading the case files that were “good to go” more than a week prior. When
California takes days and days to respond faithfully to the requests of DOL and its own external
auditors, it gives the impression that it is being purposefully unresponsive. In this case, ETA had
118 ETA Handbook No.410, 6th Edition, U.S. Dep’t of Lab. (July 13, 2022). available at
https://www.dol.gov/agencies/eta/advisories/handbooks/et-handbook-no-410-6th-edition.
119 California EDD Production 10, on file with the Committee.
120 California EDD Production 16, on file with the Committee.
121 Id.
122 Id.
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40391
Page 36 of 77
Page | 36
to state that it received a big nudge from the National Office to receive any response from EDD.
Both ETA and EDD wasted time and resources that could have been put to better use serving
taxpayers
Figure 4:123
ETA wrote back on September 8, 2022, and simply asked EDD for a date that the cases
would be uploaded. EDD replied that “data defect” issues had caused the delay and that they
would only be able to upload 52 of 190 case files; the remainder of the files would be uploaded
on a rolling basis. The question becomes, why did EDD not notify ETA of the issues with their
123 E-mail from Grecia Staton, Deputy Dir., Unemp’t. Branch, Calif. Emp. Dev. Dep’t to Steve Malliaris, Emp’t. and
Training Admin., U.S. Dep’t of Lab., (Sept. 7, 2020, 10:19 am).
Document ID 0.7.5154 273968
From:
Stalon, Qecia@EDD
Subject:
To:
RE: lxgent Response Requesled: FW: Req.iest for Caifomia's PU/\ case Fies
Mo laras, s- - ETA
Cc:
Sent:
Toomoto, Bnan@EDD: Carr¢e , GOM C. - ETA;-_ Diane@EDD
Seplenu< 7, 2022 10: 19 AM (UTC-07:00)
Hi Steve,
let me check with the tec1ms to determine the stc1tus c1nd ETA. I know we foced some
access/software/provisioning issues in order to obtain the case samples, but I believe that has been resolved.
We'll circle back as soon as possible.
Thanks,
Greda
From: Malliaras, Sieve - ETA
Sent: Wednesday, September 7, 202210:1S AM
To: Staton, Grecia@EOD
Cc: Tanimoto, 8rian@EOO
Underwood, Dlanel!)EDD
>; Campbell, Glenn C. - ETA
Subject: Urgent Response Requested: FW: Request for (alffornia's PUA case Files
Grecia
We are looking for a status as soon as possible on the upload of the PUA IP case files.
P~ase repty as soon as J>O$.sib~.
The National Office coordinators of the PUA IP estimation review project are requesting a status of the case file upload.
As you know, the original upload due date was August 26, 2022. We have sent a message or two to CA EDD since Aug
26 regarding the upload.
We have received another fbig) nudge from the National omce regarding the upload.
If we are unable to get the cases submitted, we may be elevating the issue in DOL that may result in a call from the OUI
leadership to the state.
Thank you.
Steve
From: Tanimoto, Brian@EDO
Si!nt: Tuesday, Septe
To: During, Anita - ET
Cc: Simien, Alexandr
Swenson, T
Dennis - ETA
Subject: RE: Request for California's PUA Case Files
Good afternoon Anita,
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40392
Page 37 of 77
Page | 37
data and uploads when ETA had initially reached out? To wait until intimations of elevating the
matter to higherups at ETA should not be the reason that EDD finally responds to ETA requests.
EDD has a duty to adhere to federal oversight from ETA and to do so in a timely manner.
Figure 5:124
124 E-mail from Steve Malliaris, Emp. and Training Admin., U.S. Dep’t of Lab to Grecia Staton, Deputy Dir.,
Unemp’t. Branch, Calif. Emp’t. Dev. Dep’t (Sept. 8, 2020, 3:36 pm).
l8 of 250
-
+ Autom•hc Zoom
"
From:
Ma iaras, Ste-A? - ETA
Subject:
To:
RE: U-gent Response Requested: FW: Request for ea ifornia's PUA Case Fi es
StalOn, Qecia@EDD
Cc:
Sent:
Tanirmto, 8'ian@EDD: Ca"l)be , Gem C. - ETA: lklderwood. Diane@EDD
Sep- 6, 2022 3:36 PM (VTC-07:00)
Grecia,
Thanks again for the prompt updates.
Please provide a date that you believe all 190 cases will be uploaded.
Thanks
Steve
From: Staton, Grecia@EO
Sent: Thursday, Septemb
To: Malliaras, Steve - ETA
Cc: Tanimoto, Brian@EO
Underwood, Oiane@EOD
; Campbell, Glenn C. - ETA
Subject: RE: Urgent Response Requested: FW: Request for California's PUA Case Files
CAUTION: This email originated from outside of the Department of Labor. Do not click
(select) links or open attachments unless )OU recognw, the sender and kno" the content is
safe. Report suspicious emails through the "Report Ph~hing" button on }Our email
toolbar.
Hi Steve,
The teams have unfortunately faced a few provisioning and data defect hurdles which have caused a delay in
rolling up these cases by the date requ ested. The data defect was cleared with OOL on Monday, August 29th.
That being said, we are able to begin sending 52 of the 190 case files in the requested package format on a
rolling basis beginning tomorrow. We are working vigorously to send all 190 cases over as soon as, and as
expeditiously as possible.
Thanks,
Grecia
From: Malliaras, Steve • ETA
Sent: Thursday, September 8, 2022 10:42 AM
To: Staton,Grecia@EDD ~
Cc: Tanimoto, Brian@EOD
; Campbell, Glenn C. - ETA
Underwood, Diane@EDD
Subject: RE: Urgent Response Requested: FW: Request for California's PUA Case Files
Grecia, Diane and Brian,
Any update?
Thanks.
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40393
Page 38 of 77
Page | 38
Figure 6:125
At this point, EDD was 13 days past the original deadline. EDD wrote to ETA on
September 17, 2022, to confirm that all 190 cases had been uploaded. The original deadline was
stated as August 26, 2022. To spend over three weeks going back and forth with ETA about
uploading the case files and completing a simple task as uploading cases files for three weeks
after the deadline, regardless of data defects, is unacceptable. It is a waste of resources for EDD
employees to spend time emailing with ETA about deadline extensions and issues with data
uploads when EDD employees should be dedicating their efforts to adjudicating claims from
125 E-mail from Steve Malliaris, Emp. and Training Admin., U.S. Dep’t of Lab to Grecia Staton, Deputy Dir.,
Unemp’t. Branch, Calif. Emp’t. Dev. Dep’t (Sept. 9, 2020, 12:10 pm).
Document!D 07.5154.228634
From:
Ma iaras, Stew - ETA
Subject:
To:
RE: U-gent Response Requested: FW: Request for Ca ifomia's PUA Case Fi es
'Slaton, Grecia@EDD'
Cc:
Sent:
'Tanimoto, Brian@EDD'; Ca"l)be , Genn C. - ETA; 'lkldern<>od, Diane@EDD'
Septerrt,er 9, 2022 12:10 PM (UTC-07:00)
Grecia,
I . Was CA able to upload the 52 cases?
2. Is there a target date for all 190 to be uploaded?
Thank you.
Steve
From: Malliaras, Steve - ETA
Sent: Thursday, September 8, 2022 3:36 PM
To: Staton, Grecia@EDD
Cc: Tanimoto, Brian@EDD
; Campbell, Glenn C. - ETA
Underwood, Diane@EDD
>
Subject: RE: Urgent Response Requested: FW: Request for California's PUA Case Files
Grecia,
Thanks again for the prompt updates.
Please provide a date that you believe all 190 cases will be uploaded.
Thanks
Steve
From: Staton, Grecia@EDD
Sent: Thursday, Septemb
To: Malliaras, Steve - ETA
Cc: Tanimoto, Brian@EOO
Underwood, Diane@EDD
; Campbell, Glenn C. - ETA
Subject: RE: Urgent Response Requested: FW: Request for California's PUA Case Files
CAUTION: This email originated from outside of the Department of Labor_ Do not click
(select) links or open attachments unless you recogniz.e the sender and know the content is
safe. Report suspicious emails through the "Report Phishing" button on your email
toolbar.
Hi Steve,
The teams have unfortunately faced a few provisioning and data defect hurdles which have caused a delay in
rolling up these cases by the date requested . The data defect was cleared with DDL on Monday, August 29th.
That being said, we are able to begin sending 52 of the 190 case files in the requested package format on a
rolling basis beginning tomorrow. We are working vigorously to send all 190 cases over as soon as, and as
expeditiously as possible.
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40394
Page 39 of 77
Page | 39
applicants. EDD finally confirmed upload of the PUA files nearly a month after the deadline
date.
Figure 7:126
The response to the KPMG Audit from DOL serves as yet another example of
California’s downright inability to abide by any deadlines or measures of accountability set
nationally, in which other states were able to abide by it. On October 18, 2022, KPMG followed
up on its initial letter of audit from October 6, 2022, and asked that the request be treated as
urgent and high priority.
126 E-mail from Grecia Staton, Deputy Dir., Unemp’t. Branch, Calif. Emp. Dev. Dep’t to Steve Malliaris, Emp’t. and
Training Admin., U.S. Dep’t of Lab. and Todd Swenson, UI Program Specialist, U.S. Dep’t of Lab., (Sept. 17, 2020,
1:52 pm).
Document ID: 0.7.5 154.274763
From:
Subject:
To:
Cc:
Sent:
Staton, Grncia@EDD
Upoad Compete: Ca ifomia PUA Cases
Swenson, Todd E - ETA; Ma iaras, Steve - ETA
Underwood, Diane@EDD
Septerrber 17, 2022 1:52 PM (UTC-07:00)
Good afternoon Todd, and, Steve,
I'm confirming that we have uploaded all 190 PUA Cases for the PUA Improper Payment review. Once more,
California sincerely apologizes for any inconvenience this delay may have caused .
Please let us know if you have any questions.
Thank you,
G r ec i a
S t
a t
o
n
Deputy D rector
iii::Branch,MC39
State of Ca forn a
Employment Development Department
PO Box 826880, Sacramento, CA 95814
www.edd-ca.gov
Our Bus ness s Your Success5M
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40395
Page 40 of 77
Page | 40
Figure 8:127
127 Email from Todd Swenson, UI Program Specialist, U.S. Dep’t of Lab., to Diane Underwood, Div. Chief,
Unemp’t. Branch, Calif. Emp. Dev. Dep’t and Grecia Staton, Deputy Dir., Unemp. Branch, Calif. Emp’t. Dev. Dep’t
(Oct. 18, 2022, 08:35 am).
DocumeDI ID O 7 SI 5-1 I 34688
From:
Subject:
To:
Cc:
Sent:
Attached:
Sv.enson, Todd E - ETA
RE: Response Requested Today: State UT!' Confirrmtions lo KPMG
Diane l.nderv,ood •••••••••
); Staton, Qecia@EOD
Region6UI: Ma ,aras, stew - ETA
Oclobe< 18, 2022 8:35 AM (lJTC-07:00)
CA UT!' 9.30 Confirmations SIGEO.pdf
Hi, Grecia and Diane.
This a high priority and we requesting a response by 2 PM today.
Thank you.
Todd Swenson
UI Program Specialist
USDDL-ETA-OUI -R06-DWS
From: Malliaras, Steve- ETA
Sent: Tuesday, October 18, 2022 7:18 AM
To: Diane Underwood I ,
Cc: Swenson, Todd E • ETA <llll■■■■lll■lllt;; Region6UI
Subject: Response Requested Today: State UTF Confirmations to KPMG
Diane,
We are requesting that you respond to this email today.
>; Staton, Grecia@EDD
KPMG indicates that they have not received a response to the October 6, 2022 letter (see attached) from Jim Garner to
your agency regarding delinquent reports to be sent directly to KPMG.
We deem this as an urgent, high priority request.
If you did respond to the auditor, please inform us of the date the response was sent and to whom (it was to be sent to
Mr. Coats at KPMG).
Thanks.
Steve
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40396
Page 41 of 77
Page | 41
Figure 9:128
Figure 10:129
128 Email from Diane Underwood, Div. Chief, Unemp’t. Branch, Calif. Emp. Dev. Dep’t to Steve Malliaris, Emp’t.
and Training Admin., U.S. Dep’t of Lab. and Todd Swenson, UI Program Specialist, U.S. Dep’t of Lab. (Oct. 18,
2022, 12:21 pm).
129 Email from Todd Swenson, UI Program Specialist, U.S. Dep’t of Lab., to Diane Underwood, Div. Chief,
Unemp’t. Branch, Calif. Emp. Dev. Dep’t (Oct. 18, 2022, 04:28 pm).
From:
Subject:
To:
Cc:
Sent:
Hi, Diane.
From:
Subject:
To:
Cc:
Sent:
Attached:
Ulderwood, Diane@EDD
RE: Resp:inse Requested Today: State LJTF Confirmations lo KPMG
Ma iaras, Sime - ETA; S"MmSOO, Todd E - ETA
Region6UI ; Staton, Grecia@EDD; Tanill'Oto, Brian@EDD
Cktober 18, 2022 12:21 PM (UTC-07:00)
CA UTF 9.30 Confirrretons SIGNED.PDF, RE_ Response Requested TOOay_ Stale UTF Confirmations lo
KPMG.em
Hello Steve and Todd,
Thank you for bringing this request to my attention. It appears that the October 6, 2022, letter was sent via traditional
mail and it has not made it to me as of yet. May we request that future letters be sent via email?
In the meantime, I have notified our reporting team of the request and we are actively working to collect the reports to
send to KPMG no later than EOD on Friday, October 21, 2022.
Please let me know if you have any que5tions.
