The Brief

Kim Tanner didn’t expect to become a fraud detective when she filed for disability with the California Employment Development Department.

But in mid-July, $3,161 vanished from her online account with the state’s new debit card contractor, Money Network, according to Tanner’s complaints to government regulators. Someone had gotten access to her online debit card account, added a new bank account and transferred out her money, all without any notifications, she wrote in the complaints.

Tanner said Money Network told her it could take 90 days to investigate, and that she may or may not get a full refund, leaving her short on rent money. She turned to social media and saw similar horror stories on Reddit and Facebook. “My head exploded,” Tanner said. “This was happening to tons of people.”

So she started filing complaints. First with Money Network, its parent company Fiserv and the EDD. Then with a state senator and a half-dozen financial regulators.

“It just went on and on and on,” said Tanner, who got her money back via paper check about a month and a half later, after a federal agency intervened. “This needs to be investigated.”

A CalMatters investigation a year ago exposed how the EDD’s unemployment system crashed during the pandemic, the result of historic job losses, years of missed warning signs and poor contractor performance. As a result, the system at first failed to stop widespread fraud, then cut off access to millions of real people who used it as a crucial lifeline.

Now, even with a new payment contractor in place, concerns about fraud linger for people who rely on unemployment and disability programs run by the EDD. Multiple lawsuits and 74 federal consumer complaints about government debit cards have been filed by Californians against Money Network this year alone. The EDD and the company say the debit card fraud is smaller scale than the varied forms of fraud during the pandemic.

On top of the fraud complaints, a report released Monday by the Legislative Analyst’s Office warns that lawmakers are failing to address a bigger unemployment problem: a “broken” financial model, one that threatens the whole system.

California’s unemployment fund is still $20 billion in debt to the federal government after the state took out loans to cover pandemic benefits, costing taxpayers $1 billion in annual interest — more than the state spends on child welfare. Now, after years of ignoring calls to modernize the state’s 1980s-era unemployment tax code, the system is on track to lose $2 billion a year as it fails to bring in enough revenue to cover unemployment expenses, according to the report.

The Legislative Analyst’s Office, which provides fiscal and policy advice to state lawmakers, says the state needs to bring unemployment taxes in line with other states to cover the deficit.

“This is entirely avoidable,” said LAO policy analyst Chas Alamo.

Kim Tanner scrolls through the “MoneyNetworkFraud” subreddit on her computer. The California Employment Development Department contracted Money Network to handle debit card payments after the agency faced scammers and hackers during the pandemic. Oct. 11, 2024.

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The recommendations could force a reckoning for lawmakers caught between business and labor advocates. Business groups have fought tax increases, favoring California’s current lowest-in-the-nation unemployment tax base. Labor groups argue that taxes must go up to stabilize the system. Then, they say, lawmakers should evaluate measures to expand which workers are eligible for unemployment or raise California’s $450-a-week maximum payment, which is also lower than many other states.

What happens next will be one test of how legislative leaders respond to voters’ rebuke of Democratic leadership nationwide, with the Legislature’s Democratic leadership pledging to do more to make California a less expensive place to live.

Meanwhile, the EDD has already secured funding for an unprecedented five-year, $1.2 billion effort called EDDNext to finally modernize the call centers, software and websites that power the state’s job safety net — a more ambitious version of past modernization efforts that crumbled during the pandemic.

Whether or not history will repeat itself is complicated by unanswered questions about what went wrong at the EDD during the pandemic and how the state scrambled to recover.

Former California labor chief Julie Su went on to become acting U.S. labor secretary and one of the longest-unconfirmed presidential nominees in history, thanks in part to criticism over unemployment fraud.

Gov. Gavin Newsom’s administration has denied CalMatters’ repeated requests for internal records from this period, citing an exemption that allows the governor to keep his communications secret if he chooses.

