Gavin Newsom’s empire of fraud – Latest News
California is a money machine.
The state collects some of the nation’s highest income, business, and fuel taxes, and now spends more than $300 billion per 12 months.
And but, all over the place you look, California appears to be falling aside.
And but, all over the place you look, California appears to be falling aside.
The roads are crumbling. Mismanaged wildfires have turned neighborhoods into ash. Drug dependancy and homelessness have metastasized, turning elements of Los Angeles and San Francisco into no-go zones.
And the cost-of-living disaster is pricing middle-class taxpayers out of primary requirements like groceries and gasoline, even because the state spends billions on welfare applications that by no means appear to carry anybody out of poverty.
Californians are starting to ask: Where is all this money going?
On paper, it funds public providers. But beneath the floor, one thing else is going on: huge, systematic, brazen fraud.
We performed interviews with public officers, fraud specialists, and political figures, and reviewed a whole lot of pages of authorities studies, state audits, felony indictments, and different public information on California fraud.
Seemingly each state program has been compromised by criminals.
Welcome to Gavin Newsom’s empire of fraud. Getty Images
The best estimates counsel that, on the governor’s watch, fraudsters, scammers, and arranged crime rings have stolen at the least $180 billion from taxpayers.
Welcome to Gavin Newsom’s empire of fraud.
Fourteen months after Newsom started his first time period as governor, the COVID-19 pandemic swept the world. The state’s leaders imposed some of the nation’s most restrictive public-health measures. In response to the disaster, Newsom sought to dump pallets of money throughout the state — as shortly as attainable.
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One option to inject money was by California’s huge unemployment insurance coverage program (UI). Unemployment insurance coverage is run by the state’s Employment Development Department (EDD), which can course of billions of {dollars} in funds month-to-month. Before the state turned on the money machine, nevertheless, specialists had warned that the system was ripe for fraud.
Haywood Talcove, one of America’s main fraud specialists and CEO of LexisNexis Risk Solutions for Government, stated: “I was begging [federal officials] not to let the money go out like that, because it was going to be the biggest fraud in the history of our country. Obviously, I wasn’t successful.”
For many causes, California was significantly vulnerable to the large-scale fraud schemes that Talcove foresaw.
For many causes, California was significantly vulnerable to the large-scale fraud schemes that Talcove foresaw. Getty Images
“They literally suspended all of the rules for the [unemployment insurance] program,” Talcove stated. “[That made] it possible for anyone to get that benefit even if they weren’t entitled to it. It was very intentional. They knew what they were doing. But it caught up to them because it just got so out of control.”
The scams started nearly instantly, with criminals from round the world reportedly siphoning money from this system. In one case, a Romanian-led fraud ring orchestrated a $5 million unemployment-insurance scheme. Many of the fraudsters wired the stolen funds to Romania.
Around September 2020, Fontrell Antonio Baines, a rapper from Memphis often known as Nuke Bizzle, launched a music video on YouTube entitled “EDD.” In the track, Baines bragged about ripping off California’s UI program. “Go to the bank with a stack of these,” Baines rapped, holding up EDD envelopes. Another rapper will be heard saying: “You gotta sell cocaine, I just file a claim.” All advised, Baines obtained more than $700,000 in stolen funds utilizing preloaded EDD debit playing cards. He pleaded guilty to federal prices.
California’s jail population apparently acquired in on the motion, too: The EDD allegedly paid out a whole lot of hundreds of thousands of {dollars} in fraudulent claims in prisoners’ names, together with these of at the least 133 inmates on death row.
Remarkably, EDD not solely failed repeatedly to cross-reference its unemployment payouts with a checklist of state prisoners, nevertheless it additionally had simply two bureaucrats assigned manually to examine studies of suspected fraud.
State officers finally admitted to having paid out roughly $20 billion in fraudulent claims during the pandemic, and to making an estimated $55 billion in improper funds. Talcove claims these figures don’t even inform the total story: “In California, at one point, you had more people applying for unemployment insurance benefits than you had people over the age of 18.”
California’s jail population apparently acquired in on the motion, too. Getty Images
While Newsom has conceded that “bad actors” took benefit of the UI program, he has additionally defended his authorities’s file, saying they took swift motion as quickly because the alleged jail scheme surfaced. The EDD, for its half, has a webpage documenting its anti-fraud efforts. But any suggestion that California has fraud beneath wraps is contradicted by findings from its nonpartisan state auditor.
Newsom additionally got here to energy vowing to pursue “guaranteed health care” for Californians. Under his management, the state prolonged Medi-Cal protection to unlawful aliens, lined sex-change surgical procedures for Medi-Cal enrollees, and supplied “gender-affirming care services” to enrollees of “all ages.”
Total budgeted Medi-Cal spending — which incorporates federal, state, and native contributions — has more than doubled on the governor’s watch, rising from $93.5 billion the 12 months earlier than he took workplace to $196.7 billion within the present annual funds. During the identical period, California’s resident population declined by 0.2%.
In-Home Supportive Services, a Medi-Cal sub-program, has offered main fraud considerations. In 2009, former Gov. Arnold Schwarzenegger estimated that IHSS fraud may very well be as high as 25%. That identical 12 months, a Sacramento grand jury report on the county’s IHSS program claimed IHSS fraud was “reported to be rampant and out of control.”
Yet, even in gentle of these worries, Newsom has dramatically elevated funding for IHSS. According to current estimates, taxpayers are funding practically 800,000 IHSS suppliers, who offer caregiving, cooking, procuring, cleansing, and laundry providers to aged and disabled people. In about 70% of instances, suppliers and recipients are household members. According to co-author Schrupp’s reporting, the IHSS program is accountable for 41% of all “job gains” during the Newsom administration.