Thank you,
Diane
Diane Underwood
Unemp oyment Murance Support O vs on, MC 1140
Unempoymtnt nsur.inctBranch
Employmtnt Ottvtlopment Oep,artment
?0Box816880,Satramento,CA95814
Our8usness sYourSucress~M
Swenson, Todd E - ETA
RE: Response Requested Today: State lJTF Confirmations to KPMG
Under.vood, Diane@EDD
Region6UI; Staton, Grecia@EDD; Tanirrolo, Brian@EDD; Ma iaras, Steve - ETA
October 18, 2022 4:28 PM (UTC-07:00)
We'll work with the National Office to ensure they send these types correspondences via email. We have
communicated your anticipated submission date. If you're able to send earlier, I'm sure it would be appreciated.
Thank you.
Todd Swenson
UI Program Specialist
USDOL-ETA-OUI-RO6-DWS
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40397
Page 42 of 77
Page | 42
On November 9, 2022, the DOL OUI emailed EDD to inquire how soon California
intended to provide the requested information for the external audit that DOL had contracted
KPMG to perform. California wrote back and said it would take care of this request “ASAP.”
By November 14, 2022, DOL had still not received the requested information.
Figure 11:130
130 Email from Michelle Beebe, U.S. Dep’t of Lab., to Nancy Farias, Dir. Calif. Emp. Dev. Dep’t and Grecia Staton,
Deputy Dir., Unemp’t. Branch, Calif. Emp’t. Dev. Dep’t (Nov. 14, 2022, 5:00 am).
Document!D 07.5154121201
From:
Beebe, Miehe e E - ETA
Subject:
RE: Audit Request for Information
To :
Farias, Nancy@EDD; Staton, Grecia@EDD
Cc:
Truong, Le@EDD; t.kldenM:>Od, Diane@EDD; Noan, Sarah@EDD; Tanimoto, Brian@EDD; Stapeton,
K8'in - ETA; Ma iaras, Ste"'> - ETA; Swenson, Todd E - ETA
Sent:
Noverrber 14, 2022 5:00 AM (UTC-08:00)
Good Morning ancy,
Is it possible for CA 10 submit at least a partial response while the other que tions are being worked out?
Thanks,
Michelle
From: Farias, Nancy@EDD
Sent: Wednesday, Nov
To: Beebe, Mich
Cc: Tru
Subject: RE: Audit Request for Information
; Nolan,
; Stapleton, Kevin • ETA
; Swenson, Todd E - ETA
CAUTION: This email originated from outside of the Department of Labor. Do not click
(select) links or open attachments unless you recognize the sender and know the content is
safe. Report suspicious emails through the "Report Phishing" button on your email
toolbar.
Hi Miehe e,
we w i get I his taken care of ASAP.
Nancy
From: Beebe, Michelle E - ETA
Sent: Wednesday,
To: Farias, Nanc
Cc: Tru
Subject: Audit Request for Information
Hi
ancy and Grccia.
; Nolan,
; Stapleton, Kevin - ETA
; Swenson, Todd E • ETA
Im following up on the KPMG audit request (lener anached).
KPMG is seeking information with respect to their
external audit of tlie U.S. Department of Labor and hasn t yet recei vcd tlie requested information from California.
Any help you can provide in moving this along is much appreciated.
Thanks,
Michelle
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40398
Page 43 of 77
Page | 43
On that same day, DOL, elevated the request to the EDD director and asked for any
partial response to the requested information. Later that same day, EDD wrote back and stated it
was working with KPMG on the audit and stated that it would provide a response by the end of
the day.
California eventually asked for an extension on November 14, 2022, for the report and
asked to omit information for certain sections of the report they felt did not apply to them. Their
request for an extension, as shown in the exhibit below, was denied. The resolution of this back
and forth between DOL, KPMG, and California was not included in the documents provided to
the Committee, so the date of resolution is unknown. However, KPMG sent its letter on October
6th and California was still working on its response by November 14th—and asking for an
additional extension to November 18th (Figure 26).
Figure 12:131
131 Email from Chelsea Baudendistel, Calif. Emp. Dev. Dep’t to Yvette Ramirez, Staff Serv.s Manager, Calif. Emp’t.
Dev. Dep’t (Nov. 14, 2022, 5:25 pm).
Document ID 0.7.5154 248511
From:
Subject:
To:
Sent:
Baudendiste . Che sea@EDD
RE, CA ETA 9178 Repo,1s (OE 9130/22)
Rarrirez, Y'oette@EDD; Region6UI
~
14, 2022 5:25 PM (l.JTC.08:00)
To follow up on the request below, can CA skip the ETA 9178 for the Fraud programs for UIPL 28-20, change 4 for
quarter ending September 30, 2022 since we did not receive funding for this until September 30, 2022? We will be sure
to submit a report for next quarter. Let me know if this is ok.
Thank you I
Chelsea Baudendistel
From: Ramirez, Yvette@EOD
Sent: Monday, November 14, 2022 2:S6 PM
To: Region6UI <
■
Cc: Baudendistel, Chelsea@EOD
Subject: RE: CA ETA 9178 Reports (QE 9/30/22)
Hello Andrew and Regional Office,
CA would like to request an e)(tension for the ETA 9178-F Quarterly Report, specifically for the Fraud PUA, PEUC, and
FPUC of UIPL 28~20, Change 4 programs. can we extend the deadline back to Friday, November 18, 2022?
We apologize for the short notice for this request. Please let us know if this is possible.
Thank you again for approving the below request for the 9178-P reports.
Thank you,
Yvette
Ramirez
St.oflSt-rv
M,,
~r
Fsca ProerMns011son,MC20
Admn$lr.iton8,;wich
Stateof C..fom a
Employment Development De~rtment
PO Box 826880, S-auamento, CA 94280 CUil
...............
OurBusnus $Vour5u<:cesssu
From: Region6UI
Sent: Monday, November 7, 2022 3:31 PM
To:Baudendistel,Chelsea@
~
DD
Region6Ul <
Cc: Ramirez, Yvette@EDO
Subject: RE: CA ETA 9178 Reports (OE 9/30/22)
Hello,
We can' t extend the 45-day due date since that's set Nationally, but submitting the 9178-P reports by 11/18 is fine by
us Regionally.
As a quick follow-up from last quarter's 9178-Ps, the PUA Admin, PEUC Admin, and MEUC Ad min funds were all fully
obligated by 6/30/ 22. If you mark the QE 9/30/22 PUA, PEUC, and MEUC 9178-P reports as "complete this quarter" in
section C of the report, then you won't have to submit those 9178-Ps for future quarters unless new SBR funding is
issued to CA (such as the UIPL 16-20 Change 7 PUA Admin funds that are planned to be issued by 12/31/22.) It's not
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40399
Page 44 of 77
Page | 44
Once again, the question is raised: how does wasting precious time on administrative
matters affect the ability of California to process and adjudicate UI claims in a timely manner
while also ensuring that no fraudulent claims are being approved. Being understaffed is one
element of the equation but being underprepared is another.
In its duty to abide by federal deadlines and be accountable for providing information and
processing claims effectively and efficiently, California failed. Being more prepared for the vast
number of claims that many other states anticipated would come their way and potentially taking
on more staff at the beginning of the pandemic are both ways California could have adjusted.
By the time the KPMG audit was ongoing, it was late 2022. This was nearly three years after the
onset of the pandemic. If California realized it was understaffed at the beginning of the
pandemic, it would have had the time and resources to hire staff to solve this problem. Instead,
California regularly used the understaffing excuse as a reason why it could not abide by
standards set by GAO, DOL, California EDD, and KPMG.
D. Issues Unique to CA
While many states were ill-prepared to face the uncertainty and unprecedented nature of
the COVID-19 pandemic, California was arguably the most unprepared state in the United
States. A Cal Matters investigation found that the EDD was especially vulnerable to fraud and
shortcomings because of delayed reforms, ignored warnings of potential weak points in years
past, and the waiving of requirements that made the UI fraud programs a target for fraud and
malfeasance. California was producing so many plastic cards for unemployment insurance
benefits that BOA, its contracted card processor, warned California that it may run out of plastic
to produce the cards.132
For years, California had a system that lagged that of other states with smaller budgets
and had not undergone reform for decades prior to COVID-19. California was one of only three
states that did not offer a direct deposit option for UI claims and was one of only four states to
not have changed its UI tax system since the 1980s, which led to a massive and rapid accrual of
debt to the federal government. California also did not cross-reference UI claims with prison
records, one of a few states to not do so, exposing themselves to completely unnecessary and
preventable fraud.133 State watchdogs also stated that California was slow to implement
recommended fraud reforms relative to other states and when it did so, crafted a fraud
recognition approach that was so enforced so broadly that it ended up encapsulating employed
workers in fraud claims when they should not have been so.134
The California state auditor noted that EDD had fallen behind federal standards for
administering payments in a timely manner and standards that would have accelerated approvals
on UI fraud in a safe and efficient manner. The California state auditor also noted that EDD had
been behind such federal standards since 2002, eighteen years before the COVID-19 pandemic.
Scammers were able to move through the system with ease and California began to accrue a
great number of UI claims that led to a massive backlog. It took California many months before
it realized the fraud that was coming through and the loopholes within their system. California
132 Supra n.91.
133 Id.
134 Supra n.94.
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40400
Page 45 of 77
Page | 45
had previously stopped efforts in the 2010s to prepare for any type of internet online attack or
fraud, something that proved incredibly detrimental during the pandemic.
EDD tried to restrict the fraud coming through and consequently cut off benefits for over
three million people who the EDD stated had not sent in the proper paperwork, despite the EDD
having piles of unopened mail that very well could have contained the missing documentation.
EDD also made decisions that potentially elevated the ability of scammers to commit fraud,
sending out over 38 million mailing that contained full Social Security numbers despite making
declarations years prior that the practice would cease, something that other states had also
committed to.135 Reports from the Legislative Analyst’s office of California, a nonpartisan
institute, determined that over five million Californians had unemployment payments
unnecessarily delayed and that at least one million Californians were eligible for payments but
were denied regardless. Unprocessed claims reached a high of 1.6 million and some claims were
frozen because EDD did not have direct deposit, and the plastic credit cards were in short
supply.136
EDD went with essentially a pay and chase approach to processing unemployment
insurance claims. EDD would approve claims quickly and then after the fact take the time to
verify the eligibility of the claims themselves. California took over half a year to institute ID.me
technology that would use picture identification and video chats to confirm the identity of a
prospective applicant. EDD signed an agreement with Pondera, a fraud detection software
company, to help update its fraud detection software, despite abandoning plans to institute the
same software five years prior.137 EDD overreacted once again and instituted the technology in a
way that prevented real and eligible claims from coming through, marking them as fraud.
Former EDD manager Steve Sheehan stated that EDD did not put safeguards in place and that
they were an easy target for fraud.138 Fraud in the state affected even those at the highest levels.
Governor Newsom’s staff at one point emailed LWDA Secretary Julie Su to notify her that an
individual was using the governor’s Social Security number to file fraudulent claims.139 Another
individual using the name Mr. Poopy Pants on his official application also received an approved
claim.140
EDD was such a well-known target of fraud that it reached mainstream media and music.
Fontrell Antonio Baines, a.k.a. “Nuke Bizzle, of Memphis, Tennessee rapped about successfully
getting rich from filing fraudulent UI claims in California in the music video “EDD” posted on
YouTube141 and Instagram.142 Baines rapped, “I just hit a lick of EDD” and “go[ing] to the bank
with a stack of these,” while waving envelopes he received from EDD that had contained debit
135 Id.
136 Id.
137 Id.
138 Id.
139 Id.
140 Id.
141 ShotOff & Nuke Bizzle, EDD, YouTube (Oct. 22, 2020),
https://youtu.be/K0ck7hTsug8?si=X765jUHAE61YCqJ.
142 News Release, Dep’t of Justice, U.S. Attorney’s Office, Central District of Calif., Rapper Who Bragged About
COVID-Related Jobless Benefits Scam Agrees to Plead Guilty to Federal Fraud and Firearm Charges (July 6, 2022),
available at https://www.oig.dol.gov/public/Press%20Releases/Rapper_who_Bragged_About_COVID_Related
_Jobless_Benefits_Scam_PLeads_Guilty_Fed_Fraud_Firearms_Ch.pdf.
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cards loaded with UI benefits. He boasted about how he was doing “my swagger for EDD” by
exploiting the vulnerabilities in the PUA program. Mr. Baines filed 92 fraudulent applications
using stolen PII and addresses he had access to in Hollywood Hills and Koreatown. Once EDD
approved the applications, he used his access to the addresses to collect the EDD envelopes and
debit cards. “EDD” the video eventually drew the attention of law enforcement and Mr. Baines
admitted to filing the false claims resulting in attempted losses to EDD and the U.S. Treasury of
approximately $1,256,108 and actual losses of at least $704,760. Mr. Baines, who had
previously been convicted of felonies in both Tennessee and Nevada, also admitted to possessing
an illegal semi-automatic pistol and 14 rounds of ammunition when questioned. Fontrell
Antonio Baines pled guilty to one count of mail fraud and one count of unlawful possession of a
firearm and ammunition by a convicted felon.143
VIII. Pennsylvania
A. Unprepared for the Increase in Pandemic UI Claims
In April 2020, after the onset of the pandemic, the Commonwealth of Pennsylvania
launched the PUA program.144 This led to hundreds of thousands of fraudulent claims, many
filed outside US borders.145 The Commonwealth responded by requiring PUA applicants to
upload identity verification documents on their online PUA dashboards, but the system gravely
lacked staffing sufficient to review and approve the documents.146 To account for deficient
identity verification services and a lack of staffing, the Commonwealth contracted with ID.me, a
security vendor that verifies identities by approving government IDs and other documentation
uploaded to its computer app.147 On November 30, 2020, the state sent roughly 400,000
messages to PUA applicants using the newly acquired ID.me software to verify applicant
identities. Only 12.5 percent of applicant identities were ever verified, and of the 87.5 percent
that were not verified, Pennsylvania could not separate fraudulent claims from legitimate ones.148
The Commonwealth did not issue hundreds of thousands of PUA disqualification determinations
for failure to verify identity until September 2021.
