Biden labor nominee grilled on California unemployment fraud scandal that happened on her watch

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Beverly Hills mayor describes massive unemployment fraud

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President Biden’s nominee for deputy secretary of labor, Julie Su, was grilled on Tuesday over the massive unemployment insurance scandal that happened on her watch as California’s labor secretary.

Sen. Richard Burr, R-N.C., ripped into Su during his opening statement at Tuesday's confirmation hearing, bringing up the scandal that happened during her tenure as California's labor chief in which the state paid out billions of dollars to fraudsters. 

Burr expressed his concern over the "failures and fraud in California’s unemployment insurance" and said that California had "suffered some of the largest fraud" in American history amid the COVID-19 pandemic.

"Over $11 billion and perhaps as high as $30 billion in fraud occurred in California’s unemployment system," said the North Carolina Republican. "Even death row inmates received unemployment checks."

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The senator said that "there’s a reasonable debate to be had" regarding the death penalty, but he "can’t imagine one that involves paying people on death row for being unemployed."

Burr pointed out that the fraud was "entirely preventable" and that Su had received "a series of recommendations" from an auditor as she took office as California’s labor chief.

The senator said the auditor "specifically" recommended the Golden State "exclude sensitive information, including social security numbers, from its identification system, but nothing changed."

"In fact, when the fraud was ramping up and billions being stolen from taxpayers, California actually made things worse," Burr stated before saying Su had "ordered the agency" to nix some "important safeguards" to expedite payments to claimants, "which led to even more fraud."

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Burr said Californians waited "months" to receive their unemployment benefits and that an audit revealed that call centers "only answered 1% of their calls."

"These are operation failures of extreme proportions," added Burr.

In his "yes or no" questioning, the senator brought up the scandal again and asked Su if, as an auditor's report outlined, she had "directed the Employment Development Department to pay certain claimants" unemployment insurance benefits "without making key eligibility determinations and to temporarily stop collecting biweekly eligibility certifications."

"Knowing the unemployment security system was at risk of fraud, you removed the checks and balances," said Burr. "Yes or no?"

Su pointed back to earlier in the testimony where she said there were "two" audits "in relation to the pandemic" – one for "fraud" and another for "operations" – and said "the pandemic-related fraud" being committed "across the country" was actually "a nationwide insidious, criminal scheme."

"That is a different audit and a different situation, and I'm happy to talk about that, as well," continued Su. "But then the audit about operations which mentioned, yes, that I took steps consistent with what was then the Department of Labor's guidance in order to try to make sure that benefits continued to get out to Californians when we saw that there were threats to the stability and security of our system."

"We did not waive any fraud checks at the time, there was no finding that that decision led to the massive frauds," Su said before Burr interrupted, asking if she "didn't waive any certifications."

"We did not waive certifications. What we did was we saw that individuals were coming into the system to certify every two weeks and this was threatening the stability of the system itself," answered Su. "What we said was that there was a period of time in which people, especially because of the pandemic, it was very unlikely that people would be going back to work, that, if they went back to work and were no longer eligible, they had to come and inform us of that separately but not through the system that was supporting the entire UI."

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Burr then asked if Su will "prioritize expedience over protecting against fraud and taxpayer waste," to which Su said she would "certainly prioritize" the fight against fraud.

Sen. Susan Collins, R-Maine, also got her shots in, saying "there can be no excuse for the kind of rampant fraud" that hit the Golden State.

Collins noted that unemployment insurance fraud is prevalent across America, but said the "sheer scale and scope of fraud in California not only dwarfs that of every other state" but also appeared to be "directly related" to the orders Su gave as California's labor chief.

"These fraudulent payments are incredible. $21,000 payment to our colleague Sen. Diane Feinstein, $800 million worth of payments that went to prison inmates. 1,700 claims from a single address, yet they were paid?" Collins asked. 

"You gave a confusing answer in my judgment to Sen. Burr about the directives that you issued, so I pulled up a press release your department issued." 

"And it says very clearly that you sent a memorandum to the Employment Department director directing that department to temporarily suspend unemployment eligibility certifications," the Maine Republican continued. "So, in other words, they're paying [unemployment insurance] benefits before determining if the applicants are eligible."

Collins blasted Su for directing the department to "temporarily stop collecting eligibility certifications from claimants."

"Now, the U.S. Department of Labor did not waive those requirements, and a California state audit found that your directives jeopardized the integrity of the system," Collins siad. "So, do you disagree with the state auditor and with the federal requirements? Why did you take those actions? Why did you jeopardize the integrity of the system?"

Su responded that there was a "balance" between trying to "get money out quickly" and then responding to fraudulent claims with "immediate steps," adding that a national response is needed. 

Collins responded by saying that she would "follow up" with Su on the issues because she didn't believe she "got an answer" to her question regarding the suspension of unemployment eligibility requirements.

The unemployment fraud scandal cost taxpayers $11.4 billion in known fraud with an additional $20 billion under review for potential fraud, a state audit revealed.

California was targeted by domestic and foreign criminals, who made false unemployment benefit claims during the COVID-19 pandemic and ran off with the cash, according to the audit. Over $400 million of that taxpayer money went to tens of thousands of prisoners – including 100 who were on death row.

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Su had previously admitted in a press conference that the state had "not had sufficient security measures in place" to prevent the fraud. She then blamed the Trump administration for the fraud and backlog of unemployment claims, claiming the former president’s team had not given adequate guidance to fight back against the fraud.

Biden nominated Su for the deputy labor secretary post last month, and isn’t the only scandal-plagued politician being plucked for a high-level Biden administration position. 

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The previous leader of Washington state’s Employment Security Department Suzi LeVine joined Biden’s administration in February, leaving behind an unemployment scandal of her own.

LeVine joined the Department of Labor as an interim assistant secretary of the Employment and Training Administration – meaning she will be assisting with the Biden administration’s economic recovery plan.

The White House did not immediately respond to Fox News’ request for comment.

Fox News’ Caitlin McFall contributed to this report.