author: Tyler Durden
Written by Christopher F. Rufo, Ryan Trope, Kenneth Schrupp and Haley Strack through City Journal,
California is simply a money machine. The state takes 1 of the highesttaxes income, Business and fuel in the country and now issued Over $300 billion a year. And yet, wherever you look, California seems to be falling apart.
Way to go fall apart. Badly managed fires changed neighborhoods to ash. Addiction from drugs and homelessness They spread, turning parts of Los Angeles and San Francisco into forbidden zones. And the crisis The cost of surviving excludes middle-class taxpayers from basic needs specified as food buying and fuel, while the state spends billions on social programs that never draw anyone out of poverty.
California starts asking: Where's all that money going? It finances hospitals, universities, schools, prisons, infrastructure and another public services on paper. But there's something else going on under the surface that California politician Gavin Newsom doesn't want you to see: mass, systematic, brazen fraud.
We interviewed public officials, fraud experts and politicians, and looked at hundreds of pages of government reports, state audits, criminal charges and another public papers on fraud in California. From unemployment insurance and Medicaid to failed homeless initiatives and social programs – it seems that all state program has been compromised by criminals. Best estimation suggests that during the governor's word frauds, frauds and organized gangs stole at least $180 billion from taxpayers.
Welcome to Gavin Newsom's fraud empire.
Fourteen months after Newsom began his first word as politician of California, the Covid-19 pandemic swept the world. About 2.7 million Californians yet lost work. The state economy fell into a violent crisis erstwhile its leaders introduced any of the most restrictive public wellness measures in the country. In consequence to the crisis, Newsom sought the fastest possible spreading cash pallets all over the state.
One way to inject money was by a immense California unemployment insurance program (UI). Unemployment insurance is administered by the State Department for employment improvement (EDD) which mayprocess monthly payments of billions of dollars. Before the state turned on the ATM, experts warned that the strategy was prone to fraud.
Haywood Talcove, 1 of America's leading fraud specialists and CEO LexisNexis hazard Solutions for Government, was 1 of specified experts. "I begged [Federal officials] not to let the money go out like that due to the fact that it would be the biggest fraud in our country's history," he said. "Of course, I failed."
For many reasons, California was peculiarly susceptible to the extended fraud that Haywood Talcove saw on the horizon. The state had not only 1 of the most generous social programs in the country; its bureaucrats besides failed to implement the basic anti-fraud measures during the Newsome term.
"They virtually suspended all the rules on the program [unemployment insurance]" – Talcove said. "[This allowed] everyone to receive specified a benefit, even if he had no right to it. It was very deliberate. They knew what they were doing. But it got them due to the fact that everything got out of control."
Fraud began almost immediatelyand criminals from whole The planet said they were pulling money out of the program. In 1 Romanian case A group of fraudsters organized a $5 million unemployment insurance program. Members allegedly "recruited possible candidates for [EDD-benefit] through Facebook" and met them in "parks across confederate California to complete the application process," by U.S. Attorney's Office for confederate California District. "Candidates paid . . . . partial advance fee for assistance with false applications and another fee after receiving EDD payment", the office reported. Many cheaters Transfer stolen funds to Romania.
Around September 2020 Fontrell Antonio Baines, rapper from Memphis known as Nuke Bizzle, published YouTube video entitled "EDD." In Baines' song, he boasted that he had robbed the UI program from California. "Go to the bank with a pile of these things," Baines knocked, holding EDD envelopes. You hear another rapper saying, "You gotta sale cocaine, I'm just making a complaint." In total, Baines obtained over $700,000 of stolen funds utilizing preloaded EDD debit cards. He admitted on national charges.
They were not isolated incidents either. SFV associate Peckerwoods, California neo-Nazi gang, allegedly was fraud with unemployment benefits during the pandemic. Similarly, Michael Thompson, erstwhile leader The Aryan Brotherhood that yet remained convicted. The California prison population reportedly besides involved: EDD allegedly paid hundreds of millions of dollars false claims the names of the prisoners, including at least 133 prisoners sentenced to death.
What is unusual, EDD not only regular compared her unemployment benefits with the list of state prisoners, but besides had only 2 officials hand-allocated to check reports of suspected fraud. Officials are yet acknowledged to pay about $20 billion under false claims during a pandemic; and to be done Estimated $55 billion incorrect payments. Talcove says these numbers don't even give the full truth. "Stan lost $32.6 billion of taxpayers' money on false motions," he said. "In California, at any point, more people applied for unemployment benefits than those over 18."
Although Newsom admitted, that "bad actors" utilized the UI program, and defended the achievements of his government, claiming, They took fast action as shortly as the alleged prison plan was revealed. EDD owns website documenting their anti-fraud activities. However, any proposition that California conceals fraud is refuted by the findings of an impartial state auditor.