Pennsylvania’s UC program updated its digital identification services platform using
“Benefits Modernization” (“BenMod”) on June 8, 2021.149 The UC program, too, experienced
an onslaught of fraudulent claims and contracted with ID.me to remedy the program’s deficient
identification services and lack of staffing.150 On September 15, 2021, the Commonwealth’s UC
program system failed as a result of nearly 13,000 attempts to file a claim using ID.me.151 It was
unclear how many of the attempts were fraudulent claims and how many were legitimate
143 ‘EDD’ Rapper who bragged about unemployment fraud sentenced to 6 years in prison, FOX 11 Los Angeles
(Dec. 07, 2022).
144 Sharon Dietrich, ID.me Presents Barriers for Low Income People Seeking Unemployment Insurance and Other
Government Benefits, Community Legal Services of Philadelphia (Nov. 2020).
145 Id.
146 Id.
147 Id.
148 Id.
149 Id.
150 Id.
151 Id.
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applications.152 The DOL OIG investigated the procurement of ID.me technology because of an
allegation that the National Association of State Workforce Agencies influenced the selection
process.153 Ultimately, the DOL OIG did not find sufficient evidence to substantiate the claim.
Figure 13: Email re Potential Investigation of PADLI’s ID.me Selection Process154
Pennsylvania failed to implement a modern digital identification service to offset the
spike in claims during the pandemic, reduce fraud, and provide UI benefits more efficiently.
Pennsylvania blamed ID.me and the Commonwealth’s outdated digital identification services as
a rationale for its lack of preparation to manage pandemic UI programs, ostensibly leading to
billions of dollars in lost taxpayer funds.
B. Failure to Cross-reference Claims to Prevent Fraud
Pennsylvania failed to use known databases or systems to cross-reference claims for
potential fraud. This led to multiple benefits checks being sent to the same address, checks being
sent to claimants serving time in prison, and multiple checks being sent to claimants using
fraudulently attained SSNs and government identification.
Under the Payment Integrity Information Act of 2019 (PIIA), improper payment of UI
funds is any payment that should not have been made or that was made in an incorrect
amount.155 In Pennsylvania, a “fault overpayment” is an improper payment to which the
Commonwealth determines the individual intentionally received a payment or a portion of a
payment to which they were not entitled.156 To prevent fault payments and reduce fraud, it is
152 Id.
153 Email from Syretta Scott, U.S. Dep’t of Lab. Off. of Inspector Gen., to Maria Macus, et al., Deputy Chief
Counsel, Pa. Dep’t of Lab. & Indus. Off. of Chief Counsel (Aug. 23, 2021, 12:37 am).
154 Id.
155 U.S GOV’T ACCOUNTABILITY OFF., GAO-22-105162, UNEMPLOYMENT INSURANCE TRANSFORMATION NEEDED
TO ADDRESS PROGRAM DESIGN, INFRASTRUCTURE, AND INTEGRITY RISKS, (June 7, 2022).
156 Overpayment of Benefits, Pa. Dep’t of Lab. & Indus. Off. of Unemp. Compensation, available at
https://www.uc.pa.gov/unemployment-benefits/overpayment-of-benefits/Pages/default.aspx.
Frotrn: Scot t , Syr eeta - OIG
Sent:· Monday, August 23, 202 1. 12:3,7 PM
To: Macus, IM,ar ia (u~ooq
Cc: Di ciki ,nson, Susan
Slubjeeit: RE: [External] I D•.Me
Hi Mairia,
M ille r, Jason IILJ-OCCll
M y H Q receive d an a llegat io n that NASWA recommended ID .Me to severa l
SW As incl udi ng PA I n eed to speak t o the i ndividua l or individua 11s. at PADI...I
t hat ha ndled t h e selection p rocess.
Thank ¥ou
Syreet a
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imperative that the Commonwealth cross-reference claims for UI benefits against existing
databases to determine the accuracy of payments.
An ETA compliance audit of Pennsylvania’s pandemic UI programs found that
Pennsylvania failed to crossmatch UI claims with the National Directory of New Hires (NDNH)
database. The NDNH database contains personal and financial data on nearly every working
American, even those receiving UI benefits.157 In response to this finding, Pennsylvania
admitted to not initially crossmatching UI claims with the NDNH, resulting in a failure to
retrieve NDNH data to confirm UI payments.158 Pennsylvania only began developing a plan to
begin crossmatching claims with NDNH in late 2022. This occurred after Pennsylvania twice
attempted to ignore ETA’s corrective action in earlier compliance audits based on the
crossmatching being too difficult, not beneficial, and not relevant. ETA reminded Pennsylvania
that this crossmatching was a requirement, not a suggestion.
Figure 14: Finding Status – PA Response to Finding 11159
ETA’s audit also found that Pennsylvania paid benefits without fact-finding or
adjudicating issues reported on PUA initial claims.160 Documents show that at least a portion of
these fault overpayments were distributed to incarcerated individuals.161
157 Cong. Research Serv., The National Directory of New Hires: An Overview (Jan. 19, 2024) available at,
https://crsreports.congress.gov/product/pdf/RS/RS22889.
158 Emp’t and Training Admin., CARES Act Programs Grants Compliance Findings for the Commonwealth of
Pennsylvania (Dec. 2022).
159 Id.
160 Supra n.158.
161 E-mail from Rebecca Keen, Acting Director, Office UC Benefits Policy, to Mark Basile, et. al., Fed. Project
Officer, Employment and Training Administration U.S. Dep’t of Lab. (Nov. 22, 2022, 11:01 am); see also Transcript
of Oral Interview, Pa. Dep’t of Lab. & Indus. (Aug. 31, 2022).
Pennsylvania Response [10/28/2022): Pennsylvania contacted the ND H team to ga,ther all federal
employers' names and FEIN numbers to run a report. We have started the process to ensure federal
new hues reported on DNH have not collected PUA benefits, The NDNH team \Vas unable to
provide NDNH data from Ma1ch 2020 to October 2020; however, we were able to retrieve data from
our mainframe system from November 10, 2020 to June 202 L The modernized system \Vent live
June 8, 2021. Pennsylvania also has access to the ND}UI files from June 2021 to September 2021,
and plans to filter those files for federal employers and crnssmatch any hits against our standalone
P Asystem.
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Figure 15: Record of Oral Interview 08/31/22162
Documents produced to the Committee from Pennsylvania demonstrate that the
Commonwealth’s failure to cross-reference databases resulted in a proliferation of schemes to
defraud the government of UI benefits. In one example, a tipster contacted PADLI to report an
acquaintance running a UI scam using PII from deceased individuals and posting on social media
about how much money he was receiving from the fake UI claims.163
Figure 16: 10/07/2020 Email re Report of Fraud164
162 Id.
163 E-mail from Linda Jack, Program Supervisor, Pa. Dep’t of Lab. & Indus., to Charlene Feeser, Exec. Sec’y,
Pennsylvania Treasury (October 7, 2020, 01:22 pm EST).
164 Id.
Reqord of Oral Interview 8/31/22
REBUTTAL: You completed an incarceration form, indicating that you were not incarcerated?
a. I was incarcerated, just not when the man I talked to said. I did not file while I was in prison.
In which facility were you incarcerated?
a. Delaware County
Wnat is the name of the facility? Delaware County Prison
Does it have a more specific name?
a. No.
Wnat about George W Hill Correctional_facm~?
a. Oh, yeah, that's il
REBUTTAL: You said that you did not file while in prison, did you give your information to
someone so he/she could file for you?
a. Technically, yes.
Wno did you give your information to?
a. A friend of mine.
Wnat is the friend's name?
a. Deanna
Last Name?
a. I don't know.
You gave your information to someone, and you don't know the last name?
a. It maybe
From: Jack, Linda R
>
Sent: Wednesday, October 7, 2020 1:22 PM
To: Feeser, Charlene tll■■■■■■■>
Subject: Report of Fraud
Charlene,
We received a call from a woman by the name of
. I have not been able to locate her as
being registered in the PA Careerlink system, and she stated she didn't want her name made
common knowledge in this report, so I have no other information on her other than a phone number
where she may be reached
She called to report that an acquaintance by t he name of
is running an ongoing scam with
others whereby t hey are using the names of deceased individuals to file for (and receive) UC
benefits. She claims he has never worked, but has been posting and bragging about how much
money he is receiving from these fake unemployment claims.
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Associates of the fraudster allegedly purchased cars and houses with benefits fraudulently
obtained from PADLI. The tipster also stated that the alleged fraudster was arrested for a DUI
and fraudulent UC payment cards were found at the scene. The tipster had previously attempted
to contact PADLI’s UC Fraud line, but no one answered, and the voice mail box was full, so she
was unable to leave a message.
During the pandemic, Pennsylvania’s failure to cross-reference a resourceful database,
such as the NDNH database, resulted in the Commonwealth losing at least $6 billion in UI
benefits to identity and cyber thieves.165 Emails responsive to the Committee’s document
request demonstrate that these overpayments were allocated to incarcerated individuals and
fraudulent scammers that could have been prevented if PADLI had implemented basic
safeguards before approving claims instead of only beginning to more than one year after
pandemic UI programs had expired.
C. No Transparency or Accountability
Pennsylvania also lacked transparency and accountability by not taking corrective action
to resolve issues found in compliance reviews conducted by ETA. ETA reviewed pandemic UI
claims in Pennsylvania from October 26, 2020 – March 2, 2022.166 ETA determined whether
Pennsylvania’s UI-related programs followed all state and federal laws, regulations, policies,
written agreements, and other grants management requirements and made recommendations to
improve the operation of UI-related programs under the CARES Act, CAA, ARPA, and other
guidance.167 ETA first reported the findings on Pennsylvania’s UI programs in a March 8, 2022,
letter to PADLI Secretary Jennifer Berrier.168 ETA’s findings are shown below.
165 KDKA News, State Defends Actions in Loss of Billions of Dollars in Pandemic Unemployment Relief, CBS
Broadcasting Inc. (Mar. 3, 2022).
166 Id.
167 Supra n.163.
168 Letter from Jennifer Friedman, Acting Reg’l Adm’, U.S. Dep’t of Lab., to Jennifer Berrier, Sec’y, Pa. Dep’t of
Lab. & Indus. (Mar. 8, 2022), on file with the Committee.
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Figure 17: ETA Compliance Review Findings in Letter to PADLI169
Each finding was designated a corrective action that advised PADLI on resolving the
reported issues.170 On June 21, 2022, DOL sent a follow-up letter informing PADLI that the
Commonwealth’s action was sufficient to resolve only three findings.171 Pennsylvania did not
169 Id.
170 Supra n.168.
171 Letter from Karen Pasquale, Div. Chief, Dep’t of Lab., to Jennifer Berrier, Sec’y, Pa. Dep’t of Lab. & Indus.
(June 21, 2022), on file with Committee.
ET A's review resulted in 15 findings and 2 areas of concern:
Finding One: Pennsylvania did not provide sufficient evidence to review MEUC casefiles
Finding Two: Pennsylvania has not fully implemented the MEUC program
Finding Three: Pennsylvania has not implemented the expanded PUA program eligibility
prov1s1ons
Finding Four: Pennsylvania is withholding PUA payments in violation of the requirements
of the Social Security Act (SSA)
Finding Five: Pennsylvania did not conduct required quarterly wage checks on PUA
Finding Six: Pennsylvania paid PEUC on an ineligible clain1
Finding Seven: Pennsylvania issued duplicate PUA and PEUC payments
Finding Eight: Pe1msylvania paid PEUC and Extended Benefits (EB) beyond the claimant's
benefit year end date
Finding ine: Pe1msylvania did not pay PUA benefits due to a claimant for eligible weeks
Finding Ten: Pennsylvania paid benefits without fact-finding or adjudication of issues
reported on PUA initial claims
Finding Eleven: Pennsylvania failed to crossmatch UI claims with the National Directory of
New Hires
DNH)
Finding Twelve: Inability to submit complete and accurate 227 FPUC or PEUC reports
Finding Thirteen: Penn.sylvania did not apply the required l 5 percent penalty on PUA fraud
overpayment
Finding Fourteen: Pennsylvania did not apply rhe required 15 percent penalty on FP C,
MEUC, or PEUC fraud o erpayment
Finding Fifteen: Pennsylvania failed to provide requi.red Rentm-to-Work notification to
claimants who refu e to rerum to work or to accept an offer of uitable work without good
cause
Area of Concern One: Pen.n ylvania' P A initial claim application did not request
sufficient information to properly establish whether rhe claimant was eligible for backdati.ng
Area of Concern Two: Pennsylvania's integrity procedures do not sufficiently guard against
potential fraud
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resolve seven of the remaining twelve findings until October 28, 2022, and five were never
resolved as of the last version of the findings produced to the Committee.172
IX. New York
A. Disaster in New York
Like other states, the State of New York experienced an increased demand for temporary
UI benefits when the COVID-19 pandemic resulted in non-essential businesses closing statewide
beginning March 20, 2020. Expanded eligibility and extended benefits, combined with less
stringent requirements to qualify, led to an increased number of claims. According to the Office
of the New York State Comptroller, the New York State Department of Labor (NYSDOL)
experienced massive fraud and improper payments in the UI program, especially PUA, largely
due to identity theft. New York’s estimated fraud rate in the state’s UI program increased to
almost 18 percent for the period from April 1, 2021, to March 31, 2022, compared to around five
percent two years earlier.173 From April 1, 2020, through March 31, 2021, New York made
218.2 million UI payments totaling more than $78 billion.
Prior to the pandemic, NYSDOL exceeded the ten percent annual improper payment rate
required by the Payment Integrity Information Act of 2019; NYSDOL reported estimated
improper payment rates of more than 13 percent and more than ten percent in the two fiscal years
prior to the pandemic. At the height of the pandemic, NYSDOL reported improper payment
rates of more than 21 percent in FY 2020-2021 (representing only three quarters of the year’s
data) and more than 28 percent in FY 2021-2022. The estimated improper payment rate for FY
2022-2023 is more than 18 percent, which is well above the ten percent rate required by the
Payment Integrity Information Act.
