featured graphic for Michelle Steel, Congresswoman for California’s 48th District, during COVID-19

Steel leads bipartisan effort to recoup billions in pandemic unemployment fraud

Reps. Michelle Steel (CA-48), Kevin McCarthy (CA-23) and Josh Harder (CA-10) announced the introduction of The Pandemic Unemployment Assistance Fraud Protection Act, legislation crafted in response to the billions of Pandemic Unemployment Assistance (PUA) fraud that has been stolen from American taxpayers. As part of COVID relief efforts, PUA was established last year by Congress to provide federal funding to states to help support the availability of unemployment insurance. PUA provides additional benefits to individuals who usually wouldn’t be eligible for unemployment benefits, such as independent contractors or gig workers.

The Pandemic Unemployment Assistance Fraud Protection Act, H.R. 4190, would require states to recover funds, prevent fraud, and support the victims of unemployment fraud identity theft.

“We should all be on the side of good governance and protection of taxpayer money, and the billions in fraud paid out over the last year is an embarrassment. While millions in California waited for benefits, the state paid out $11.4 billion to fraudsters and criminals. This bipartisan legislation ensures transparency and accountability and protects more of your taxpayer money from falling into the wrong hands,” said Rep. Steel.

“Last year, Congress acted in a bipartisan manner to provide emergency unemployment benefits to Americans who lost their jobs because of the pandemic and various state shut-down orders. Unfortunately, there has been an outrageous amount of fraudulent unemployment assistance distributed throughout the country, with California’s Employment Development Department estimated to have paid out up to $31 billion in Pandemic Unemployment Assistance (PUA) benefits to fraudulent entities or ineligible individuals. Every dollar distributed fraudulently is a disservice to the millions of Californians who have become unemployed due to the pandemic and have struggled to receive aid while attempting to return to the workforce.

“I am proud to join Rep. Michelle Steel’s Pandemic Unemployment Assistance Fraud Protection Act as an original cosponsor. This bill creates an incentive structure to encourage states to recover fraudulent PUA payments, requires that states revamp and improve fraud-prevention efforts in the PUA program, and includes necessary protections for victims of unemployment benefits fraud. My constituents, Californians, and Americans who actually need unemployment assistance should be the ones to receive it, not criminals. I look forward to continue working with Michelle to hold California and other states that wasted taxpayer dollars accountable for recovering those funds,” said Rep. McCarthy.

“For over a year now EDD has been a complete disaster riddled with fraud and incompetence., I’m proud to lead a bipartisan effort to recover lost unemployment funds, prevent future fraud, and support the folks who’ve been scammed out of the benefits they deserve,” said Rep. Harder. “Central Valley families deserve a system that works for them, not fraudsters and cheats from out of state. This bill is an important step toward fixing our broken unemployment agency.”

  • H.R. 4190 incentivizes Governors to recover funds by requiring states to a) submit their plans to recover fraudulent PUA benefits payments to the Secretary of Labor, b) develop an anti-fraud task force, and c) provide to Congress reporting on each States’ recovery plan. The legislation also enables the U.S. Attorney General to partner with State task forces and State and local law enforcement and requires the Secretary of Labor to provide monthly reports to Congress regarding any findings developed by the State Task forces.
  • H.R. 4190 prevents fraud by requiring states to cross reference PUA benefits claimants’ information with Federal records, state prison records, and E-Verify. The legislation also provides that maximum fines and prison penalties for Federal mail and wire fraud will apply to those seeking PUA benefits fraudulently with a falsified or stolen identity.
  • H.R. 4190 supports victims of identity theft by requiring states to establish a fraud hotline through which residents may report 1099-G tax forms that they received if they are victims of COVID-19 related unemployment fraud and requiring states to maintain a database of all claims of incorrect 1099-G forms and transfer this data to the IRS. The legislation also provides that, if an individual receives a 1099-G form incorrectly and files a correction claim with their State, the individual must receive their Federal tax refund payment in full while their claim is adjudicated.

The U.S. Labor Department’s inspector general’s office estimates that more than $63 billion of taxpayer dollars have been fraudulently paid out. It’s estimated that the total in fraud could reach $400 billion. California has been the biggest target. The State of California’s Employment Development Department (EDD) confirmed that it has paid out more than $11.4 billion in fraudulent unemployment claims, mostly through the PUA program. An estimated $20 billion in potentially fraudulent unemployment payments are still under investigation. California State Auditor Elaine Howle reported last month in an audit that the federal government warned California multiple times about the threat of fraud, but states like California continued “to pay claims despite having evidence that they are very likely fraudulent.”

In an attempt to reduce fraud on December 31, 2020, the EDD suspended the processing of roughly 1.4 million unemployment benefits claims in order to verify the identities of claim applicants. This was done with no warning to those whose benefits had been suspended. Since then there has been little follow-up clarification on which claims were found to be fraudulent and which were legitimate, or how EDD is making such determinations.

In February, Reps. Michelle Steel and Kevin McCarthy led the California delegation in a letter to the Newsom Administration expressing outrage at the fraud payments, and asking questions about the state’s plan to deal with the billions of dollars lost, and the Californians who were still waiting for their benefits.

This article was released by the Office of Congresswoman Michelle Steel.