Acting Labor Secretary Julie Su Facing Heat For Pandemic Fraud

by Thomas Buckley at

A judge cannot declare herself not guilty of a crime.

A priest cannot absolve himself of a sin.

But it appears quite possible that Julie Su can politically cleanse herself of the blame for the state of California losing up to $55 billion to fraudsters during the pandemic response by letting it be “waived.”

Tuesday, Acting Secretary of Labor Julie Su – formerly California Labor Secretary in charge of, among other things, the job-killing AB 5 and the disastrous performance of the state’s unemployment agency, the EDD, during the pandemic – testified before Congress that a rule she put in place in December would not allow states like California to “write off” money lost to fraud.

In other words, the significant majority of that $55 billion off the books debt to the feds the state currently carries could not be simply wished away – and onto every American taxpayer.

Su stressed that fraudulent payments cannot be “waived.”

But that may not exactly be the case – at all – as the language in the new rule is, um, slippery.

“The fraud raid in California happened “under your watch,” Rep. Michelle Steel (R-CA) told Su.  “If you are forgiving fraudulent payments, that is not acceptable.”

Steel then implied that she did actually trust Su’s claim that fraud losses cannot be waived, citing Su’s promise to not have California’s anti-freelancer AB-5 bill be adopted by the federal government only to implement, in March, a new regulation nearly doing that exact thing.   

At the heart of the EDD fraud waiver issue:  

In December, Su’s labor department issued a rule regarding something called “finality.”  In a very rough nutshell,  the feds are letting states follow their own regulations regarding when to declare a claim over and done with. Once an account claim is final – i.e., there is nothing left to do with it – if it owes money it owes it directly to the feds.

In other words, even though the money was handed out by the EDD, the EDD is not necessarily on the hook for the debt – that’s becomes the responsibility of the fraudulent claimant.

In February, the EDD asked – again in a nutshell – for permission to declare at the very least most of the $55 billion done and gone.  In theory, the EDD is meant to continue to hunt for fraudsters even on closed claims – the agency claims it has clawed back about $6 billion in fraudulent payments so far – though the issue of urgency, or lack thereof, will most likely come into play.

It is this issue of who gets to decide what is “finality” that has Steel and Sens. Bill Cassidy (R-LA) and Makie Crapo (R-IN) very worried that Su is making her own $55 billion mistake go away while doing a serious favor for potential Democratic presidential candidates like, oh, I don’t know, Gavin Newsom.