Last December the auditor reportedUI EDD — which remains on the "high risk" list of the auditor — had indicator fraud at 7.6 percent in 2023 and 7.9 percent in 2024. For UI expenditure in state, these figures suggest over $1 billion of stolen taxpayers' money since the pandemic. "EDD continues to show advanced rates of incorrect UI payments, including fraudulent payments," wrote the auditor. "These imperfections have caused a crucial hazard of serious harm to the state and its inhabitants."
While many states struggled with UI fraud during the pandemic, California stands out in completely different class. At best, the EDD results meant massive government incompetence; At worst, it shows complete indifference to fraud.
"It happens in all state," summed Talcove, "but in California it happens much more often."
Newsom took over, By swearing prosecute "guaranteed wellness care" for California residents. Under his direction, the state expanded Media-Cal insurance for illegal immigrants, included sex change operations for Medi-Cal participants, and offered "sex-confirming care services" for people "at all ages".
The full budget expenditure of Media-Cal — including federal, state and local contributions — increased more than twice during the governor's word of office, growing of $93.5 billion a year before taking office to $196.7 billion in current yearly budget. During the same period population California residents down 0.2 percent.
Experts have long warned against the susceptibility of Media-Cal to fraud. State auditor for the first time defined "Medi-Cal Eligibility" as a question of "high risk" in 2007 and has since applied that term. However, the state government has made small advancement in solving what the auditor calls "qualification mismatches", which represent "a crucial hazard of serious financial harm to the state." lawyer General of California saidThat "medi-Cal fraud can scope billions of dollars a year."
Newsom may have inherited a bad situation, but his actions made it worse. During Biden California Administration received national approval to "raise and yet destruct asset limits" for any Medi-Cal beneficiaries, a change that, according to Talcove, caused an avalanche of inappropriate payments. In addition, Medi-Cal suspension prior authorisation requirements for certain wellness services and medicines, creating another vulnerability to fraud.
In any cases, as the prosecutors say, that is what happened. In 1 case Paul Richard Randall, Kyrollos Mekail and Patricia Anderson allegedly "used"The softened limits of Media-Cal as part of a plan that tricked taxpayers at over $178 million. Conspirators allegedly utilized Monte Vista Pharmacy to process fake prescriptions; Randall and others allegedly laundered gross through 3rd parties to finance bribes for Anderson and hide the operation from law enforcement, according to a 2025 Department of Justice press release. Mekail confessed to criminal charges in August 2024, and reportedly Randall He's going to do the same thing this year.
In-Home Supportive Services, sub-programme Media-Cal, besides raised serious concerns about fraud. In 2009, erstwhile politician Arnold Schwarzenegger estimatedThat IHSS fraud can scope up to 25 percent. That same year, a study by a grand jury in Sacramento concerning IHSS program in the region claimed that IHSS fraud was "reported as common and out of control."
However, even in the light of these concerns, Newsom importantly increased IHSS funding. Between the first budget of Newsoma and his latest proposal, legislative analyst estimatesthat the full costs of IHSS will increase by about 170 percent, and for the next financial year $33.4 billion were proposed, including $12.5 billion from the state. According to the latest estimates, taxpayers finance almost 800,000 IHSS providers that offer care, cooking, shopping, cleaning and laundry services to aged and disabled people. In around 70 percent of cases, providers and beneficiaries are Members families. By relationships co-author of Schrupp, the IHSS program accounts for 41 percent of all "employment gains" during the Newsoma administration.
IHSS seems almost designed to facilitate fraud. According to a sworn confession, Summary In a study from Sacramento, IHSS participants falsely presented the needs of beneficiaries; incorrectly presented working time cards; and even secured payment after the recipient's death. The strategy works mostly on the basis of trust, and suppliers "work" in the privacy of the recipient's home. IHSS Protocols clearly forbid random unannounced home calls, which would be the best tool for detecting possible crimes.
The supervision of the IHSS programme is highly inadequate. Audit a local IHSS program conducted in Riverside region of 2021 showed that region social workers did not process and study "fairies" in "term" The way. erstwhile complaints went to region regulators, many of them, apparently, were dealt with by persons financially associated with IHSS. study showedthat 41 of the 68 region employees in the Social Services Department, which the auditor considered liable for overseeing the programs, were besides IHSS suppliers — i.e. they had an interest in protecting the system.
Starting in 2024, officials national announced many criminal proceedings for fraud of IHSS. In 1 case, prosecutors claimed that Cindy Lynn Fromm provided services for over a year erstwhile the recipient was in custody. In another prosecutors, they claimed that IHSS carers were falsifying working time cards and claiming that they provided services erstwhile beneficiaries were in hospitals, nursing homes, another facilities — or were dead.