NYSDOL officials did not heed warnings going as far back as 2010,174 that the UI system
was antiquated, difficult to maintain, and unable to handle surges in claims, nor did the state
adjust to the new pandemic relief laws and temporary UI programs. The New York State
Comptroller issued a 2015 report175 recommending modernization and the NYSDOL’s response
indicated a long-term plan.176 However, the State Comptroller found that NYSDOL ignored the
warnings and did not modernize its IT system prior to the pandemic. The request for a proposal
to redesign the IT system was not issued until June 2017, and the contract was not awarded until
2019, with development of the new IT system expected to continue throughout the pandemic.
The new system was expected to be implemented in the fall of 2023; full implementation was
172 Emp. and Training Admin., CARES Act Programs Grants Compliance Findings for the Commonwealth of
Pennsylvania (Dec. 2022).
173 OFF. OF THE N.Y. STATE COMPTROLLER, 2021-S-3, DEPARTMENT OF LABOR: CONTROLS AND MANAGEMENT OF
THE UNEMPLOYMENT INSURANCE SYSTEM (Nov. 15, 2022).
174 Nat’l Ass’n of State Workforce Agencies, A National View of UI IT Systems (July 2010).
175 OFF. OF THE N.Y. STATE COMPTROLLER, 2014-S-9, Office of Information Technology Services, Security and
Effectiveness of the Department of Labor’s Unemployment Insurance System (Feb. 24, 2015).
176 Letter from Theresa Papa, Dir. of Admin. N.Y. Off. of Info. Tech. Serv.s, to the Hon. Andrew M. Cuomo, et al.,
Governor of N.Y. available at https://www.osc.ny.gov/files/state-agencies/audits/pdf/sga-2015-14s9-response.pdf.
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later delayed until May 2024, but as of June 2024,177 this has not yet occurred. The lack of
modernized IT also made it difficult to find and hire staff who were knowledgeable in some of
NYSDOL’s programming languages.178 NYSDOL eventually contracted with IBM to assist with
data entry and coding at an additional cost to the state. NYSDOL also had to contract with
Google to create a cloud-based solution due to the State UI system’s limited capacity.
Like many other large states, NYSDOL employed a ‘pay and chase’ method for
processing UI claims. In May 2021, DOL reported that New York, while it lacked modernized
IT, was among the fastest states to pay out pandemic UI benefits. Forty percent of total
pandemic UI claims were paid in the first quarter and 75 percent were paid in the first year. The
State Comptroller found that the NYSDOL resorted to stop-gap measures to compensate for its
system’s limitations, which ultimately proved costly to the state. For example, NYSDOL
implemented the use of a local code already in the system concluding that it would be the only
way to process benefits under the temporary programs. Workarounds resulted in
misclassification of claims, overpayments, and additional spending to maintain the outdated UI
system. The local code that the state implemented to compensate for the outdated IT systems
also overrode the automated internal controls to enforce the 26-week maximum for regular UI
claims in the State of New York. This allowed claimants to be paid from incorrect program
funds and increased the risk of overpayments to claimants. This in turn led to NYSDOL needing
to spend additional resources to adjust claims and recover improper payments.
Prior to and during the pandemic, NYSDOL compared UI applicant claim data to
multiple databases including the Department of Motor Vehicles and the Social Security
Administration. However, many applications used stolen identities that passed the data matches
NYSDOL had in place. NYSDOL only started considering additional solutions in August 2020
and contracted with ID.me but did not implement the services until February 2021. By then, 80
percent of the state’s total claims had already been paid out.179
In January 2022, the New York State Commissioner of Labor testified during the state’s
budget hearings that NYSDOL had prevented more than $36 billion in fraudulent UI payments.
However, NYSDOL officials were unable to provide the State Comptroller with any data or
analyses to support their management of and response to fraudulent claims on the UI system.180
Officials could not account for the number of claims that were actually paid to fraudulent
claimants before being detected, the length of time from when claims were filed to when they
were identified as fraudulent, or how the claims were originally identified as fraudulent. When
the State Comptroller sought to obtain statistics and supporting documentation, information that
the State Comptroller expected to be readily available, NYSDOL failed to provide it. This
contributed to the State Comptroller’s inability to determine the veracity of NYSDOL’s claims of
the dollar amount of fraudulent claims prevented and fraudulent claims paid and in need of
recovery.
177 Letter from Andrea LaBarge, Audit Manager, Off. of the State Comptroller, to Roberta Reardon, Comm’r, Dep’t
of Lab. (June 17, 2024) available at https://www.osc.ny.gov/files/state-agencies/audits/pdf/sga-2024-23f41.pdf.
178 OFF. OF THE N.Y. STATE COMPTROLLER, 2021-s-3, DEPARTMENT OF LABOR: CONTROLS AND MANAGEMENT OF
THE UNEMPLOYMENT INSURANCE SYSTEM (Nov. 15, 2022).
179 Call between COA staff and the Office of the New York State Comptroller (January 30, 2024).
180 Supra n.178.
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Additionally, as stated earlier in this Committee report, the State of New York borrowed
$9 billion from the federal UI trust fund to pay UI claims. At the state budget hearings, the State
Commissioner of Labor, during questioning, was unable to provide an answer to a question about
how much of the approximately $9 billion owed to the federal UI trust fund was for fraudulent
claims.181 As the State of New York continues to delay repayment of these loans and
accompanying accrued interest, employers and small businesses in the state will continue to pay
higher rates of UI taxes to pay off money that was borrowed and paid to fraudsters.
NYSDOL’s slow response to certain data requests, in some cases up to six months late,
delayed the State Comptroller’s findings and recommendations, and the NYSDOL’s ability to
promptly address serious problems. NYSDOL officials seemed unfamiliar with certain
procedures and protocols, such as basic security controls, and were not able to readily produce
related records and documentation or failed to provide it altogether.
B. Lack of Urgency and Missed Deadlines
In the documents produced to the Committee, NYSDOL repeatedly failed to meet
benchmarks requested by the DOL related to PUA and regular UI administered by New York
State. Lacking urgency, NYSDOL continued to miss deadlines, both set by the state and by the
DOL, for no apparent reason and without any explanation. While an influx of pandemic-related
complexities certainly forced burdens onto UI offices across the nation, NYSDOL appeared to
display incompetence and apathy well before the start of the pandemic that was only exacerbated
during it.
In one series of email exchanges, DOL OIG requested a work search questionnaire
form.182 NYSDOL appears to request two additional weeks to produce the form, promising to
deliver it to the OIG by February 7, 2020. There is no known or stated reason for delay, and just
“hope” for accommodation. Upon request, the OIG accepts the extension.
NYSDOL misses the February 7 deadline by two weeks, requesting an additional two
weeks to produce a rather simple work search questionnaire.183 Between February 7, when
NYSDOL is given its second deadline, and February 24, 2020, there is no contact or mention of
delay from NYSDOL, until this additional extension request. Again, without explanation,
NYSDOL in a one sentence email requests a “final” two-week extension.
In the two weeks after NYSDOL’s self-imposed “final” deadline to produce the
questionnaire, the agency yet again apologizes for failing to meet this promise.184 On March 9,
2020, NYSDOL declares it fully anticipates being able to “transmit within a day or two.”
NYSDOL appears to be aware of its own incompetence, noting its appreciation for the ETA’s
“extraordinary patience.” Two months removed from the original deadline, all the NYSDOL had
181 Id.
182 New York Production, on file with Committee.
183 Id.
184 Id.
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Page 55 of 77
Page | 55
to show for was another delay (as seen in Figure 3 below). The documents NYSDOL produced
did not show how long it took to fulfill OIG’s request, or if it was completed at all.
The many months of long delays just to provide a work search questionnaire to the OIG
occurred before the onset of the COVID-19 pandemic. NYSDOL’s apathetic response to a rather
mundane pre-pandemic request appeared to be an indicator of the state’s pending incompetence
in advance of the onslaught of UI claims that was about to be unleashed during the pandemic.
In the figure, below, ETA alerts NYSDOL of a developing problem wherein ETA’s
National Contact Center has reported calls from New York claimants being advised by NYSDOL
staff to contact ETA for the issuance of FPUC funds. The callers reported that NYSDOL, rather
than assisting those urgently seeking FPUC benefits, had deflected and abstained completely
from helping, instead pointing the callers to ETA for information.
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Figure 18: 5/26/20185
185 Email from Gay Gilbert, Admin. Emp’t and Training Admin., U.S. Dep’t of Lab., to Stephen Geskey, N.Y. Dep’t
of Lab. (May 26,2021 10:51 am).
Sent:
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Subjocl:
Geskey, Stephen (LABOR) 1/0• EXCHANGELAIIS/OU•EXC-GE ADMll'IISTRATIVE GROUP
IFYOIBOHF23SPOl TJ/CN •REC11'1ENTS/CN ■'ISF203BSSA.33463 I esn IBl'B'l41380A2-GES~EY. ST£!
5/27/2020 7:06:27 PM
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I ehecked with my st.ate· st.aff & thE.s was foreign. As a result~ I referred this to our contr~ct managers In the- event It could
be a ~ndo, Issue.
Should you re~ive any Sf)«ifios, please don't hesitate to fo,ward my w~ so I can ,everse engineer the is.ue.
From: Gllb<!rt, Gay • ET A
Sent: Tuesday, May 26, 202010:51 AM
To: Ge.i,ey, Stephen ltABOR)
Subject: FW: Communications
.4.11l."VT/u,\' nm ..,,., .,, l"l}nfc' /f'0..••1 '"' r"Xh"nH,J ~C,llr(',e l.,., NOI opt·1, utlr.11 """""' ,.,. 'lut ,,n /ml~ ,,,~,n M1•.bl11hf1 S,c<,1i/, n (Jr
lliJr•'Yf"'C'' ,/.•111,1~!,
Hi, Steve. I'm writing for your help. U DOL's ational Conract enter has reported receivi11g
calls from cw York claimants indicating they ha c bcc11 told by New York sttilTthat it is the
U .. Department of Labor that issues FPU
fund and/or 1hut your Ul staff are saying to contact
USDOL's National Comact enter for more infonnatio11 on FPU .
We would appreciate you lookiug into tbi and a k that you oot have staff refer claimants to our
Contact Center. They only ha e the most generic infom1a1io11 and obviously cannot answer
claim specific questio11.
Timnks for any help you can provide.
Gay
Gay M. Gilbert. dministrator
Unemployment lnslll'ancc.
U.S. Ocpanm nt or Labor
Em lovmcm and Training Adrninis1rn1ion
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40412
Page 57 of 77
Page | 57
Figure 19 shows a thorough and pointed directive from ETA to NYSDOL after mounting
months of incompetence and deflection. ETA, in addressing “several issues and areas of concern
that New York must remediate as soon as possible,” provides reminders of established law and a
firm deadline of response. An ETA official points out that the NYSDOL claimant form for those
seeking unemployment insurance does not require the claimant to identify which applicable
COVID-19 reason resulted in their ongoing unemployment. By the end, ETA makes two
recommendations, both of which seem to be obvious for any UI form in which an individual
seeks PUA benefits but in this case were both left off the original NYSDOL form for UI
insurance.
Figure 19: 7/13/20186
In a May 2021 message to all UI Directors across the United States (as shown in Figure
20), ETA warned of a “serious vulnerability” with an open-source program and of credential
stuffing which could lead to fraud and improper payments particularly in states like New York
with outdated IT and little ability to control to whom it was paying benefits. This notice served
186 Email from Cathy Lovely, Emp’t and Training Admin., U.S. Dep’t of Lab., to Stephen Geskey, N.Y. Dep’t of
Lab. (July 13, 2020, 8:39 am).
S.nt;
To·
CC:
......,, c.athy · ff•
7/U/2020$;3':SLAM
G•SQY, Stephfn CLA.BOA) Voah< ... r\lft.-lb.,ou•bc:h•nce Admin1S-tr11t1w Group
(FYOl90i-lf :USPDt T)/cnalt:eap nufcn-9bf2dlbSSt334631bSntb'b9'1380d ·Ge!iiey, St•I
Vo•bc.'h1nc~ou~nce-AdmiftdU<1tlW:Group
(f'YOIBOtlF-2lSPOt.1')/cn• RKIP!t:nU/cn•22?tsc36'2.3'43cdbw2ldJSb41.9?12l~
y.c.athl
Notit 11 rtr; NY PUA /Hun -1nd Areas of Contttn
Fonow up
AITTNflON 'lld\tn!ll'MCOJtltJtomon,.tt,rmaliOUl'(,r DoltOl~OJt~MUOltlldonlr,b/t'Om(lff.lnO.,,,st'Tld#IO,
.,,,,,OtttttlfflMrlh
Goad moming Steve.
As you know. we recently requested informat1on from New York regardjns vour agenc"(s 1mp!eme.ntatlon of
the Pindemic Unemployment Assist.Ince (PUA) prOBfilm authorized under the Coronavirus Ald, Rellef, and
Ec.Ol\omic secutity (CARES) Ac.I. I would like to communiUte several Issues. ar\d .areas of concern that New
York must remedlate u soon ■s posslble. You m•v have already been workin.g to c:orrect lhese issues. but
because it Is so ctitlcal to the admlnlstratlon of the proa,am, £TA wants to ensure you are takfng steps to
Implement the correct program requlremenu.
Please respond to this •m•Dwllhln 21 days (Aueust 3, 2020):
l .
It app ars New York's contlnued claln, form does not require the cla1mant told ntifywhkh of lhe
apphcable COVID·l9 rtaMJM re:sult~ in the d &imant's on,:oina unemplcvrMnl, p.anial uM-mplo-(mt.nt, or
lnabiUty to bl! able or a.valfable ror work.
~
A!. described in QuesUon 45 of Attachment I to UIPL No. 16-20. Cha nae l, the sllte must ensure that an
lndivldu'4ll complete5 41 5elf-<.ertific.aUon form it the time of flling Qth cont1nued cliilm t~t includes.:
ldentifl<ation of the appll<able COVI0-19 related reason(•) under i ectlon 2102(ol(3)1A)llil{I) of the
CARESA<!.
