The U.S. Department of Labor has deployed a specialized "strike team" to California to investigate what federal officials describe as systemic fraud and financial mismanagement within the state's unemployment insurance program. The action targets a system that borrowed $21 billion in federal funds just to keep running and now faces mounting evidence of improper payments, eligibility failures, and outright theft of taxpayer money.
Labor Secretary Lori Chavez-DeRemer announced the move alongside DOL Inspector General Anthony D'Esposito, a former NYPD officer and ex-congressman from Long Island. The strike team will include specialists from the Labor Department's national and regional offices.
Chavez-DeRemer did not mince words about what prompted the intervention:
"Financial issues and potential fraud in California's unemployment insurance program will be fully examined. The previous administration turned a blind eye toward failing Labor programs. This ends now."
California received roughly $290 billion in COVID relief. That staggering sum was supposed to sustain the state through the pandemic, including its unemployment insurance system. Instead, California's UI trust fund was depleted, forcing the state to borrow $21 billion in federal funds to keep checks going out the door, as Fox News reports.
The Labor Department cited an 83-page California State Auditor report in building its case. Chavez-DeRemer also wrote a letter to California's Employment Development Department citing a litany of failures:
That list reads less like a policy critique and more like a systems autopsy. Every checkpoint designed to prevent fraud either failed or was ignored. And while the trust fund bled dry, California workers faced the downstream consequence: higher UI taxes to cover the gap.
The people who played by the rules got punished for the failures of the people who didn't.
Inspector General D'Esposito painted a grim national picture that implicates California as a central player. His office found nearly $1 billion in taxpayer funds "at risk" nationwide due to COVID-related UI fraud. An analysis of 6.5 million prepaid debit cards used for pandemic unemployment benefits revealed $720 million still sitting on those cards, unrecovered.
"My office has warned that, absent swift action, U.S. taxpayers risk losing nearly a billion dollars in fraudulently obtained benefits."
Think about that number in concrete terms. Seven hundred and twenty million dollars loaded onto debit cards, floating somewhere in the system, belonging to no legitimate claimant. That money didn't vanish into the ether. Someone has those cards. Someone spent or is spending that money. And until now, no one with the authority to act seemed particularly bothered by it.
D'Esposito framed the stakes plainly:
"This is taxpayer money, and it demands immediate attention."
This is not an abstract accounting problem. At least one California UI steward, someone entrusted with managing the system, was convicted of using her position to file nearly $860,000 in fraudulent claims. Civilians were also convicted of exploiting the program, though specific case details remain limited in the public record.
A government employee, hired to administer benefits for people who lost their jobs, instead used her access to steal nearly a million dollars. That is the kind of fraud that erodes public trust not just in a single program but in the entire apparatus of government aid. Every legitimate claimant who waited weeks for a delayed payment while insiders looted the system has a right to be furious.
And it raises the uncomfortable question that Sacramento apparently never wanted to ask: if the people running the program were stealing from it, how many claims that looked legitimate on paper were anything but?
California governs by announcement. New programs, expanded eligibility, record spending, all delivered with the confidence of a state that believes scale equals competence. But the backend, the actual administration, the fraud controls, the auditing, the accountability, consistently collapses under the weight of its own ambitions.
The EDD has been a known disaster for years. Legitimate claimants during the pandemic reported months-long waits, frozen accounts, and unanswered calls by the hundreds of thousands. Meanwhile, fraudulent claims sailed through. The system was simultaneously inaccessible to the people who needed it and wide open to the people exploiting it.
Fox News Digital reached out to Governor Gavin Newsom for comment. No response was noted.
The silence is its own statement. When $21 billion in borrowed federal money and a conviction of your own staff for fraud don't warrant a public response, you are either confident the press won't press you or indifferent to the outcome. In California, it may be both.
Chavez-DeRemer's deployment of specialists is a direct assertion of federal oversight over a state that treated pandemic relief money like a blank check with no memo line. The strike team approach signals that this administration views California's UI failures not as a bureaucratic hiccup but as a front in a broader fight against government waste and fraud.
"Immediately, we are engaging a specialized strike team to uncover any potential fraud or abuse and quickly moving to protect the American worker and taxpayers. I look forward to restoring the California UI program's integrity and financial health."
D'Esposito connected the fraud directly to the cost of living, a link that politicians who benefit from bloated spending never want voters to make:
"When we root out fraud, we protect taxpayers and lower the real cost of living."
He's right. Every dollar stolen from UI programs is a dollar that either adds to the national debt or gets clawed back through higher taxes and reduced services. Fraud is not a victimless line item. It lands on the paychecks of working Americans who never filed a false claim in their lives.
For years, the prevailing attitude toward pandemic-era spending was that speed justified sloppiness. Money had to go out the door fast, the argument went, and some waste was the price of urgency. That framing conveniently absolved every bureaucrat and politician who failed to build even minimal guardrails against theft.
The urgency argument had a shelf life, and it expired a long time ago. California has had years to audit its own system, recover stolen funds, and hold bad actors accountable. An 83-page state auditor report apparently wasn't enough to trigger serious internal reform. It took the federal government showing up with a strike team.
California borrowed $21 billion to fund a system it couldn't manage, oversaw fraud it couldn't detect, and employed at least one steward who stole from the people she was supposed to serve. Somewhere in that wreckage are the workers who actually lost their jobs during the pandemic and deserved a system that worked for them.
The strike team is there for them, too.