Experts investigating the Medicaid strategy say that it has long been full of fraud. Malcolm Sparrow, Professor from Harvard, which advice The national government in wellness care fraud cases, he suggested to legislature that "fraud and abuse" could account for between 10 and 20 percent of Medicaid spending. (Sparrow noted difficulties in trying to accurately calculate "loss factors" as government investigation "unfortunately was undercompensated" and "provided comfortably low and rather misleading estimates.") Brian Blase, president of the impartial Paragon wellness Institute, estimates the current Medicaid fraud rate of "15 to 20 percent of the full program."
Talcove estimates that the Medicaid fraud rate in California is 20 percent, which he calls a "very conservative" indicator. However, national officials believe that the current medi-Cal fraud rate is even higher — and given the state's supervisory errors and the massive expansion of medi-Cal under Newsoma, they are almost surely right. Many high-level sources from the U.S. Department of wellness and Welfare, which is presently investigating fraud in California, reported City Journal provided that they stay anonymous that their first estimates of the Media-Cal fraud rate since 2019 are 25 percent.
Based on the best estimates State experts on the yearly expenditure of Media-Cal and the application of a conservative, 15% fraud rate in each fiscal year since 2019, Media-Cal lost about $146 billion from taxpayers' funds for fraud during Gavin Newsom's tenure.
Meanwhile, in Sacramento, legislators began to alarm. In February, Leticia Castillo, a Republican at the California State Assembly, proposed Draft Act creating a "Fraud Assessment Team" of Medi-Cal, which was to "view current fraud prevention tools" and "evaluate the best practices of the national government and another states could be applied in California."
So far, Newsom has not publically supported this bill.
The second main mark of frauds is an extended welfare strategy in California. As politician of Newsom, he tried to make a image of a compassionate California who cares about its most susceptible people. The state is celebrated for its immense wealth, but besides millions of lives in poverty, and for 2024 more than 180,000 people The homeless.
Responding to these realities, Newsom launched a wave of spending on social initiatives. He oversaw a large part of US spending worth $24 billion on projects Homelessness, about doubled benefits from food vouchers during the pandemic and maintained a advanced level of cash aid. Like unemployment insurance and Medi-Cal, these social programs proved to be an easy mark for fraudsters. Spending on homelessness, for example, was a immense transfer of funds to complex network non-profit organizations and another performers, with seemingly small oversight. No wonder there are fraud cases.
Cody Holmes served as the financial manager of Shangri-La Industries, a housing developer at affordable prices from Los Angeles. His company reportedly received nearly $26 million from the state for real property improvement as part of a program to supply accommodation to homeless people. Prosecutors reportedly sayThat Holmes who didn't said guilty, embezzled about $2.2 million to pay For "exotic cars" and monthly rent for "a residence of 6,500 square feet". Review in City Journal concerning political donations, he revealed that Holmes was a frequent associate of democratic politicians and initiatives in California.
In a separate case Steven Taylor stayed. The defendant the alleged usage of "false bank statements and false cash statements" to safe loans to finance their real property activities. Taylor allegedly utilized these illegally obtained loans to buy a $11.2 million home that he sold for $27.3 million to a publically funded homeless housing developer.
At the beginning of this year Alexander Soofer, who served as CEO of Abundant Blessings, a charity from Los Angeles, remained The defendant o alleged overshoot at least $10 million of funds for homelessnessto fund "a luxurious lifestyle including lavish vacations and branded clothes."
None of these things should be surprising.Report of the 2024 Office of the Inspector General of the Department of Housing and Urban improvement of the United States has shown that the California Housing Agency was not "adequately prepared to prevent, detect and respond to fraud due to a deficiency of focus on the hazard of fraud and establishing a robust framework for managing fraud risk." In addition, report California State Auditor of 2024 emphasized limited government data on homeless programs. In the case of 3 of the 5 initiatives that the auditor analysed, "he was incapable to full assess" their success due to a deficiency of data on results.
For many California observers, the 2024 audit came years besides late. In 2020, MP Kevin Kiley, then sitting in the California State Assembly, asked for a akin report, said City Journal, but legislative Democrats have rejected this proposal after Newsoma's intervention. "I submitted a proposal to the state joint committee on legislative audit and it lacked 1 vote to approve after the administration testified against the audit," said Kiley. "They most likely knew what the audit would show and didn't want taxpayers to have specified insight into how their money, frankly, is wasted."
Officials besides expressed concerns about fraud involving California SNAP benefits, officially known as CalFresh, and more frequently called food stamps. Since last year, state auditor found CalFresh for "high risk" program. yearly state spending on food stamps increased from around $8 billion in 2015 to almost $16 billion Under the regulation of Newsom.