As described in the Operation lnstructk>ns (#13 OeterminaUon of Entitlement: Notices to lndivlduats) or
Ati.ehment I to UIPl No. 16-20, the mte must determiM whether the individual is entitled to payment of
PUA for a week of unemployment. If the ~late- ls not requiring an Individual lo '.sct1f..urtify on a weekty basis,
the state wlll have no means or determlnil'\g whether suc:h indivldual meets the eli&ibilltv requirements to be
considered a •c:ove~d lndiVrduar" In any g,ven wttk.
Correc-tM! Action:
New York's continued dalm cettifKation must be modified to allow lhe da1mant to set.ec:t and/or enter lhe
appropriate COVID~19 related reason to verify continued PUA entitlement. New York must obtam seJf•
certificatlons for alt weeks. of PUA paid since the becinnin1 of the program. An O\lerpayment must be
established for any weeks lmptoperty paid.
Cons.Stent with the requirements noted in UIPl No. 16-20, the self-cettiffation form should not deviite: fro.m
the re:a50ns in the statute and UIPL
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40413
Page 58 of 77
Page | 58
as a clear flag to UI administrators that their agencies could be targeted. At the end of the email,
ETA instructs all SWAs to take “steps to guard against these types of attacks.”
Figure 20: 5/5/21187
In 2021, ETA tasked regional offices with making assessments of states’ implementation
of the PUA program to determine “if the state made a good faith effort” in accordance with the
federal CARES Act. To assess state implementation, ETA asked each state, including NYSDOL,
to provide a complete copy of every version of the PUA claim forms or questionnaires in use
between February 22, 2020, through February 7, 2021. Below is ETA’s request with a deadline
of COB on October 15, 2021.
187 Email from Cathy Lovely, Emp’t and Training Admin., U.S. Dep’t of Lab., to UI Directors (May 5, 2021, 11:45
am).
Messaa:e
Fromi
Sent:
To:
cc
SU'bjecl:
LOY
,c.ad1y- -
5/!;/2ll21 Jl:45:2A AM
e Adm
straH'l'I! Group
R • JO'>E A. IOS
i/1 • Gaty
Atlachmcnb; Nation.ii U11empfoym.ent losur.ince F,.iud Tilsk Foo-re All!f't • OpenBul l .ind ClNlenti;i S uffi1J,11 OS/O!i/2021
lmp,oftHtt!
H,ch
A rTEHTION ni1, tma/J rorrn.• /1om an ut.,rnat sourr:<'. Do flOl t,p•YI llllacJtm.-iru or clldr. on rrnks /1om 111iww1i JeJ)d~,. ot
un~xprclca rmalls.
Good morningUI Directors,
The attaclled alert Ii provided to inform you of a sertow vulnerability, which is aisoclated with all open source
program called OpenBullel and the pract'ce of credential s1ufflng. Sev ral s:tatei Uncludlng on
n our reglon)
were Informed earlier this morning that th y could poss:lbly b targeted In the near ft1ture. However, as noted
In the alert, "'all SWAs should ta e steps to guard against theM! types of attacki:"
Pl ase note that this alert is fo, your internal use only and is NOT to be made available to the public.
Cathy
Qs 1h~ 'ti .1.ov~lg
UI P-,og,am Spec 1111st
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40414
Page 59 of 77
Page | 59
Figure 21: 10/4/21188
Upon receiving and reviewing NYSDOL’s copies of the requested PUA forms, an ETA
official wrote back on December 1, 2021, with serious concerns and to note glaring
discrepancies. Among those concerns were missing and conflicting information across forms,
and, notably, the fact that “claimants were not able to self-certify to the COVID-19 reasons at
any time during the continued claims process.” Mismanagement and inconsistency from
NYSDOL and other state workforce agencies provided ample opportunity for false reporting and
fraud.
188 Email from Cathy Lovely, Emp’t and Training Admin., U.S. Dep’t of Lab., to Lars Thompson and Erin Murphy,
N.Y. Dep’t of Lab. (Oct. 4, 2021, 8:30 pm).
Fl'om: lovdy. othy- ETA
nt: Monday.October 04. 2021
: 0 PM
To: T11orn
011. Lars E (LABOR)
cnifica,ions
Murphy, Erin (LABOR)
Murphy, Erin (LAB R)
f 'J"IE\'TJf).\'· n,,. nruu/ cnmt•Jmm mt r-:'(te~,J :umrrc. llv NOi (>J~'11 1Hlud1trKNh or dicl"" 1ml \ {rt>m 1mAno11'fl ..,,..,.,1..-r.i ,,,.
unt•Yf•n in/ 4•mul,
Good momini; Lars und Erin,
Pcrparagroph4.c. ofCnangc6 to
IPL 16-20. ET baschm-gcd the regional offices with a~ sing talcs'
implcmcniation ofth PUA program again 10 "dc1cm1inc if, 11
~a, made n good failh effort 10 implc:mcm 1h
P A progrom in accordoncc wi1h Section 2102 of the CARE Ac1 nd 20 FR 625.6." The rcsul1s of 1he
• ·sessmcnls will dc1crminc "hcihcr a stale "ill be required lo complete any mtroacti,•e ae1ivi1ic$.
To assc
slates' implcmcnlation of the sclf-«11iftca1 ioo, we a11: asking lhat each stale please provide a
comp! 1c: copy of very \·c.-sion of the PUA ini1inl and con1inued dnim forms or qucs1ionnaircs 1hut were in u.·
any time between Fcbruory 22, 2020. through February 7, 2021. Also, please indiclllc 1hc smn and end d.11es
that c~ch fonn wa in use. For case imd cfority. we suggest totes use the naming conventioru, shown below for
each document provided, but this is optional.
Slute obbrc\'ialic>n IC VCr$N
t3!10atc-EndDate
State abbrcYiation= C_vcrsll_StnnOate-EndDatc
W rculi7.c srnt
pro id d sornc of these docum nt 0\/Cr year "!,>O whe,1 P
in1plcmcn1a1ion clforis, ·ere
first cvnluated, and so 1his n:qucs1 may ecm rodundon1. HowC\·cr, 10 en urc a proper nc, assc mcn1 or the
full period under review. we rcquc t that state provide all new copies.
No1c: If o cl3imant' response 10 ccnoin qucs1ions prompa the s tcm to present ddi1i011al qucs1ion or
roqucsl.$ for iofommtion. pk3
cns11rc those additiunal qu<=lition or requ ts aJ'C' included in the d1Xumcnt( )
provided.
s you know,
IPL 16-20. change 6 require states 10 i111pfom<"1n the expanded cli •ibility provision ( cc IPL
, o. 16.20. Chan~,e S, and c~1ion 4.o. of IPL
o. 16-20. ch ngc 6) - if they did 001 already do so before
Oc.,..,mbcr) I, 2021. Some slnles lhal have not implcmentoo those e,p.mdcd eligibilily pro isions arc wailing
for our good faith assc m m to be complc1«! first. Therefore, our o cssmcms mu I begin a oon as possible,
so please provide the rcqueslcd documents by OB on October 15. 2021 .
Please no1c 1ha1 we will also be sending stales a scparo1e. bri f qucs1ionnairc IQ focili1.o.1c assessment of PUA
monetary detcmunatioJ1S.
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40415
Page 60 of 77
Page | 60
Figure 22: 12/1/21189
189 Email from Cathy Lovely, Emp’t and Training Admin., U.S. Dep’t of Lab., to Lars Thompson and Erin Murphy,
N.Y. Dep’t of Lab. (Dec. 1, 2021, 4:38 pm).
From: lovely, Cathy • ETA
S-i!t1t: Wedne<-day, D cember 1, 2021 4:38 PM
To: Thomps.on, Lars E (LABOR I; Murphy, Erin (LABOR)
Cc;: Filburn, Su$an (LA.SOR); Murphy, Erin (LASOR);
5ubjett: ~E: NYSOOL'$ lmplemenla1ion of Self-Certification$
,'.TTENnDN· This tmaJ/ r.onN J,r,m r:in t-1,·m"I joun:c Oo no.r open au(Ktlm,nts or ct,eJ. 011 /tnkS, from U'lll.now!l srndln o,
r.inc.l(p,('(1.t'd ~mmJ)..
Than~ }OU ng.1in for pro~iuing 1hc IC nnd
forms. r,.: look d ov~r II rhc dm·umcot 1rnd ha~ 1h quc 1ic,,1,
,hown b.:IO\\ . t.:nfonu11a1d, . I need lhi info,~nmion by noon n Frida}. ,f aull ])<) , ible. Ir you nee.I 1110
11111c. please kl me kno\\
On the IC appllcat,ons dated 12/18/2020 and l/27/2021, addihonal questions may have been presented
depending on a claimant's Ves/No response 10 certain COVID-19 questions. or example, claimants who
indicated they became the major breadwinner w<!re asked to provide the date the farmer head of housi,hold
died, the deceased's SSN, and annua I netincome if tt>e deceased had been self-em ployed. Did NYSOOL
adjudicate lhese and ba!>e any eligibility decisions on 1he respon5es to rhe additional questions?
On the IC doc dated 4/26/2020, I do not see equmlents for reasons {bb), (eel, and (iii, but ,1 is possible they
were cut olf fronnhe screen shot Simila riv, the version dated 12/18/2020 shows an equivalent for (Ill but
jbb) and (ee) are not Included. If NYSOOL wa~ presen ng those reasons In these IC versions, please send
copies of each showlng th4' complete li~1 of re;asons that '1a1mants would have seen.
Conrldenlial Treatment Reques.ted by
NewYGrk Statfl IMJ)lliln\MI or L.abOr
NYSOOL_COA._00004950
The last IC form provided is dated 1/27/2021. It includes a CC at lhe back but is also in T<ack Changes ~nd
shows comments. I thi$ version was put into production. plo
send a cle,H• final copy .ind I will delete the
Track Cha,lJleS werslon.
Is !here a subs quent version ot the IC and CC forms that added (klr-2), (kk-31. and (kl<.-4) r asons?
llased on the documeriu provided, it appears Iha claimants wer not able lo self-certify to the COVID-19
reasons at any lime during the continued claims process. Is that correct?
From what I can tell, the JC versions provided have the nan dates listed below. Please send any versions tlta1 I
may be missing or conffrm that this Jin is comple~ and I wlll assume e cl> wa~ used unlll 1he ne~t verslo11
began and the last ir> 1he hst was uS<?d until th~ program ended.
!£
4 10.:201,,
~ :!~'10:!()
4 26.•~020
docum~m dated 1111,20111
7,1 5:_020
'1,-::•!01(1 (ID\ pai,:c, onl)-1
ll I 20:!0
I l7 .021
cc
-1114'.0W
-I ' 1)•10:IJ (break in d.oimJ
I :n ,21)21 \A CC 1s included at the batl of the IC rrock
h~nb,c,
l.ct me kn(>w if you have ony 9u~ticm;,
111:ml you Bgoin l<lf ) <.IUr hdp'
Cathv
eatiiy t1.1.ont11
I Progrom Spc ioU,1
SDOIJETA
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40416
Page 61 of 77
Page | 61
Prompting alarm from ETA over NYSDOL’s UI claim forms, and wanting an urgent
explanation of the missing information, ETA asked NYSDOL to explain the discrepancies by
Noon on December 3, 2021. NYSDOL delayed again, writing back in a short email (as seen in
Figure 23 below) asking for an extension until December 10, 2021.
Figure 23: 12/2/21190
It is not clear if NYSDOL ultimately handed over sufficient answers to ETA regarding the
botched UI claim forms it used amidst the height of the pandemic. What we do know is that
NYSDOL did not hesitate to continue missing deadlines, as evidenced in the request of a
separate questionnaire requested on December 8, 2021, for completion on January 7, 2022 (seen
in Figure 24 below). Writing back a week later, NYSDOL stated it would not have the
questionnaire completed as requested, and instead requested an extension to January 28, 2022,
three weeks after the original deadline.
190 Email from Erin Murphy, N.Y. Dep’t of Lab. to Cathy Lovely, Emp’t and Training Admin., U.S. Dep’t of Lab.,
(Dec. 2, 2021, 5:30 pm).
From:
5cm;
·10:
t:c:
.SU'bje,t:
t,Wtphy, Ertn. jlAEIORI [/O:EXctiANGEI.A8.sjOU=~CttArm1: AOMINlS.lFLAflVf GROUP
jfVDi 801-iF 23S'f>D.L T)/CNoA.ECI PtmTS/Cff ot7'9801D51A64A4!.7l'9BCD.;.t.OOt'l.1.;EE.l).MlJRPii'i', EAll
U/2/21>21 S;Z0•;34 fM
Tliorn;>~, Lar1 E [IMIOR) 1/o=Ex<ot,~i:,g
!i;,j/,;,1,1:if:«1\~tigl: A<lmilfl<W• · \l'C GrQ\IJ!
jFYOI BOH~ 23S~ll!L T)/.em=Reoipf ents/en:cSdMl:MSOEi644419e19~ 189llb4.af • Thompson, l];
IJ,o cxchang.elab5/011 'Exchanie Mmlnls!rathle Group
jFYDI BO!iF.2.llS!'<l)I. i)/c111• lle:<=lpienlJ/cn• 22.7lS,;3692.:J.943i;.db6a2:ld!Sb4197ll1
J;i lburn, S\l~n ltAtORJ, j/,;,=f~Chai\,£tl4~/0Ll=E>:(h,11ij!e ~i,;.lnr,i,tl,;e Gro11p
tF·YOI SOH~23Si>Dl. 'f1/.er:i=R~lpte~~/c;i=.ad1er".e,!>.aladd42.3m89e3i~.i24jaa4S-Filbum. SU
1Jo~h<"hanget:abs/ou.,bcha11ie Admfnistta,tlve Group
IA'lllBO"IF .l.3$Plll T)/rn~R!!<;ipienl'l/i;n" 2_271Sc369:l.394Ji;.db6ii112k0Sb41'972:21
Re: NYS(Kl:t.'s lmplementallo:. al Self-O!rtlfic-:nfons
OoNI e\1eni11g Citlhy.
