SACRAMENTO, Calif. (Diya TV) — The U.S. Department of Labor is launching a federal strike team in California to investigate alleged unemployment fraud tied to pandemic-era relief programs. The move places the state’s Employment Development Department under intense federal scrutiny and signals a broader push to recover taxpayer funds. Federal officials say the probe will examine financial issues and potential fraud within California’s unemployment insurance program. The investigation will mirror similar efforts already underway in Minnesota.
Labor Secretary Lori Chavez-DeRemer confirmed that her department will send a formal letter to California’s Employment Development Department announcing the deployment of the strike team.
“Financial issues and potential fraud in California’s unemployment insurance program will be fully examined,” Chavez-DeRemer said in a statement. She also criticized the prior administration, saying it failed to address weaknesses in federal labor programs.
The strike team will include investigators from both national and regional offices. Officials say the group will focus on rooting out fraud, recovering stolen funds, and restoring integrity to the unemployment insurance system.
During the COVID-19 pandemic, the federal government sent nearly $290 billion in relief funds to California. The state’s Employment Development Department, known as EDD, managed a large share of that money as it expanded unemployment benefits for millions of residents.
In 2023, state auditors reported that EDD failed to prevent widespread fraud. The audit estimated that fraudulent unemployment payments may total tens of billions of dollars. Investigators found that the agency approved many claims without proper verification during the rush to deliver aid. Federal officials believe the scale of potential fraud in California could exceed cases uncovered in Minnesota.
In Minnesota, federal prosecutors uncovered what they describe as a massive web of pandemic-era fraud. The case known as Feeding Our Future allegedly diverted about $250 million in federal child nutrition funds through fake claims and shell companies.
Prosecutors estimate that as much as $9 billion may have been stolen in Minnesota through various pandemic programs. Authorities have charged nearly 100 people in connection with those schemes. Federal investigators have reviewed financial records, tracked shell companies, and brought criminal charges. Labor officials plan to use similar tactics in California.
Authorities have already prosecuted several individuals in California for unemployment fraud. Last year, a former EDD employee, Regina Brice, received a prison sentence of 66 months. Prosecutors said she used her position to file more than $858,000 in fraudulent unemployment claims.
In a separate case, four siblings in Kern County received prison sentences after they created fake businesses to claim more than $1.1 million in unemployment benefits. These cases highlight gaps in oversight that allowed insiders and outside actors to exploit the system.
California still owes $20 billion on a federal loan it used to cover unemployment insurance claims during the pandemic. Lawmakers have not yet repaid that debt. As a result, businesses across the state face higher payroll taxes. Employers currently pay about $42 per employee to help reduce the outstanding balance. That amount will increase each year until the state clears the debt. Business groups have criticized the ongoing financial burden. They argue that fraud and mismanagement have forced employers to cover costs that stem from government failures.
Chavez-DeRemer said the strike team will act quickly to uncover fraud and protect taxpayers. She said her department aims to restore financial stability and rebuild public trust in California’s unemployment insurance program. EDD officials declined to comment on the pending federal investigation. The launch of the strike team reflects growing national concern over pandemic unemployment fraud. Federal agencies across the country continue to investigate how billions of dollars flowed through emergency relief programs with limited safeguards.