The fraud factor

During the pandemic, a wide range of fraud schemes hit the unemployment system at once. Global hackers used large-scale identity theft. Low-level social media scammers and prison inmates adopted fake names to file for benefits under emergency federal programs that waived normal identity checks. Debit card scammers cloned insecure EDD cards then run by Bank of America and drained the accounts.

Millions of real California workers got caught up in the mess, state audits found. Some saw their EDD accounts flagged as suspicious due to clerical errors, communication failures or faulty fraud software. Laid-off workers saw EDD debit cards overdrawn by thousands of dollars or cut off as the bank and the state scrambled to rein in fraud.

California and other states were partially let off the hook when the federal government agreed to absorb the bulk of the billions lost to fraud in emergency programs. After Bank of America pulled out of the unemployment business last year, the EDD tried to turn the page on debit card fraud by hiring Georgia finance tech company Money Network to take over.

The scope and details of the current fraud that workers allege isn’t clear. State auditors and financial regulators haven’t analyzed it; lawsuits and regulatory complaints only show that money disappeared from workers’ accounts, not how it was taken.

The Consumer Financial Protection Bureau, which previously fined Bank of America $100 million over what it called “botched” pandemic unemployment payments, declined to answer questions about new complaints. The bureau’s public records show that Californians have filed 149 complaints against Money Network since 2022, when the company first started running a different state debit card program, with 101 complaints mentioning government cards.

Money Network said in a statement that “only a small percentage of EDD recipients have reported suspected fraud,” and that anyone concerned should “call the number listed on the back of their card.”

The EDD and Money Network also now allow direct deposit, giving people the option of skipping debit cards altogether. Since direct deposit launched in June, about 15% of new applicants have opted for debit cards, the EDD said in a statement. The agency could not immediately say how many of its hundreds of thousands of existing customers still use debit cards.

“Anyone who suspects they are a victim of fraud should take steps to protect themselves and file a fraud report,” the EDD said in a statement.

A flyer for identity theft resources and information sits on top of other documentation related to Kim Tanner’s financial fraud case on her desk at her home in Carlsbad on Oct. 11, 2024.

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Lea Bitton was still reeling from a high-risk pregnancy when it happened to her.

One evening in June, the Orange County resident logged into her Money Network disability account and realized that $4,000 was missing. She relied on the EDD money to cover her family’s costs during parental leave.

Someone Bitton didn’t know had hacked into her account, according to a lawsuit she filed against Money Network. Similar to Tanner’s case in Carlsbad, a new electronic transfer was set up for someone with a different name and bank account, and Bitton was never asked to authorize the change before the money disappeared.

Matthew Loker, Bitton’s attorney, said the fraud appears similar to some EDD debit card fraud cases that he handled during the pandemic.

“It’s deja vu a little bit,” Loker said. “It’s a difficult problem, but it shouldn’t be the consumers who are left holding the bag.”

If fraud occurs once unemployment or disability money has already been transferred from the EDD to Money Network, the state’s contract says that Money Network is responsible for investigating and reimbursing clients if necessary. But some people with EDD Money Network debit cards say that it isn’t always easy to figure out how to start that process.

In Los Angeles, Greg Zekowski filed for unemployment while in between film projects. He hadn’t even used his EDD Money Network debit card yet, he said, when he logged into the online account and saw several unfamiliar charges to Uber and other retailers.

He called Money Network. “Their response was, ‘The problem is EDD,’” Zekowski said.

So he called the EDD: “Their response was, ‘It’s all them.’”

The EDD and its contractors aren’t alone. The state’s food assistance and college financial aid programs are also among the many financial systems facing mounting fraud risks.

One broader challenge is how few financial institutions bid on government benefit projects. The lack of options puts more pressure on agencies working to secure debit cards and other payments, according to a 2023 report by the Consumer Financial Protection Bureau.

“Providers may face minimal competitive pressure from program innovation, new entrants, or customer choice,” the report authors wrote, “which may exacerbate or cause the issues with fees and customer service that benefits recipients face.”

A financial cliff

While the EDD and the people who rely on it play whack-a-mole with fraud, California has big decisions to make about the future of the state’s job safety net.