YS will 11ol have lhe infoomlt11Jn ready by lomorrow a.t noori. Can we c ·tend lhc deadline till nc->;I -riday
12.flO 111 noon?
.PlCllSC let Us know.
Thank )'OLl,
Erin
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40417
Page 62 of 77
Page | 62
Figure 24: 12/8/21191
191 Email from Cathy Lovely, Emp’t and Training Admin., U.S. Dep’t of Lab., to Lars Thompson and Erin Murphy,
N.Y. Dep’t of Lab. (Dec. 8, 2021, 9:02 pm).
From: lovely, Cathy - ETA
Sent: We-dnesday, Dec.ember 8, 2021 9:02 PM
fo: Thompson, Lan E (lABOR} - - - - Murphy, Erin {LABOR)
CC: Filburn, .Susan (lAWR} ~
Subject. Tou~l»ck Monl orlns Que tll)nn lte - CARES Act Progf mi
~m:,\'f//J,\1 nmtntrlllfl, ,tr frnmrr,1 ,,·r,n,,,J 1,,u,r.a,, I~> ,.,,lopm oJltr,, ,_,,,, lflr,.r.l,, t,,,, l111h In""""~"""' ,,·1,tl,ff ur
1l,'nt'Y/>it~./ -,Jlftrlf.\
H(>ilo Lars a11d l:rin,
Thant you for Ne\'< York'$ ongol~ effort with our office's CARES Ai:t mon,tor,ng. Before iuujn the monltot ns,,eporu,
I.he last CQmpon-ent of ou, fieldwork cons•~t.sof .i questio:nnitlre covering MEUC r,d af'\y luue$ thill were created by
!!uldance that was not available• at the I,meofour review ofyourst.-it . That ques.tlonnai1e is attadled. I realJie there Is a
tot golng on and t"he holidays are comjng up, so please let me know if you do noteicpect to be able to return lhe
completed questionnaire by Friday, January 7, 2{122.,
Please- n-ote, th1 qu stionnaire asks lor wt MEUCca~ fil 5, (3 allo-d and J d ni di. II there is Mlm one lse on your
l~m I ~hov1d work with to ere h: or tr n mil llio~e fi!e-s, pl ,ate le mi lcn1JW,
C.ilny
Ql1bg \1. 6oviz;lg
Ul PfOgram Spedal1it
USDO
ETA
From; Mu~~v. Erin {LA90R) <l■iiiiiiil--------------------7
Sent: Wc-dn dav, D cember JS, 2021 9;4S AM
To! lo\/ tv, ~ 1;.,, •
A
lbornMor., l.3r E I BORl
Cc: Filbum, Susan (LA&OR}
5ubfert: fl : ouehback Monitonq11 Questionnaire - CARES Act Prog,un~
I
C.lUflON • "Jh. s.l"ldu of
1- ll'H1~ >I kl~I O the OOL "~IV/Orie,
Sl'J'\!ltnM 1nlor
t,01\. 5i!nd ,o,pldou5 ma to
4 "~
gv,
Hl Cathy,
New York State will not be able to have this completed by January 7. Would it be possible to extend the due date to the
end of lilnu,II'y, We ,ould return <11144 teiponscr, nd si:,: c;asc rites by 1.Jnuary 28 .
fife se let
e know.
Than \IOU,
Erin Murphy
Olredor
N w York State Oepartm nt of labor I Aud1I Unll
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40418
Page 63 of 77
Page | 63
Figure 24: 12/8/21 (cont’d)
Two years after NYSDOL’s exchange with DOL OIG staff, during which the state had
trouble providing the OIG with a basic questionnaire form in a timely manner, ETA’s national
office was now similarly awaiting the crucial UI-1 report from NYSDOL two weeks past the
deadline. Interestingly, ETA did not have a record of NYSDOL’s point person for the report and
had to request another NYSDOL employee forward it to that person once identified.
l'rom:
Sent:
To;
CC:
l,ov,ely, Cltlly-£TA .......
11/20/2021 7:11:32 PM
t.w rphy, Erin (lABOJII Vo~ExchangeL,1bs{01Juf.xchafli)? Administrative G,oup
jHOIBOHFl3Sl'OI. T)/cn=Rcciprenc~/cn~ 7!1001CIS 1:164a4!>7flltxd44Ca3tJ 1~..0-MIJl"phy, tnl; Thomp$01'1, UI"$ E
jLABOP.1 l/o=£xchar,aeLabs/ou~£xchange A<1m;11mr.llive Group
(fVOIBOHFl3Sl'lllT)/cnaReclpienL'S/cn-c6dOdb6~0G64441g~1976(le1891b4af•lhompson, l)
Filburn, SuRn (lABOIIJ [/oa:E,(cha1>1el~bs/ou•fi(ch1111e Admi'l¼tratilll! Groi.p
jFVDIBOHfl3SPDl,T)/<:n=R~pii:nl,!/Q>:.adlel39ll21\dd413oll9e3?e$3241:t345-Filbum, SvJ
RE: Touchba<k Mocmor,ag Q~stionnaite • CARES A.:t Progrann
ATTFNUON: This emaJ/ ri,rn~ /ttHT• ,,,, ~:rurnal >01JTU. Do Ml 0/N!fl 1.11<xJ1m,•1m ,,, cll(k on l,n,s Jro11, .,.,k,,.,w,, ,endm a,
uneJIPl'cled em{lt/;
Hi Erin,
Yel, I w.is totd we can give New York until the end of January to get evemhing in. t hope this Is helpful.
Happy holidays to all ol you!
Cathy
from: Murphy, Erin {LA80R)
Sent: Wcl'dnescfav, De~mber IS, 2021 9;4S AM
TO! l~elv, Cathy • £TA
Thofl'll)$01'!, l..'!~$ E (I.ABO~]
Cc: Filbum, Sus11n (lAl\0~}
Sul:!jett: ll£: Touchbadt Mon,torrn11 Questionnaire - CAAES A<:t Program~
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40419
Page 64 of 77
Page | 64
Figure 25: 10/14/22192
It appears the NYSDOL point person for the report had emailed a non-working address at
ETA (as evidenced in Figure 26 below), received a bounce back message, and failed to follow up
to ensure that the report reached ETA. This conveniently generated a three-month gap until ETA
192 Email from Cathy Lovely, Emp’t and Training Admin., U.S. Dep’t of Lab., to Lars Thompson, N.Y. Dep’t of Lab.
(Oct. 8, 2022, 5:47 pm).
f rom!
Gc><e\'1th, Jotln J (LABORJ VO=EXCHANGl!I..AB.S/OU=£XCHANGE: ADMIHIS"TRATIV[ GROUP
IFYDI llOHf 2 lSPlllT]/CN ■R£Cll'IEHTS/CN •2CDBOB4 218094' A.SA 7AABlD'IBAS04IF7-GOREVICH, J]
Sent;
lQJt•fl022 ll:13:48 AM
To:
o=-EXc.t\.t,r\ltLabS/OU,..El¢hllngeAdmlf"liilt4ti'Ye Ciroup
(fYDlllOHf23SPllll)/cn=Rl!Clplenu/<n=2271Sc36112lll<3<db6•2lCOSb4191221-!ovely_caLIIJ
CC:
lhOffll)!Oll, Lars E (LA80R] 1/o•E>oc:han,etab</ou gn.,n1e ll.dmin,nratlve GrovJ>
IFYDll!OliF2.35Plll T]/cn•R,clpl•nu/cnac6dOclWS06644419411976col8911>4>f•Thomp,on, lj; Rone•. l<>••n D
tLABOfl) t/ozf.xch•n.ael::ib#ou.:f>tcha.n1e Adm,njstrativ,: Group
~FYDI BOHF-23SPotT)/cn=Reclpre-nb/cn~ab592160da94e3 l a3b8-719c.8b6ad.2 ll·ROM.l, Kare}.: f!lbum., SUSl.n {LABOR}
VoitExcban1Jel.ttK/ou1LExcbangl! Admlnl-stc.ate\le Group
tFYOIBOHF23SPOlT)/cns-R~1pi4nt1,/cnlQd2tf.a9o11bddA,23W9-t321!.s3-24f~iJ4S•Filburn, Sou): lopti, Mom~ • ETA
Daly, M1<hell<> M (LAl!0I\] Vo=E•<h•oa•Labl/ou=El<charce Admi111strative Group
IFYDll!Olif23Sf>OlTJ/cn Rocipien!S/cn
3n9t~~l>6e4034b7ll9cbf6~63<~0.ly, Micht)
S..t,Jccl:
fW; N•w Vork UM Ropo11rorl'o•iocHndln109/30/2023
AU~chm~nl:s: FY 20.23 Ul•l tran$mittat.pdf
Hello C.thy,
Vour mes~ge to Lars wa5 forw.arded to me, as I am the con-ta<t for the UJl repon:. We did transm{t th l-s ,epon by the
deadline. It Is attached for your reference. Please lel me know If anything additional ts requlred.
John Gorevich
[)1"6(...
ot F1J1
tCial M-i dQem .c S
•
From: lovclv,Cathy • ETA ···••■■■----------------------
5ent: Thul$~y. Octobe, 13, 2022, S:47 PM
To: Thompson, l a<• E (lA8OR)
Cc: F,lburn, Sus~n (lASOR]
Lopez, Marisol - OASP
Suble<t: NewYo,k Ul-1 Report for Period Endlng09/30/20l3
u-n-·,..710,· ,,,,. na.11I <-1",~ /n,t111 IIJI l".CU.'flUII \ttu'l'I": /)., n.,, ()JJIIW Jll,J1 h1"r-JJh ,,,., lu-1.: r,n /mb /mm 1tnhJrt'11,, 1r11d«1 "'
Ult."f('fl I~/ ~•1ffi14/•
ih• national oHk• ~•• not rec•lvtd NV's UJ-1 report for 9/30/2023, which was due by 9/30/202-2. I do not
lmow who the contact is. for NYSDOt report. Could you please either forwafd thi~ to the appropriate person or
Confidential Treatment Requested by
NewY()tk State DepMmen1 or lllbOt
NYSDOL...COA_00002829
send me their email addre$5 so I uo reath out to them diretlty to find out when the report will be
submitted? I would then add their information to my Contacts so I would not h.ive to bother you ;,gain with
questions al>out the Ul-1 report.
Thank you for vour help with this.
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40420
Page 65 of 77
Page | 65
wrote to NYSDOL about the missing report and the need for a point of contact for it (seen in the
Figure above).
Figure 26: 7/18/22193
Figure 27 shows ETA, about a week after NYSDOL finally submitted its report, inquiring
about the large quantities of negative entries in row 30 and beyond. Wanting an immediate
response, ETA then asks for a reason for the large negative entries.
193 Email from Lars Thompson, N.Y. Dep’t of Lab. to non-working address, U.S. Dep’t of Lab., to (Jul. 18, 2022,
9:26 am).
Non l)ehverv eoo<t
Flom:
M crosott Olltlook [/O=EXOiANGELABS/OU=fXCHANGE ADMINISTIIAilVE GROUP
(F't0I IIOHF23SPOi. T)/CN=R.ECI PIE
/Ci;
tCllOSO TEXCl-f.AflGD29E71ECSSA£~1stlSC36AMitt:4 lloo:l:8FC.610~8J
To: --
SUbJll'Ct:
Ul'ldi!' e_r.ible-: -vor Staf Des14nat,on • PUA !PER Secpt. 2022
AUuhmi!'nts: New Yori Staff Oestinali011 • Pih\ IP£R Sept. 202.2
Vourmc·~ag; did not rc-11 h omc oral! ofth imcndcd
ipfcnl
UbJC :1: cw Y .rk Ulff Dcsign1uion • PUA IPER cpl . .2022
cnt:711 f-02. 9:.6: 3 M
-
The followino r, ipicnt( ) canno1 be reached:
aid I.go,• on 7 '1 1202 9: 6: J :'i.M
Diagnostic code
'0Di,1y.nos1ic; Reason :ode -
runsforFuil id; talus rode
5 0
< # .0.JS0 mtp;S f) ~.0.350 Remo!· crver l'C'Lumc:d on error-> S # .I.
ddn:11.S Jcclcd.>
0 Office365
Your message t~
~dol.gov couldn't be delivered,
When Office 365 tried to send your message, the receiving emai
server outside Office 365 reported an error.
Lars.Thompson
Sende
Office 365
PUA_Revl~w
Action R qu1red
Poltcy violation or system
error
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40421
Page 66 of 77
Page | 66
Figure 27: 10/20/22194
As stated earlier in this report, New York, like other states, was not prepared for the
increase in claims and began posting public “help wanted” ads in March 2020. NYSDOL was
posting job ads in March of 2020 (see below in Figure 28), specifically for the role and position
of Senior Employment Security Clerk. Essential services that included instructing customers on
194 Email from Cathy Lovely, Emp’t and Training Admin., U.S. Dep’t of Lab., to Lars Thompson, N.Y. Dep’t of Lab.
(Oct. 20, 2022, 8:30 am).
~ , v,nNutlon ond , upport ror ETA 2112 reports [l>'YI
Roo"ivcd and we'll be gcuins bn k t,i; soon '1S we ton. Uuders10 d.
Get t)11thmk lor 1.\11drold
From: lo•etv, Cllthy • ET A
Sent: Thursd y, Ociobtr 20, 2022 8:30:44 AM
To: Thomp$0n, l <$ e (LABOR] <
Cc; Poirier, Amanda • ET A
Subje<;t: FW, Ve,if]caliOll •nd wpporl for ITA 2112 reports (NY)
ATTCr,JTlON· Thti 1111tt!J(llml! /tom an tj;tetnat ;ourct De 1'0l opt1l rJlloth1t11rnt1 or cNc>.-. on ltn,-,s from U11kniOwrt stn.tJtri or
r.mtxprtft:d rrnorls
Good morning lilr~.
