EXAMINING FRAUD IN CALIFORNIA

On 2026-01-09, Representative Kevin Kiley (R-CA-3) delivered a floor speech titled "EXAMINING FRAUD IN CALIFORNIA" in the House. The speech addressed gun policy and also covered the economy, taxes.

EXAMINING FRAUD IN CALIFORNIA

Congressional Record, Volume 172 Issue 7 (Friday, January 9, 2026) [Congressional Record Volume 172, Number 7 (Friday, January 9, 2026)] [House] [Pages H612-H614] From the Congressional Record Online through the Government Publishing Office [ www.gpo.gov ] EXAMINING FRAUD IN CALIFORNIA (Under the Speaker's announced policy of January 3, 2025, Mr. Kiley of California was recognized for 30 minutes.) Mr. KILEY of California. Mr. Speaker, I want to take a moment this morning to examine the biggest fraud scandal in the history of California and probably in the history of the United States, and that was the fraud in unemployment benefits that occurred in California during the COVID years, amounting to a minimum of $32 billion--$32 billion. It is easy to kind of throw these numbers around and lose sight of what they really mean, so just to put that in perspective, that was one-half of the education budget in California at the time, and it is more than the entire State budget of the vast majority of States in the country. {time} 1210 Now, the reason that this scandal bears scrutiny right now is threefold. First, a State audit just found 2 weeks ago that this unemployment fraud in California is ongoing to this day continuing to cost taxpayers billions of dollars. Second, the Senate still has not passed a bill that we passed in the House to hold some of these fraudsters accountable by extending the statute of limitations. Third, the Newsom administration, perhaps sensing the political peril following the events in Minnesota, has come out and absurdly tried to deny responsibility for this scheme, for this scandal, and even more absurdly tried to blame the Federal Government for it. I want to go through exactly what happened because I believe it is important to show why taxpayers were so thoroughly defrauded and to assure that this does not continue to happen going forward. The reality is that the fraud that occurred in California took place despite the repeated warnings of the Federal Government, and it was uncovered not by State officials but, rather, by local prosecutors. On November 23, 2020, a group of nine county prosecutors disclosed what they called the most serious significant fraud of taxpayer funds in California history. Now, at the time, they said they could only prove $1 billion. So $1 billion was already the biggest fraud of taxpayer dollars in California history. Now we know that it was at the very least $32 billion. Contrary to what the Newsom administration is trying to say now, at the time, the district attorney of Sacramento County, Anne Marie Schubert, said: ``We have asked and implored the Governor to turn the spigot off.'' She said the Governor's Employment Development Department was not doing commonsense things, like cross-checking claims with prison rolls, something that the vast majority of other States were doing and that the Federal Government had advised. She said this made the scheme ``relatively easy.'' She called the Governor's response slow and nonexistent. She advised Governor Newsom to ``look to other States for solutions.'' The district attorney of Fresno County, Lisa Smittcamp, said: ``(Newsom) did nothing until the elected district attorneys brought it to the media.'' She added that she did not think the State has a handle on it. Those were comments made back in November of 2020. The following January, the State auditor came out with a report that laid forward in very precise detail exactly how significant the failures of the Newsom administration were, specifically with their unemployment office, known as the EDD. A heading in that audit said: ``Significant Weaknesses in EDD's Approach to Fraud Prevention Have Led [[Page H613]] to Billions of Dollars in Improper Benefit Payments.'' Among the key findings: Despite repeated warnings, despite repeated warnings, EDD did not bolster its fraud detection efforts until months into the pandemic, and it suspended a critical safeguard. The audit goes on to list examples of where suspicious addresses were simply ignored in the claims process. In one case, more than 1,700 claims came from a single address. From one address 1,700 claims, and yet the checks were issued. One of the problems, as mentioned, is there was no crossmatch system to crossmatch the claims against the prison rolls, so you actually had checks that were being sent to State penitentiaries, the State prisons. Here is a timeline of the aforementioned warnings that actually came from the Federal Government. Now, this is significant, again, because the Newsom administration is now claiming somehow that it was California that warned the Federal Government when, in fact, it was exactly the opposite. Other States followed these warnings, but California didn't. In April of 2020, the United States Department of Labor sent instructions for implementing the