If the state continues to do nothing, the LAO projected this week, it will have no unemployment reserves and become even more reliant on loans from the federal government to weather future recessions, likely costing taxpayers billions more in interest.

Or the state can bite the bullet, as many others have, and change the way it pays for unemployment.

First, the LAO recommends that businesses pay a flat 1.9% unemployment tax while digging out of debt. California companies also currently only pay unemployment taxes on the first $7,000 a worker earns each year. Instead, the LAO recommends taxing employers on workers’ first $46,800 in earnings — higher than some neighbors like Nevada, but lower than Washington, Idaho and Oregon.

“We understand that the scope of the recommendations that we’re putting forward in this report are significant,” said LAO analyst Ann Hollingshead. “This is just an honest reflection of the severity of the underlying problems in the system.”

State lawmakers last revamped unemployment taxes in 1984. And businesses are already voicing opposition to temporary tax hikes to pay down California’s deep federal debt. One bill to recalibrate how the system is paid for — raising unemployment taxes to eventually increase weekly benefits — died in committee this year.

Robert Moutrie, a policy advocate for the California Chamber of Commerce, said that the business group is still reviewing the details of the LAO proposal. In the past, the Chamber has favored tightening unemployment eligibility to reduce benefit payments, labeling any form of tax increases and proposals to expand the unemployment system “job killers.”

Daniela Urban, executive director of the Sacramento Center for Workers’ Rights, said there is broad agreement on how unstable the current situation is but discord on where to go from here. She and other labor advocates say that unemployment is one area where California businesses have long underpaid compared to other states, and that the system has not kept up with non-traditional jobs and increasing costs of living.

“We’re in a huge hole, and that’s not financially acceptable,” Urban said. “But how and when to make those changes I think is what the contention is.”

In addition to the funding hole, the pandemic revealed other problems at EDD. Tech systems buckled: jammed call centers, spotty online accounts and a patchwork behind-the-scenes process for tracking unemployment claims. The agency is currently overhauling these systems with EDDNext.

Last year, the agency hired Salesforce to remake the MyEDD online system that workers use to manage their accounts. It brought in Amazon Web Services to update and integrate EDD phone systems that left as many as 40 million calls a month unanswered during the pandemic.

Early next year, the state will award a contract for the biggest chunk of the project — a new central system for EDD personnel to manage claims, which comes with more than 600 pages of specifications.

“We are making tremendous investments in modernizing EDD and the work is going well,” the agency said in a statement.

LACC Swap Meet has been running in Los Angeles City College’s parking lot for nearly 30 years, but one of its owners says city officials are trying to destroy the business to support street vendors.

The owners are suing the city of L.A. for allegedly interfering with business and contractual relations at the swap meet. They claim the problems stem from Councilmember Hugo Soto-Martinez, who they say blocked sidewalk vending enforcement and other requests for help from the owners.

If they succeed with the lawsuit, which was filed in L.A. County Superior Court last week, they are asking for more than $30 million in damages.

Soto-Martinez told LAist he wants a solution for street vendors and the swap meet.

L.A. City Attorney’s Office did not immediately respond to LAist’s requests for comment.

Why the lawsuit is happening

According to the lawsuit, the swap meet owners claim that Soto-Martinez has a “personal vendetta” against the swap meet’s co-owner, Phillip Dane, and is trying to get him removed from managing the swap meet.

They allege that Soto-Martinez used his influence to allow the vendors to keep working outside the venue even though city law prohibits them from doing so near swap meets.

“The vendors were encouraged to do this and were even assisted in doing this, by the City and its officials, including City Councilmember Hugo Soto-Martinez,” the lawsuit reads.

It also says Dane called the Los Angeles Police Department multiple times to respond to problems with the street vendors, but his requests were blocked. His applications for temporary parking restrictions were denied as well.

During the COVID-19 pandemic, several vendors left the then-closed swap meet to set up on the sidewalk. As LAist reported, many didn’t return to the swap meet after it reopened, choosing to stay outside the college.

