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Chairman Smith, Rep. Steel Question DOL Forgiving California’s UI Fraud Debt Citing Potential Conflict of Interest for Acting-Secretary Su

May 17, 2024

WASHINGTON, D.C. – Ways and Means Committee Chairman Jason Smith (MO-08) and Representative Michelle Steel (CA-45) called on Department of Labor (DOL) Acting Secretary Julie Su to detail any attempt to “forgive” or write off fraudulent unemployment insurance (UI) payments issued by California or any other state.

During the COVID-19 pandemic, it is estimated that the California Employment Development Department (EDD), then under the leadership of Acting Secretary Su, paid approximately $30 billion to fraudsters, prisoners, scammers, and known international organized crime rings. Acting Secretary Su’s role in allowing this fraud to occur during her time at EDD raises serious concerns should the Labor Department intervene.

Chairman Smith and Representative Steel wrote, “As you know, in addition to the large amount of fraud that occurred at EDD, California remains one of only three states and territories (the others are New York and the U.S. Virgin Islands) that continue to maintain an outstanding federal UI loan. California received the largest such loan in US history, at one time totaling $23.8 billion in August 2021. With a current loan balance of approximately $18.3 billion, California owes federal taxpayers nearly three times more than the State of New York at $5.7 billion.

“For this reason, we were very alarmed about guidance from the Department of Labor (DOL) – issued by you in your role as now Acting Secretary of DOL – that would potentially ‘forgive’ this $30 billion in fraudulent benefit payments issued by EDD and other states – suggesting a serious conflict of interest.”

Smith and Steel are demanding DOL provide the Committee with all relevant correspondence between the Department and the State of California’s auditor. This includes any documentation of DOL’s consideration of forgiveness for California, or any other state’s, fraudulent UI payments.

The Ways and Means Committee has been working to make American taxpayers whole following widespread fraudulent UI payments during the COVID-19 pandemic, which the Government Accountability Office (GAO) estimates to be somewhere between $100 billion and $135 billion. In May 2023, the House of Representatives passed H.R. 1163, on a bipartisan basis, the Protecting Taxpayers and Victims of Unemployment Fraud Act, which incentivizes states to recover fraudulent payments.

You can read the letter here.

ONE-PAGER: Protecting Taxpayers and Victims of Unemployment Fraud Act

READ: Pandemic Unemployment Fraud Estimates Double to $100-$135 Billion; Smith and Crapo Call for Action

READ: Chairman Smith Applauds Bipartisan Passage of the Protecting Taxpayers and Victims of Unemployment Fraud Act

READ: Five Key Moments from Oversight Subcommittee Hearing on Pandemic Fraud