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California Commentary
Warriors against waste have their work cut out for them
By Jon Coupal
Readers of this column might recall the name Haywood Talcove, CEO of LexisNexis Special Services Inc. Along with yours truly, he co-authored two columns regarding the inexcusable waste of California tax dollars by the Employment Development Department. The first column, entitled Preventing Future Fraud, was published in February of 2021 while the state was deep in the throes of the Covid pandemic.
At the time, we predicted that the total amount of fraud could be as high as $31 billion. We now know that it was much more than that. As we laid out, the problem was the abject failure on the part of EDD to verify the identities of individuals who were receiving benefits. Transnational organized criminal groups from China and Africa have made off with billions of dollars - used for child trafficking, drugs and terrorism - while millions of deserving taxpayers have been struggling just to stay afloat.
Despite the warnings from District Attorneys, the FBI, and government watchdogs, officials at EDD showed no interest in stemming the flow of billions going out the door to people who were not entitled to the money. The excuse was that because the data management systems the EDD uses are built with antiquated programming languages, any short-term fix would be impossible. But Mr. Talcove noted that even if overhauling the EDD data-management system and platform did require a monumental capital investment, the identity-verification piece could operate as a stand-alone solution. Moreover, it could be implemented very inexpensively because off-the-shelf identity verification solutions were common in the private sector.
The second co-authored column, published by the Southern California News Group in June of 2023, exposed a stunning level of fraud at the national level with the Supplemental Nutrition Assistance Program (SNAP). At that time, nearly 8,000 California families struggling with poverty discovered that the benefits on their EBT cards had been drained by criminals stealing access to EBT cards. The perpetrators ran the gamut from low-level organized criminal gangs in Michigan to criminal syndicates as far-flung as Romania, journeying to California specifically to exploit the gaping security flaws in the SNAP program.
At the federal level, the effort to strengthen the integrity of government assistance programs with rigorous identity verification was the principal topic last week at the first congressional hearing by the House of Representatives Subcommittee on Delivering on Government Efficiency (DOGE). The hearing was entitled "The War on Waste: Stamping Out the Scourge of Improper Payments and Fraud."
It should surprise no one that, given his expertise in this area, Haywood Talcove was asked to testify. There, he laid out a three-step plan for reclaiming control of federal payment systems: "There's no excuse for the government to lag if we do the following. Number one, implement identity verification on the front end. Criminals should never receive a dime. Eliminate self-certification. No more honor system for billion-dollar programs. And continuous auditing. Keep verifying because criminals never stop adapting."
In response to a member of the committee who asked about the differing rates of fraud in the public sector Talcove noted that "the fraud rate, that the criminals are taking advantage of the public sector is around 20%. In the private sector, it's around 3%. And it's really because the tools that are used in the private sector aren't used in the public sector. Front end identity verification . . . and making sure that individuals are who they say they are. If we start using these tools, you will see the fraud rate go down dramatically because for the most part, this fraud isn't taking place by individuals. It's individuals whose identities have been stolen on the dark web."
Americans are just now beginning to understand the level of waste, fraud and abuse being uncovered by the DOGE project. Until now, even when such activity was revealed, very little was being done to correct it. We saw this intransigence in California with EDD.
But real action is taking place in Washington as jaw-dropping levels of mismanagement and even criminal behavior is being exposed. Warriors against waste, like Haywood Talcove and many others like him, have their work cut out for them.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.
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Jon Coupal is the President of the Howard Jarvis Taxpayers Association. He is a recognized expert in California fiscal affairs and has argued numerous tax cases before the courts.
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