Some claimed Dane harassed them for doing so.

Sidewalk vending near L.A. City College has grown since then. Dane told LAist vendors are now on Marathon and Monroe streets, as well as Madison and Vermont avenues — too close to the college, he said.

Dane has asked the city to make the vendors move, which has upset some residents in the community. Since taking over, he’s faced allegations of being a gentrifier against street vendors.

Dane disagrees.

“Show me. How am I anti-street vending? By asking a vendor to please not set up right in front of the swap meet because you’re hurting your friends?” he told LAist.

The lawsuit claims that street vendors, led by Soto-Martinez, have left trash on the property and caused other problems creating “several million dollars” in damages each year.

The excessive foot traffic and cars drew away business, according to the lawsuit, lowering profits for the swap meet. It also says the owners have paid lower rent as a result, which Dane said has been happening for three years. Their rent is an unfixed amount based on profits.

The councilmember’s reaction

Nick Barnes-Batista, a spokesperson for Soto-Martinez, said his office wasn’t aware of the lawsuit until LAist reached out Friday.

The councilmember didn’t respond to specific claims in the suit but told LAist in a statement that as a son of street vendors, he understands the role they play in culture and the economy.

“It’s essential to bring together residents, vendors from inside and outside the swap meet, and LACC to build a system that supports safe vending while respecting the needs of the local community and the swap meet itself,” he said.

No court dates have yet been scheduled.

Members of a University of Southern California program are developing an AI program meant to help law enforcement agencies improve their interactions with the communities they serve.

The Everyday Respect Project partnered with the Los Angeles Police Department to analyze body camera footage of 1,000 random traffic stops. Now, they are using what they have found to train an AI model to look through countless hours of videos for critical elements of good policing — respect and de-escalation.

Benjamin Graham is an associate professor of political science at USC and helps to manage the project, which is being conducted by a team of professors, students and members of the community.

 ”LAPD conducts, give or take, a thousand stops a day,” Graham told LAist. He said those stops lead to thousands upon thousands of hours of body camera footage.

In most cases, Graham said, the body camera videos are uploaded to the cloud and never seen. He said only an automated program could sort through this rich source of data, analyze it and reveal the stories it holds.

With AI able to look through this data, Graham said police and sheriffs departments across the country could identify officers who are best able to communicate respectfully during traffic stops to be given promotions or training positions. They also could find the best techniques for officers to bring down the temperature in high-stress situations.

Georgetown University, the University of California, Riverside, and the University of Texas at Austin also are working with USC on the project.

What they’ve found so far

Graham told LAist researchers spoke with a wide range of community stakeholders, including community organizations that are critical of law enforcement and working police officers, to understand different perspectives of what separates a good traffic stop from a bad one.

They heard from thousands of Angelenos through surveys and interviews, reviewed LAPD training materials and rode along with officers on the streets. Graham said they focused on those diverse community perspectives throughout the project.

“ We have former law enforcement officers who are annotating this data,” he told LAist. “We have individuals who have been arrested before, and we have a lot of Angelenos from ... a range of ages, races, genders, professional backgrounds.”

Graham presented some of the Everyday Respect Project’s findings to the L.A. Board of Police Commissioners on Dec. 16.

He said researchers involved in the project analyzed 500 traffic stops in which LAPD officers conducted searches of the drivers they pulled over and another 500 stops in which there were no searches.

They found in cases when no search was conducted, some drivers were treated differently by officers based on their perceived race and wealth.

Researchers found that Black drivers were treated with more respect than Hispanic drivers. White drivers were pulled over least often, and the researchers did not find a significant difference between how white and non-white drivers were treated.

Of drivers who were stopped by police but weren’t searched, the researchers found those who were perceived as more wealthy also were treated with more respect by officers.

They did not find significant differences in how drivers were treated due to perceived race or wealth in stops in which searches were conducted.