Pandemic Unemployment Assistance program and told States to take reasonable steps to deter and detect fraud, including audits. The following month, in May of 2020, there was a second notice from the U.S. Department of Labor, warning the States to maintain the integrity of the unemployment program. Later that month, in May, the U.S. Department of Labor requested data from California, and the Office of the Inspector General warned California that the State was likely to see at least a billion dollars in fraud based on new claims for March and April. During this time, the Newsom administration's EDD office had exactly two staff members who were responsible for reviewing suspicious claims. Newsom's EDD also allowed the backdating of claims until September of that year, so if you were a fraudster, you could simply claim that you had worked a certain number of weeks, previous weeks that had already passed, and there was no verification needed at all. The problem of suspicious addresses got even worse. The audit reports there were 26,000 addresses listed as suspicious, with more than 500,000 associated claims. The audit concludes: Our review illustrates that EDD continues to pay claims despite having evidence that they are very likely fraudulent. Again, this is a finding. This is a talking point. This is not from the Governor's political adversaries or from people on social media, this is a report from the nonpartisan California State auditor in January of 2021 saying: ``Our review illustrates that EDD continues to pay claims despite having evidence that they are very likely fraudulent.'' The audit continues: Between March of 2020 and early January of 2021, more than 2.2 million claimants did not satisfactorily answer requests that they provide identity verification. In fact, there was another problem that then emerged from this that people became victims of identity theft, and then they ran into issues like they had to pay taxes on wages they hadn't actually received. As mentioned, the audit also notes that ``EDD was unprepared to detect and handle the hundreds of millions of dollars in fraudulent claims associated with incarcerated individuals.'' I mean, how crazy is that? That you had claims coming in from State prisons, and those claims let out hundreds of millions of dollars. As the auditor says: ``As we describe throughout this report, EDD's approach to fraud prevention and detection demonstrates the weaknesses caused by its poor planning and program management.'' Local media reports at the time substantiated all of these claims, including in publications like The Sacramento Bee and the Los Angeles Times. What is even worse is that the criminals who are purloining our State Treasury of these taxpayer funds in many cases were using those dollars--I mean, what do you think they are using them for? We talk about waste, as in this money is just squandered, but it is actually much worse than that because the criminals who get these funds, they are not then giving them to charity. They are using them for further criminal activities. One example from The Sacramento Bee is about how these funds were used to buy guns illegally. For example, a report from The Bee reported that multiple fraudulent EDD cards were discovered along with firearms in the hands of convicted felons, results that law enforcement officials say leads them to one conclusion: Criminals are using funds from the growing EDD fraud scandal to buy weapons. Mind you, this was at a time when violent crime rates were soaring in California and far outpaced the rest of the country. Just to give you a couple examples, the Torrance police found that more than two dozen people had been arrested in the fall of 2020 for alleged unemployment benefits fraud and identity theft. The 27 suspects used stolen identities to obtain over 130 EDD cards. When they recovered these, the authorities also found $150,000 and four handguns, including two without serial numbers. The Glendale police, in early 2021, arrested a man who was in possession of a so-called ghost gun, along with ammunition, drugs, several fraudulent EDD cards, and other illicit items. To summarize, you had the largest fraud of taxpayer dollars, likely in the history of the United States. The nonpartisan State auditor in California, along with nonpartisan prosecutors from throughout California, clearly identified the negligence of the Newsom administration as enabling this fraud to occur which far outpaced anything that occurred anywhere else in the country. {time} 1220 You then had the criminal syndicates and other criminals, more run- of-the-mill criminals, who obtained these funds and used them to spawn further criminal activity that victimized even more Californians. Now, 5 years later, the fraud continues. The administration still hasn't learned its lesson. The same State auditor just found that EDD remains one of eight high-risk agencies in California, a number that has doubled during the Newsom administration, finding that the EDD continues to allow millions in fraud, alongside millions that are being lost in fraud in connection