I apologize for the Interruption, but he NO and KPMG need NYSOOL's response as soon u possible. TtK:v are
a~klne NYSOOL to 1) venfy lhat lhe oea.itlvc entrles are correct In row 30 and beyond on the attached rel)<>rt
and 2) provide lhc rca~n(s) for the large negaliv
nlrics. Lei me know If vou pref rthat I reach out directly
to a member of your riscal tc.im for this information.
Thank you.
Cathy
Cathy 1'i. i,,ov~y
UI Program Speoahst and Rogaonal
Cont•~• for Bl'C/lntegnty, Tax/TPS, Ne.
USDOI/ITA Boston Regional O fice
Head up; 51.;iy strong; Wear a 5mih:; Move on.
From: Pasquale, K•ren • ETA
Sent: Friday, October 14, 2022 5:14 PM
To: Thompson, Lars £(LA~
Ct: Poirier, Amanda • ETA ----
Subject: FW: Verification and support for ETA 2112 reports
conri<le,1tial Trca1men1 Reques.tea by
Now York Slate Departmonl of LJlbor
NYSDOL_COA_00002825
L~rs. '0 hod a inoc1i11g wi1h KPMG and the. 'vc idcniificd a couple of areas or concern I h re ·iates reported
negative net di~burscments in the bcncfil payment account on particular . TA 21 12 reports. For rq;ion I, 1h31
includes 1hc rollowi11g:
Y' January 2012 report
We need N 10 verify 1h011he ncga1ivc disbursem ·nts arc comx.-i and 10 c-xplain lhe reason for 1hc lnrge
negative ? They're looking specifically al row 30 mid 1hc row below Ihm net to thm figure. The report i
aunchcd for rcfC1'Cllcc,
KP IG is h"!"in NY ""n p:rovidc the i,1fo •~ ><'\Qll "-' f>O>Siblc- in otdrr 10 rc.<olv<: tbe co"""'"·
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40422
Page 67 of 77
Page | 67
the methods of certifying UI benefits, processing claims, interaction with other offices and
governmental agencies, and constant guidance of customer eligibility, were all abandoned as a
result of vacant positions in the NYSDOL. While NYSDOL had already positioned itself as a
stalling’ agency, staff shortages amidst the COVID-19 pandemic help explain why an influx of
cases and callers were being mistakenly directed to the ETA for the issuance of FPUC funds by
ETA employees (as seen in Figure 28). This lapse surely contributed to extended delays for
providing UI benefits to rightful claimants of UI insurance, a vulnerable opening for those
seeking redress against identity theft, and ripe opportunities for fraud to infiltrate NYSDOL’s
claimant form.
Figure 28: 3/20/20195
A few months after ETA voiced concern over NYSDOL clerks misguiding customers (as
seen in Figure 18) and after NYSDOL posted help wanted ads, NYSDOL could not account for
the “anomalous one week jump” in PUA initial claims in the month of September 2020. The
reported initial claims increased from 31,284 in the week ending September 9, 2020, went up to
41,016 in the week ending September 19, 2020, and back down to 33,141 in the week ending
195 StateJobsNY Review Vacancy IDL 80204 (Mar. 20, 2020).
Duties
Description
StateJo.bsNY
Review Vacancy
Date Posted: 03/20/20
Applications Due: 05/08/20
Vacancy ID: 80204
As a Senior Employment Security Clerk assigned to New York
State Department of Labor (DOL)'s Unemployment Insurance (UI)
Telephone Claims Center, you would:
- Instruct customers on the requirements and methods of
certifying for benefits including the consequences of failure to
certify
- Process claims and make appropriate determinations
- Ensure that the customer understands the criteria for alternative
methods of becoming entitled to benefits
- Interact with other offices and governmental agencies to obtain
information that may affect customer eligibility
- Provide information regarding the hearing process so customers
understand their due-process rights; and explain penalties and
forfeitures of benefits
- Respond to business inquiries or complaints regarding UI benefit
claims
- Work under the pressure of continuous public contact
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40423
Page 68 of 77
Page | 68
September 26, 2020. This caused so much confusion and worry that a supervisory actuary at
DOL requested immediate information from NYSDOL in hopes of an explanation for the
abnormality. Providing a non-answer, the NYSDOL official responded that they could not
account for the “exact drivers” of the anomaly.
Figure 29: 9/30/20196
196 Email from Kevin Stapleton, U.S. Dep’t of Lab., to Doug Lukazewski, N.Y. Dep’t of Lab. (Sept. 30, 2022, 4:07
pm).
Messa. •
Lu ll<ttwskl, Dool (LABOR) Ve>,,EXCHAUGW&/OU=EXOiANGE ADMINlifRATI\lt GROUP
IFY0180HF23Sl>DlTI/CN• R£CIP1ENT$/Clh8049E4Ff80404111!86FSC13ClCSAl2C8-lUKAS2EWSK1]
9/3-0/2020 9:ll>:14 PM
St J)ltton. K•""' • ETA
Btown, Scott F (LABOR) Vo•Exth01111elabs/ou=Exch1n1e Mmlnl<tfil\,v, Group
1FYOIBOHF23SPDlTI/cn• Reclplenl>/cn"'8579b23bld1'>48dSb89d21S32n0393S.-8rown, Scot)
JU:; Mowment in PUA initi~I d~fms
I hesitate t.o speculate as my impressions would not be soundly rooted in or supported by the data,
The exact drivers are unclear at this time.
From: Stapleton-, Kevin • ET
Sent: Wednesday, Septem
TO; Kan1, Dae,hlk I LABOR)
Lukaszewski, Doug I LABOR)
Sublect: MO'llement in PUA initi;11l dalms
Anwar, AhmadtLABOR)- - - -
Brown, Scot1 F(LA~
-i f/1.A'l f()\" nu ... ,"fN<ul ,~111,,• fn, ,,, an 1 \li•rtflll so/JI\,. l}r, ,,_,, f1pt 11 ,a,,,u,,.,"".,\ ,u, hd "" lml., /rrurt aJNbtr,111 n Af ~ .,,,~ ru
im.~r,<r:11•,l ,•,.,..ulf
Goodnllcmoon.
C3n somcon provide any in igllt into the mov ment in
cw York's P A initfol cl3ims owr the pas1 couple of
w«:ks? Rcp<utcd P A initial clmim increased from 31,284 in the week ending 9/ 12, up 10 41.016 in the w«:k
ending 9119 nnd b•ck down to 33,14 1 in the week ending 9126. Thi~ would appear from the wrekly series 10 be
an anomalous one w«:k jump and I'm \\Ondcring if there is nn cxplana1ion for it,
I rocog,,i,.e it's a bit lotc in th, day, but I'm hoping 10 hove omclhin{: before tomorrow morning news rclcasc.
Whatever information you might be able to provide this aflcmoon or first thing romorrow morning would be
appreciated.
Thank )'OU,
Kevin A. 1aplcton
S..ipcrvisory Actuary - Di\.•ision or Fiscal & Ac,WlfiaJ
nic~
00.Cc ofUn<:11 la 1mc:ru IMUr"J.JlC'C - U.S. De artmcru of Labor
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40424
Page 69 of 77
Page | 69
X.
Organized Crime and Insider Threats
Over the course of the COVID-19 pandemic, organized crime played a major role in the
proliferation of UI fraud by targeting pre-existing system vulnerabilities. Organized crime ran
identity theft schemes, gained U.S. taxpayer individual information with data breaches, and filed
claims in multiple states with the illicitly obtained information. The increased fraudulent activity
resulted from a rapid influx of applicants but also because of limited enforcement measures like
background checking and outdated IT systems that allowed for capability gaps.
There are several stories and examples of fraudulent UI claims filed by foreign nations,197
organized criminal gangs,198 on behalf of prison inmates,199 and even one involving an assistant
in California Governor Gavin Newsom’s office.200 These illegal acts are made worse when the
fraud is conducted by a state employee, one whose job is arguably to prevent such activities from
occurring in the first place. This makes such insider threat concerns an additional area of
pandemic UI fraud that warrants attention. Given the administrative rights and access some state
employees possess, there are multiple opportunities and methods available to them to approve
false claims or to work with non-state employees to facilitate fraudulent applications.
A. California
In California, federal authorities uncovered three conspiracies, including one by a
“former Employment Development Department employee who was able to scam more than
$200,000, including one claim that used the name of U.S. Sen. Dianne Feinstein.”201 The EDD
employee, Andrea Gervais, previously worked for EDD from 2010 to 2018 under the name
Andrea Dangerfield.202 She was fired by EDD in 2018 after an investigation implicated her in a
money order theft.203 She was also subsequently arrested in January 2020 on identity theft
charges for “allegedly obtaining a credit card under false pretenses,”204 but the charges were
dropped for lack of evidence.
Separately, Nyika Gomez, employed by an EDD contractor as a call center agent, was
arrested after investigators “alleged she conspired with her boyfriend, a prisoner serving a term
of 94 years to life at California State Prison, Sacramento, for murder.”205 With help from her
boyfriend, Gomez allegedly obtained PII from California prisoners, along with stolen PII from
out of state residents, to file fake UI claims.206
197 Lily Hay Newman, The Nigerian fraudsters ripping off the unemployment system, WIRED (May 19, 2020).
198 Press Release, OIG U.S. Dep’t of Labor, Labor watchdog’s pandemic work results in more than 1,000 individuals
charged with UI fraud and $45.6 billion identified in potentially fraudulent pandemic UI benefits (Sept. 22, 2022).
199 Patrick McGreevey, California’s Prisoner unemployment fraud now estimated at $400 million, officials say, LA
TIMES (Dec. 1, 2020).
200 Supra n.94.
201 Anita Chabria and Patrick McGreevy, Former California EDD worker faked being Dianne Feinstein in scamming
jobless benefits, sources say, LA TIMES (Dec. 17, 2020).
202 Id.
203 Supra n.199.
204 Id.
205 Id.
206 Id.
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40425
Page 70 of 77
Page | 70
Constantin Sandu, “a suspected organized crime figure,”207 was charged in March of
2023 for orchestrating a scheme involving 214 other Romanian nationals “to fraudulently obtain
[$5,207,687.00] in California unemployment insurance benefits by fabricating documents,
creating fictitious accounts and businesses, and filing bogus claims with California’s Economic
Development Department.”208 In November 2023, Sandu pleaded guilty, was sentenced to 40
months in prison, and ordered to “forfeit $214,950 that he personally received from the
offenses.”209
Sandu and his 214 co-conspirators submitted “fraudulent identifications, falsified utility
bills, falsified earnings statements, falsified W2s, fraudulent health insurance cards and
[company information].”210 Sandu’s criminal enterprise also modified UI to generate larger
claims and would submit their own PII to Sandu via Facebook or by meeting up with Sandu in
person. Reports do not make clear whether any of the over $5,000,000 defrauded from EDD
made its way to Romania or Romanian crime organizations, but it is certain that taxpayer dollars
went into the hands of the Sandu crime organization—all 215 of them.
B. New York
In March 2024, a vast criminal conspiracy involving employees of the New York City
Department of Homeless Services (DHS), U.S. Postal Service (USPS), and other co-conspirators,
was uncovered by the Manhattan District Attorney, resulting in four indictments charging 18
people. This scheme was led by two NYC-DHS employees, Charde Baker, a former employee
of the New York Police Department,211 and another unnamed DHS employee. The pair
allegedly orchestrated a despicable scheme that involved stealing PII from homeless people, then
sharing those details with more than a dozen government-and-non-government-employed co-
conspirators who “submitted 170 false applications that netted approximately $1.2 million in
[prepaid bank cards].”212
Initially, the claims were sent to addresses that Baker and her accomplices “had access to
or control over, including their own home addresses. Eventually, they listed addresses along an
Upper East Side mail route of a (USPS) employee. This defendant intercepted the mail and
provided the [prepaid bank] cards to the other defendants to access the stolen funds.”213 This
case has ties to a 2022 investigation in which a ghost gun factory was uncovered in the apartment
of the aforementioned unnamed DHS employee, who 3-D printed various gun parts. The ghost
207 Press Release, OIG U.S. Dep’t of Labor, Romanian citizen arrested and charged in $5 million Covid relief fraud
(Mar. 2, 2023).
208 Id.
209 Press Release, U.S. Dep’t of Justice, Southern District of California, Foreign National sentenced to 40 months
custody for $5 million unemployment fraud scheme (Nov. 21, 2023).
210 Supra n.200.
211 Press Release, OIG U.S. Dep’t of Labor, D.A. Bragg announces indictments in sprawling investigation that
charges city employees in ghost gun and fraud conspiracies (Mar. 7, 2024).