This expansion coincided with respective fraud cases. In 2023 arrested 15 persons associated with the Romanian criminal gang on charges of stealing CalFresh and another social funds, of which at least 1 later acknowledged I'm guilty. In the following year, 7 people remained defendants the alleged "false withdrawals of cash" as part of a multi-centenary theft of social benefits. In March more than 50 people remained defendants as part of "a multi-year action with organized gangs of thieves" in which "many were associated with Romania." The defendants allegedly stole millions of public funds utilizing the California Electronic Benefit Transfer system, which distributes benefits to programs specified as CalFresh.
Despite this constant wave of fraud cases, at least 1 Democratic legislature from California pursues au decreased penalties for persons stealing from welfare programs in the state. In April 2025, state Senator Lola Smallwood-Cuevas proposed a bill that would rise the threshold of social fraud from $950 to $25,000. This provision would besides make it more hard to prosecute perjury on the basis of incorrect statements to the region welfare departments. Republican State Assembly associate Carl DeMaio He saidThat if the bill came into force, it would de facto "legalize social fraud" in California.
Federal prosecutors, however, exacerbate law enforcement. Last year, Bill Essayly, first Deputy national lawyer for the Central territory of California, announced establish a national task force to combat fraud and corruption in state homelessness programs. The squad has already set charges in respective multimillion-dollar cases of homelessness fraud, and Essayla announced that there would be more. "California spent $24 billion on homelessness in the last 5 years and no 1 can explain where that money truly went" — He said Essayla in January. Gavin Newsom, added, is the "king of deception".
We contacted Newsome's office about the case. A spokesperson whose signature contained the pronouns "she/her", called Kiley's claims "absurd", he accused Trump administration of "inventing numbers" and suggested, surprisingly, that California has no "missing funds for homelessness."
The culture of fraud in California is so omnipresent that it allegedly even reached the governor's office itself. From 2022–December 2024, Newsoma's chief of staff was Dana Williamson. In November 2025 she stayed accused about fraud for alleged "tending funds from campaigning and recovering COVID-19 into her pocket and her associate." 2 another "well-connected co-workers in state policy were besides charged" and concluded settlements that allegedly confirmed the existence of this programme.
Newsoma's office reported that it was informed of an investigation into Williamson in late 2024 and immediately made a decision to place her on leave. erstwhile she officially left the governor's office a period later, News in a Farewell Pass Praised her "insight, perseverance, and a large heart," not to mention her investigation. And even despite charges against her, Williamson left the government with payment $50,000 for an unused vacation.
Williamson, who did not plead guilty, is not the only state authoritative charged with fraud during the Newsoma administration. In January, Phyllis Hope Stitt, former employee The EDD liable for establishing entitlement to an application for a pandemic benefit admitted fraud over an amount exceeding $750,000. In the same month, erstwhile worker of entitlement to benefits in Madeira County, Leticia Mariscal, remained accused The alleged fraud of $40,000 in food benefits.
The model that appears in California is not a single breakdown of supervision, but a immense strategy that almost seems to invitation fraud. From widespread failures in unemployment insurance, through alleged programs aimed at Media-Cal, to increasing concerns about homelessness spending – each case points to serious negligence by state officials liable for managing public funds. By California MP David Tangipa, "Sacramento is soaked in corruption culture." And he points his finger at the top: Newsom, as he says, helped "create an environment in which corruption flourishes."
Despite This California fraud crisis is not a loser, nor is it beyond repair. March 16 president Donald Trump signed the implementing regulation setting up the Fraud Elimination Task Force. This initiative led by Vice president J.D. Vance will "coordinate the actions of the full government to combat widespread fraud, waste and abuse in national benefit programs." The information sheet published by the White home identified California as a state in which "insufficient safety and mediocre oversight increase the hazard of large-scale fraud."
Minnesota fraud scandal, facing national Note by City Journal, is simply a meaningful case survey of what may happen erstwhile a seemingly hidden problem — long visible — yet emerges. The scope of Minnesota fraud has been an open mystery for years. However, as the scandal drew the attention of the full country, investigations intensified, yet destroying Tim Walz's political career. This may seem improbable today, but a akin script is possible for Newsoma in California.
Newsom is not untouchableAnd the scale of fraud in California seems much bigger than in Minnesota. Despite his claimsThat he took "decisive action" against 1 form of fraud, the wider problem is real and ongoing, and taxpayers in California and across the country have reasons to rage. Newsom will surely trust on charisma and organization appeal to underestimate the scale of these abuses. But if you perceive carefully, you can inactive hear the California cash machine, which constantly spends billions indeterminate to criminals, scammers and organized gangs—measures taken from taxpayers and diverted from the most deprived.
Christopher F. Rufo is a elder associate at Manhattan Institute and associate editor City diary and author of the bookAmerica's Cultural Revolution. Ryan Thorpe is simply a method author at the Manhattan Institute. Kenneth Schrupp and Haley Strack are investigative journalists in City Journal.
Translated by Google Translator
Source:https://www.zerohedge.com/political
