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UPDATE: California EDD, Bank of America At Odds Over Resolving Fraud Victims' Claims

SAN FRANCISCO (KPIX 5) -- Despite assurances from California's Employment Development Department (EDD) and Bank of America that they are working together to fight fraud, emails between EDD and Bank of America obtained by KPIX 5 show the two are not on the same page.

As KPIX 5 first exposed in the fall, fraudsters are stealing thousands of dollars in unemployment benefits from EDD debit cards issued exclusively by Bank of America. But the bank is denying victims' claims.

"In the last week I've taken about 250 of these calls," said an EDD call center employee who spoke to KPIX 5 after seeing our reports about the brazen hacks of EDD debit cards.

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We exposed how hackers are stealing identities of EDD claimants on the dark web, duplicating their cards and security pins, then stealing thousands of dollars in cash at ATMs far away from where the victims live. "I am having claimants that have had their debit cards used in New York, Vegas," said the EDD employee, who chose to remain anonymous.

Making matters even worse for victims, he says Bank of America is now freezing the hacked accounts. "The bank won't give them the funds that they still have on that debit card," said the employee. He says it's a repeat of what he saw happening this past fall when, at EDD's request, Bank of America froze 345,000 debit card accounts because of suspected fraud.

Turns out there was collateral damage then as well, to potentially hundreds of thousands of innocent people like Gonzalo Arceo. "I got a charge for a thousand dollars on an ATM far away from me," said Arceo.

READ MORE: KPIX 5 Original Reports: EDD Fraud

He says someone hacked his EDD debit card in September and right after that his account was frozen. "All the money that I had coming from unemployment, over $8,000, is there," said Arceo.

It's money he desperately needs to care for his disabled daughter. EDD eventually confirmed his identity and is now sending him paper checks. But Bank of America still won't unlock his funds. And he's not alone. "Most people are still locked out of those accounts, even since September," said the EDD employee.

Publicly, Bank of America and EDD say they are working together to solve what they admit is at least a $2 billion fraud problem involving the debit cards. But internal emails we have obtained show there's tension between the two.

In mid-October EDD's former director Sharon Hilliard wrote to Bank of America's regional executive Bobby Chestnut: "It is imperative that we meet right away. It appears a number of the issues being discussed between EDD and BOFA have not been resolved."

Chestnut wrote back: "Can we discuss? ... My plan is to schedule a business meeting tomorrow."

Hilliard responded "Is there a reason for the delay? EDD is ready now. Every minute we wait we have people impacted by lack of access to their funds."

At issue, according to the emails: the 345,000 debit card accounts that EDD suspected were fraudulent and asked the bank to freeze in September.

EDD wants BofA to "unfreeze" 256,000 of them that it now believes are legitimate.

But the bank in mid-October had only unfrozen 51,000, while at the same time initiating another 58,000 freezes of its own, without fully consulting EDD.

In another email, EDD's lead counsel Carole Vigne wrote, "To the extent that EDD has asked you to unfreeze accounts, or has not asked you to freeze an account, Bank of America is acting without EDD's authorization."

Bank of America's regional executive Bobby Chestnut pushed back: "As EDD is well aware, the cardholder agreement gives the bank the specific right to freeze ... if we suspect irregular, unauthorized, or unlawful activities may be involved."

And he gave one stark example of the rampant fraud at ATMs: "The cards in question were used at a Bank of America ATM between midnight and 2 am on October 11th, when a single individual (captured on clear, color videotape) accessed the ATM with a stack of EDD prepaid cards in hand and fed them into the terminal, one after the other, until he managed to withdraw over $35,000."

The EDD employee we talked to says after what he has heard from victims, he is not surprised. "It's how that criminal syndicate is working the system. They are just going in with multiple debit cards and just withdrawing money day after day, that's their job," said the EDD employee.

"It's just ridiculous. No one gives you an answer, a straight answer, this is what we are going to do," said Arceo. "Nothing, zero. Zero answers, that's the worst one."

After we gave Arceo's name to Bank of America, it finally unlocked his account and he was able to get his $8,000 dollars out. He's one of at least 20 victims who had got their money returned after we gave their names to the bank. Countless other jobless Californians are still waiting, desperate to pay their rent and put food on the table for their families.

Bank of America has an exclusive revenue-sharing agreement with EDD that is profitable for both the bank and the state. Right now the bank is handling more than eight million unemployment accounts that hold altogether more than $105 billion.

Statement from Bank of America spokesman Bill Halldin:

We have had an ongoing and productive dialogue with state officials over the last several months to identify and stop fraudulent activity to protect taxpayer dollars. These actions have helped stop billions of dollars in fraud.  We commend the state for its recent actions to suspend payments to 1.4 million recipients over fraud concerns and require identity verification before resuming those payments.

The program is unfortunately riddled with billions of dollars in fraud. Criminals have found ways to steal money from the state and the debit cards of legitimate unemployment recipients. We have helped stop billions of dollars in theft by these criminals and protected taxpayer dollars, in partnership with state and law enforcement officials.

The criminals don't ever stop – even calling Bank of America and the news media trying to get money from the bank with fake claims. We review every claim and restore money to the debit cards of legitimate unemployment recipients. In instances where we deny a claim, we encourage people who disagree with our decision to ask for reconsideration. We take any new information or further identity verification from the account holder, and if it addresses our concerns we will credit the customer's account. We have added thousands of additional agents to answer phone calls and investigate claims for areas of the program we are responsible for and, as a result, our average wait time for callers has dropped dramatically.

We report wrongdoing to law enforcement and assist them in their prosecution of the criminals trying to steal money and undermine this program.



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