212 Id.
213 Supra n.209.
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40426
Page 71 of 77
Page | 71
gun factory operation took place in 2022 and 2023, after the 2020 PUA fraud conspiracy, raising
the possibility that it may have been funded by the unlawfully gained funds.214
Two NYSDOL employees, Wendell Giles and Carl J. DiVeglia III, were indicted in 2022
for conspiring to fraudulently obtain UI benefits, including “federally funded pandemic-relief
benefits.”215 According to the indictment, from around July 2020 through August 2021, Giles
and DiVeglia “initiated fraudulent unemployment insurance applications in the names of other
people and then abused their NYSDOL computer systems access to release benefits payments on
the false claims.”216
Giles and DiVeglia’s responsibilities as NYSDOL employees included processing UI
claims and distributing benefits to eligible New Yorkers.217 The pair used their position and
access to create and approve false insurance UI applications by using PII such as name, date of
birth, and Social Security numbers, and inserting information in required fields such as maiden
name or work history.218 In many instances, the pair made arrangements with the individuals
whose identities they were using to file the fraudulent claims to share the payouts, which “often
were in the tens of thousands of dollars.”219
DiVeglia and Giles have both pleaded guilty. DiVeglia waived indictment and pled guilty
in April 2022, admitting responsibility for “over $1.6 million in losses to NYSDOL and to
personally receiving approximately $225,000 in fraud proceeds.”220 Giles pled guilty a few
months later in August 2022 and admitted responsibility for “$826,530 in losses to pandemic-
related UI benefits programs administered by the state.”221
DiVeglia ran a similar operation with other individuals. In an indictment last year, Todd
Ward – aka “Fats”, Christopher Ward – aka “Reek”, Rocco Resciniti – aka “Rock”, and a fourth
unidentified defendant were indicted for “conspiring with a former New York State Department
of Labor (NYSDOL) employee to fraudulently obtain unemployment insurance benefits in the
names of other people.”222 The fourth defendant was subsequently identified as Jamaine
Myers.223 According to the indictment, from around November 2020 to September 2021, the
four defendants submitted fraudulent UI applications by providing the PII of at least 13 people to
DiVeglia, who submitted, approved, and paid out the fraudulent claims.224
214 Id.
215 Press Release, U.S. Attorney’s Off. N.D. of N.Y., Former state employee indicted for unemployment insurance
fraud (Apr. 22, 2022).
216 Id.
217 Brendan J. Lyons, NY labor dept. workers snared in massive unemployment fraud scheme, TIMES UNION (Apr.
24, 2022).
218 Id.
219 Supra n.215.
220 Id.
221 Press Release, U.S. Attorney’s Off. N.D. of N.Y., Former state employee pleads guilty in unemployment
insurance fraud case, (Aug. 25, 2022).
222 Press Release, U.S. Attorney’s Off. N.D. of N.Y., Four capital region men charged with pandemic fraud scheme
(July 20, 2023).
223 Press Release, U.S. Attorney’s Off. N.D. of N.Y., Troy man pleads guilty to unemployment insurance fraud (May
9, 2024).
224 Supra n.215.
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40427
Page 72 of 77
Page | 72
Christopher Ward pled guilty earlier this year and admitted to providing DiVeglia “with
the personal identifying information of another individual, which DiVeglia used to file a false
claim via the NYSDOL website,”225 leading to NYSDOL paying out just over $15,000 in
fraudulent UI benefits.226 Resciniti also pled guilty earlier this year, admitting to providing
DiVeglia with the PII of three individuals which ultimately led to payment of fraudulent UI
claims to the tune of almost $70,000.227
And Myers pled guilty earlier in the year as well, admitting that he provided DiVeglia
with “the personal identifying information of a third party, which DiVeglia used to file a false
claim via the NYSDOL website.”228 It is not clear from news reports how exactly DiVeglia was
identified and ultimately caught. But stories like this, where a state employee was able to take
advantage of his position and use it to abuse the system, are especially problematic, when
considering the impact on public trust in addition to loss of taxpayer dollars.
C. Wisconsin
In May of 2023, 30 members of a Milwaukee street gang known as the ‘Wild 100s,’ the
‘Shark Gang,’ or ‘SNG’ were charged with a 43-count indictment in which all gang members
were charged with defrauding DOL to unlawfully obtain funds from various UI programs,
including PUA.229 Based in Wisconsin, the gang’s reach spanned multiple states, including
California, to falsely obtain pre-loaded debit cards, which were used to withdraw cash from
Wisconsin ATMs.230 These funds were then used “to purchase, among other things, firearms,
controlled substances, jewelry, and vacations, and to solicit murder for hire.”231
Ronnell Bowman, the alleged leader of the gang, along with fellow member Ronnie
Jackson, have pleaded not guilty to all charges.232 Bowman and Jackson are also alleged to have
“used, carried, and discharged a firearm in furtherance of [a] murder for hire, resulting in the
death of [an unidentified individual].”233 Bowman has further been identified by Assistant U.S.
Attorney Laura Kwaterski as “the ringleader of the fraud scheme and…personally responsible
for $850,000 in stolen Covid relief money.”234
225 Supra n.221.
226 Id.
227 Press Release, U.S. Attorney’s Off. N.D. of N.Y., Colonie man pleads guilty to unemployment insurance fraud
(Feb. 29, 2024).
228 Supra n.221.
229 Press Release, OIG U.S. Dep’t of Lab., Thirty individuals associated with Milwaukee street gang charged with
federal offenses ranging from fraud to murder for hire (May 10, 2023).
230 Spencer Kimball, Covid fraud: Street gang in Milwaukee allegedly stole millions to pay for murder, guns and
Drugs, CNBC (August 29, 2023).
231 Supra n.227.
232 Supra n.221.
233 Supra note 227.
234 Supra n.221.
Case 3:21-md-02992-GPC-MSB Document 590-14 Filed 10/17/25 PageID.40428
Page 73 of 77
Page | 73
D. Michigan
In February 2024, Antonia Brown, a Michigan Unemployment Insurance Agency
(MUIA) employee received a 21-month prison sentence for her role in a UI fraud scheme
involving two other individuals, Angela Johnson and Kiannia Mitchell.235 From May 2020
through September 2021, the individuals defrauded the federal government and State of
Michigan in a scheme involving around “123 UI claims totaling more than $3 million dollars in
benefits paid, $1.6 million of which was paid after Brown’s unauthorized actions.”236
Once again, a state employee abused her position to take advantage of the system. In this
instance, Brown reportedly accessed, altered, and authorized more than 100 claims filed by
Mitchell and Johnson.237 Michigan’s Unemployment Insurance Agency (UIA) uses “software
that flags certain claims for review when it recognizes a likelihood of fraud, wage discrepancies,
or someone making multiple claims.”238 But Brown “removed those flags to release the
payments.”239
During the investigation of this fraudulent activity, agents traced the IP addresses
associated with the fraudulent claims to two single-family homes that had “no reason to file
dozens of unemployment claims.”240 Investigators connected the two IP addresses to Brown,
confirmed that she wasn’t authorized to access or approve any of the questionable claims, and
further noted that Brown “removed many of the fraud stops placed on the claims.”241
Additionally, court records determined that Brown’s Michigan call center phone system “had
never reached out to any of the numbers listed on the 101 claims,”242 meaning Brown
circumvented the required application process so as to be able to conspire with Mitchell and
Johnson.243 Brown’s actions included discarding a fraud investigation placed on one of her
fraudulent claims, and inappropriately discarding an employer protest against Mitchell that
alleged she was not entitled to PUA benefits.244
E. There’s More
These are only a few examples of specific cases that have drawn national attention. But
there are more, in various stages of investigations. For example, in Illinois, the state’s Executive
Inspector General issued a report in 2023 identifying at least 177 instances where there was
“reasonable cause to believe that a State employee violated the State of Illinois Code of Personal
Conduct and/or agency policy by obtaining PPP loans based on falsified information.”245
235 Newsletter, Off. of Inspector General for the U.S. Dep’t of Lab., Volume 51 (Mar. 31, 2024).
236 Id.
237 Derick Hutchinson, Longtime Michigan unemployment worker helps 2 friends who stole $1.6 million with 123
false claims, CLICK ON DETROIT (May 20, 2022).
238 Id.
239 Supra n.235.
240 Id.
241 Id.
242 Id.
243 Id.
244 Id.
245 News Release, Off. of Exec. Inspector Gen. for the Agencies of the Ill. Gov., Paycheck Protection Program (PPP)
Fraud (Sept. 12, 2023).
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In the Commonwealth of Massachusetts, the Department of Unemployment Assistance
(DUA) hired Tiffany Pacheco, in April 2020, shortly after her release from federal prison
following a conviction for aggravated identity theft.246 While employed by DUA, Ms. Pacheco
“allegedly misused her position to submit fraudulent PUA claim information on behalf of herself
and her husband”247 Arthur Pacheco, who was incarcerated in Texas, until September 4, 2020.
Mr. Pacheco was not eligible for PUA and provided false information by phone to DUA
regarding his PUA appeal.248 DUA also received a forged letter indicating a Massachusetts
retailer withdrew a job offer due to COVID-19 in January 2020 when Mr. Pacheco was
incarcerated in Texas at that time.249 Mr. Pacheco pleaded guilty to two counts of wire fraud in
federal court in July 2021, and Ms. Pacheco was scheduled to plead guilty to federal wire
charges in August 2021.250
In Georgia, a grand jury indicted eight former state employees who allegedly falsified
their applications and weekly certifications to get paid while they were “employed full-time with
the State of Georgia during the entire period in which they claimed to be unemployed and failed
to fully disclose their earnings. As [a] result of their applications and certifications, the eight
employees received a total of approximately $170,931 in UI benefits and federal
supplements.”251
These instances are but a few of many examples of the “biggest financial scam in U.S.
history.”252 In the first year of the COVID-19 pandemic, “an estimated 20% of every dollar paid
[went] out…to criminals.”253 Due to the severe lack of agency oversight and traditional
regulation, criminals were not only emboldened to commit mass fraud, but practically
encouraged. Although the Department of Justice has recovered $1.4 billion as of April,254 this is
a far cry from the DOL OIG’s 2023 estimate that “at least $191 billion in pandemic UI payments
could have been improper payments, with a significant portion attributable to
fraud.”255 Congress understandably “lowered the usual guardrails”256 in 2020 to get money into
people’s hands quickly. However, circumventing verification processes meant that even
rudimentary checks were not implemented, resulting in a situation analogous to “a bank opening
its vault and asking customers to leave an IOU as they helped themselves.”257 While federal and
246 News Release, Dep’t of Justice U.S. Attorney’s Off. Dist. of Mass., Former New Bedford Man Pleads Guilty to
False Pandemic Unemployment Claims (July 23, 2021).
247 Id.
248 Supra n.246.
249 Id.
250 Id.
251 News Release, Off. of the Inspector Gen. for the State of Ga., Eight former state employees indicted for
pandemic unemployment fraud (July 27, 2023).
252 The Editorial Board, Chicago Tribune, Editorial: Crimes of the century? Monstrous COVID-19 fraud leaves
taxpayers holding the bag, YAHOO! NEWS (June 24, 2024).
253 Id.
254 Supra n.235.
255 The Greatest Theft of American Tax Dollars: Unchecked Unemployment Fraud, 118th Cong. (statement of Larry
D. Turner, Inspector General, OIG U.S. Dep’t of Labor).
256 Supra n.235.
257 Id.
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state governments “have restored guardrails that came down in 2020,”258 it will take
“decades”259 to prosecute all criminals, many of whom will likely never even be apprehended.
The violation of public trust and confidence naturally brings into question the integrity of
public servants and reflects poorly on those who were trying their best to help people during a
difficult and tumultuous period. It is a credit to the various federal and state law enforcement
efforts that these individuals were identified, indicted, and in some cases sentenced to prison.
The brazenness of such employees benefiting financially while eligible families struggled to
make ends meet, require scrutiny to identify how to catch and terminate such behavior before
irreparable loss of public trust and funds. This should serve as a lesson to Congress, the
Administration, and to states and territories, to do better next time the nation faces a similar
crisis.
XI. Conclusion
The Committee’s investigation found that, while Congress and Executive Branch actions
placed states in an unprecedented position to implement temporary pandemic unemployment
programs and process claims quickly, several large states, including California, New York, and
Pennsylvania lost billions of taxpayer dollars in improper and fraudulent payments that will
likely never be recovered. These are benefits that could have been directed to American workers
who had recently been laid off or furloughed due to lock downs across the nation. State
workforce agency and labor department officials made decisions to ‘pay and chase’ to get benefit
payments out without knowing who they were sending payments to in many cases. This led to
payments going to fraudsters from organized crime, foreign governments, and convicted
criminals. Some of the fraudsters even had assistance from individuals working inside the very
offices tasked with approving benefits.
Even after DOL OIG and other law enforcement entities warned states early in the
pandemic of widespread fraud in the PUA program, states did little to nothing to prevent identity
thieves and other fraudsters from receiving benefits as they made the decision that any
safeguards that would detect suspicious claims or non-existent addresses might delay benefit
payments going out. Congress did not require PUA claimants to provide proof of eligibility until
the program had been operating for nearly nine months, and none of the temporary pandemic UI
programs required claimants to provide evidence that the claimant was searching for work.
When states finally began implementing fraud control measures and cross-checking claimant
information against common databases, it was after most of the pandemic UI benefits had
already been disbursed. Some of the measures states put into place were ‘too little, too late’ and,
in some cases, prevented eligible beneficiaries from receiving their benefits: problems that
fraudsters and identity thieves never faced.
Some of these states also have not owned up to their mistakes. New York officials
claimed to have prevented billions of dollars in fraud but could not provide any numbers to back
258 Id.
259 Id.
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up their claims to state oversight officials and have delayed other oversight efforts. California
officials continue to seek ways to avoid paying back their outstanding loans from the Federal UI
Trust Fund by passing the bill onto small businesses within the state, or by brokering a backroom
deal with friends in the Biden-Harris Administration, including former California LWDA
Secretary Julie Su, who led the agency during the pandemic. Few states have implemented any
IT upgrades or addressed staffing concerns that could have avoided some of the problems they
faced—and could face again.
In March 2021, when states had been opened back up for many months, and COVID-19
vaccines were rapidly rolled out, the Biden-Harris Administration and Democratic majorities in
the House and Senate authorized and extended benefits for an additional six months despite clear
evidence that the extended and increased benefits were deterring many working aged adults from
reentering the workforce. Eventually, more than half of the states ended the federal benefits
early to fill labor shortages in those states. Yet, the Biden-Harris Administration and
unconfirmed Department of Labor Acting Secretary Julie Su seem to not have heeded any
lessons from the disastrous pandemic UI programs as they have recently supported plans to make
some of these temporary UI programs permanent and allow those who choose not to work to
collect UI benefit payments.
While the United States may never face a crisis like the COVID-19 pandemic again,
Congress, the Executive Branch, and states should heed the lessons of how the pandemic UI
programs were designed and implemented to avoid waste, fraud, and abuse during future
economic downturns that might again require temporary UI benefits programs.
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