Across all stops, the researchers found the more respect they perceived an officer showing to a driver they pulled over, the more legitimate the researchers would tend to rate the stop overall.

The LAPD has not responded to LAist’s request to comment on these findings.

Training AI to tell good traffic stops from bad

After analyzing and manually taking detailed notes on the first 1,000 traffic stops, Graham said the researchers are using what they’ve found to build an AI tool that can do the same thing — but is able to cover vastly more data and is accessible free of charge for any law enforcement agency.

To do this, Graham said team members use their notes as training data for the AI model.

By having humans label a number of things that happened or didn’t happen in videos of traffic stops, Graham told LAist, the AI model they are developing can learn to predict what humans will say about other videos.

“You're trying to train a model to do the same job that a human being does when it watches the video,” he said.

These notes include things like whether a search happened and at what time, whether officers explained the reason for the stop, if the driver complied with requests from the officer and any efforts by officers to de-escalate tense situations.

Graham said other companies have been working on AI tools to sell to departments, as well, but that the Everyday Respect Project is unique in its effort to build community perspectives into the program that will be fully open-source and open-science.

That means anyone can see exactly how the program works and the research behind it.

What could be coming next?

Graham said the Everyday Respect Project will be working through the winter and spring to improve the AI model and use it to analyze more LAPD bodycam videos. Then they will present their new findings to the police commissioners and release their AI model to the public.

It still is uncertain whether LAPD will use the Everyday Respect Project’s AI program once it is completed, but Captain Shannon White of LAPD’s Strategic Planning and Policies Division told the police commission Dec. 16 that the department looks forward to using the group’s research to spark “actionable change within the department.”

The LAPD has not responded to LAist’s questions about whether or how it will use the AI program once it is made available.

Graham told LAist other departments have shown interest in continuing to work with the Everyday Respect Project and the program in the future.

He said they may soon be working with the Rochester Police Department in New York on a trial to find the most effective de-escalation techniques for officers.

“ That's an incredible piece of learning that we can bring to improve policing, to improve officer safety, community safety, the whole nine yards,” Graham told LAist.

As of January, California is the first state in the country to partner with a nonprofit to develop, produce and sell its own insulin as a solution to the widespread unaffordability of the life-saving hormone that helps the body process or store blood sugar from food.

The nonprofit Civica will develop a CalRx Insulin Glargine pen – referred to as “biosimilar insulin,” meaning it references a U.S. Food & Drug Administration-approved product and has no “clinically meaningful differences from their reference product in terms of safety, purity, and potency.”

This CalRx pen can be substituted for Lantus and other branded insulin glargine, according to a spokesperson from the state’s Department of Health Care Access and Information (HCAI).

“California didn’t wait for the pharmaceutical industry to do the right thing — we took matters into our own hands,” Gov. Gavin Newsom said in an October news release about the CalRx insulin. “No Californian should ever have to ration insulin or go into debt to stay alive — and I won’t stop until health care costs are crushed for everyone.”

CalRx aims to be another competitor in the field by introducing a lower-cost alternative — and possibly put “pressure on other manufacturers to lower their prices as well.”

According to the state and Civica, the suggested retail price is:

• No more than $30 for a 10mL vial of insulin
• No more than $55 for a 5-pack of 3 mL pens

According to the HCAI spokesperson in an email to KQED, the “out-of-pocket cost may be lower, depending on insurance coverage.”

Advocates for people with diabetes see the production as a win.

“We look forward to the rollout of CalRx® insulin in January,” said Christine Fallabel, director of state government affairs at the American Diabetes Association, in an email to KQED. “Any meaningful step to improve insulin affordability and provide additional options is a win for people with diabetes.”

Fallabel also pointed to the recent passage of Senate Bill 40 — which prohibits high copayments for a month’s supply of insulin — as another state decision that helps with accessibility.

The initiative could provide major financial relief for nearly 3.5 million Californians who have been diagnosed with diabetes, a majority of whom have Type II diabetes – where the body cannot use insulin correctly. Type 1 is when the body produces little to no insulin.

Type 1 or Type 2 diabetes can impact energy levels and organ functions. Insulin shots – or, in some cases, diabetes pills – help with major body functions. The National Diabetes Statistics Report found that 38.4 million people have diabetes – almost 12% of the country’s population.

Read on to learn more about changes to the price of insulin in California, how prescriptions will work and where to find more resources.

What is the predicted price of CalRx Insulin?

Difficulty accessing affordable insulin — specifically buying it — in America is a well-documented and widespread issue due to a market dominated by three major companies.

Insulin is seven to 10 times more expensive in the United States compared to other countries, despite being affordable to produce, according to a 2023 article by the Yale School of Medicine. In fact, it explains that “the same vial of insulin that cost $21 in the U.S. in 1996 now costs upward of $250.”

What should I do if I am paying more than $55?

According to the HCAI spokesperson, “CalRx and Civica cannot mandate the final price to the consumer as this would conflict with antitrust and competition law.”

But the spokesperson stated in the email that Civica is planning to include a QR code on the side of the boxes, so consumers can report if they have paid more than $55 for the product.

“At which point Civica would contact the pharmacy for remediation,” the spokesperson said.

Where can I get CalRx insulin? Do I need a prescription?

You do not need to apply to access the new insulin, and there are no eligibility requirements. You do not need insurance.

“Broad wholesale distribution will allow any California pharmacy to order CalRx insulin glargine,” the state explained in the email. Mail-order pharmacy outreach is still ongoing.

People interested in the CalRx insulin can “ask their pharmacist or doctor if they can switch their prescription to CalRx insulin glargine,” continued the HCAI spokesperson. Since the CalRx insulin is interchangeable with other brand names, you would not need a new doctor’s prescription.

“Health plans will be responsible for communicating about CalRx insulin glargine with their provider and patient networks,” said HCAI.

Can people in other states access it?

According to the HCAI spokesperson, “Yes, Civica Rx’s glargine insulin will be available in other states under Civica Rx’s label.”

Where can I learn more information?

• CalRx website
• CalRx fact sheet
• American Diabetes Association’s Center for Information
• Insulin Basics for Diabetes
• Civica Insulin
• T1International

KQED’s April Dembosky contributed to this report.

The Department of Homeland Security is pausing the immigration applications from an additional 20 countries after an expansion of travel restrictions took effect Jan. 1.

U.S. Citizenship and Immigration Services, or USCIS, in a memo released Thursday, said it would pause the review of all pending applications for visas, green cards, citizenship or asylum from immigrants from the additional countries. The memo also outlines plans to re-review applications of immigrants from these countries as far back as 2021.

The list, which is composed mostly of countries in Africa, includes Angola, Nigeria, Senegal, Tanzania and Zimbabwe.

Last month, the Trump administration expanded the list of countries with travel restrictions to the U.S. from 19 to 39, plus the Palestinian Authority. The move comes as the administration is bringing sharper scrutiny of those who have followed legal steps to seek permanent status in the U.S.

"USCIS remains dedicated to ensuring aliens from high-risk countries of concern who have entered the United States do not pose risks to national security or public safety," the memo states as rational for the pause and reviews. "To faithfully uphold United States immigration law, the flow of aliens from countries with high overstay rates, significant fraud, or both must stop."

There are some exceptions outlined in the memo, including athletes and members of their teams competing in the World Cup and 2026 Olympics, both hosted by the U.S. this year.

The administration first suggested it would expand the restrictions after the arrest of an Afghan national suspect in the shooting of two National Guard troops over Thanksgiving weekend.

Towards the end of 2025, DHS began taking steps to further pause and review these legal avenues of migration. The U.S. Citizenship and Immigration Services, the agency that oversees processing of applications including for visas, naturalizations and asylum, announced it would re-review the status of everyone who had been admitted into the U.S. as a refugee under the Biden administration, essentially reopening those cases.

The agency also previously announced an indefinite pause in all processing of asylum applications while it works through its backlog.

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