The IHSS program nearly appears designed to facilitate scams.
The IHSS program nearly appears designed to facilitate scams. Anadolu through Getty Images
According to sworn testimony summarized within the Sacramento report, IHSS individuals have falsely represented recipients’ wants; misrepresented hours labored timecards; and even secured fee after a recipient has died. The system operates largely on trust, with suppliers “working” within the privateness of the recipient’s home. The state’s IHSS protocols explicitly prohibit random unannounced home visits, which might be the best software to uncover any potential rackets.
Beginning in 2024, federal officers introduced a number of prosecutions for IHSS fraud. In one case, prosecutors alleged that Cindy Lynn Fromm claimed to have supplied providers for more than a 12 months whereas the recipient was incarcerated. In others, prosecutors stated that IHSS caregivers falsified timesheets and claimed to have supplied providers whereas beneficiaries have been in hospitals, care houses, different services — or lifeless.
The different main goal for fraudsters is California’s expansive welfare state. The state is famously home to monumental wealth, but in addition to hundreds of thousands dwelling in poverty, and, as of 2024, to more than 180,000 homeless people.
Responding to those realities, Newsom has unleashed a wave of spending on welfare initiatives.
He has overseen a lot of a $24 billion state spend on homelessness initiatives, roughly doubled food-stamp advantages during the pandemic, and has maintained high ranges of money help. Just like unemployment insurance coverage and Medi-Cal, although, these welfare applications proved simple targets for swindlers. The homelessness spending, for instance, was a huge switch of funds into a sophisticated web of nonprofits and different contractors, with apparently little oversight.
Unsurprisingly, fraud instances adopted.
Responding to those realities, Newsom has unleashed a wave of spending on welfare initiatives. Jack Plunkett/Invision/AP
Cody Holmes served as chief financial officer of Shangri-La Industries, a Los Angeles–primarily based affordable-housing developer. His company reportedly acquired practically $26 million from the state to develop properties beneath a program geared toward housing the homeless. Prosecutors allege that Holmes, who pleaded not guilty, embezzled roughly $2.2 million to pay for “exotic cars” and month-to-month rent for a “6,500-square-foot mansion.”
In addition, a 2024 report from California’s state auditor highlighted the federal government’s restricted knowledge on homelessness applications. For three of the 5 initiatives the auditor examined, it was “unable to fully assess” their success as a result of of a lack of end result knowledge.
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For many California watchers, the 2024 audit got here years too late. In 2020, Rep. Kevin Kiley, then serving within the California Assembly, requested a related report, he advised City Journal, however state legislative Democrats rejected the proposal after Newsom intervened. “They likely knew what the audit would show and didn’t want taxpayers to get that window into how their money is, quite frankly, being squandered,” Kiley stated.
Notwithstanding this regular drumbeat of fraud instances, at the least one California Democratic lawmaker is pushing to decrease penalties for individuals who steal from state welfare applications.
In April 2025, state Sen. Lola Smallwood-Cuevas sponsored a invoice that will raise the edge for felony welfare fraud from $950 to $25,000. The measure would additionally make it more troublesome to charge perjury primarily based on misstatements to county welfare departments. Republican state Assemblyman Carl DeMaio has stated that if the invoice turns into law, it can successfully “legalize welfare fraud” in California.
Federal prosecutors, nevertheless, are stepping up enforcement. Last 12 months, Bill Essayli, first assistant U.S. lawyer for the Central District of California, introduced the creation of a federal activity drive to fight fraud and corruption within the state’s homelessness applications. The activity drive has already introduced prices in a number of multimillion-dollar homelessness-fraud instances — and Essayli has vowed that more are coming.
We reached out to Newsom’s workplace for touch upon this story. REUTERS
We reached out to Newsom’s workplace for touch upon this story. A spokesperson referred to as Kiley’s claims “ridiculous,” accused the Trump administration of “mak[ing] up numbers,” and urged, remarkably, that California had “no missing homelessness funds.”
The tradition of fraud in California is so pervasive that it has allegedly reached the governor’s own workplace. Between 2022 and December 2024, Newsom’s chief of workers was Dana Williamson. In November 2025, she was charged with fraud for allegedly “siphoning campaign and COVID-19 recovery funds into her and an associate’s pockets.” Two different “well-connected aides in state politics were also charged” and struck plea offers that reportedly confirmed the scheme’s existence. Williamson has pleaded not guilty.
Newsom’s workplace stated they have been made conscious of an investigation into Williamson in late 2024 and instantly moved to put her on go away. When she formally left the governor’s workplace a month later, although, Newsom’s send-off message applauded her “insight, tenacity, and big heart,” whereas making no point out of the investigation in opposition to her.
The sample that emerges in California is that of a huge system that just about appears to ask fraud.
According to California Assemblyman David Tangipa, “Sacramento is pervaded by a culture of corruption.” And he factors the finger proper to the highest: Newsom, he says, has helped “create an environment where corruption thrives.”
Still, California’s fraud disaster shouldn’t be a misplaced trigger, neither is it past correction. On March 16, President Donald Trump signed an govt order creating the Task Force to Eliminate Fraud. The effort, led by Vice President JD Vance, will “coordinate government-wide efforts to combat widespread fraud, waste, and abuse in federal benefit programs.”
The sample that emerges in California is that of a huge system that just about appears to ask fraud.
The Minnesota fraud scandal, delivered to national consideration by City Journal, gives a revealing case research of what can occur when a seemingly hidden drawback — one long in plain sight — lastly comes into view.
The extent of fraud in Minnesota had been an open secret for years. But as soon as the scandal drew national consideration, investigations snowballed, in the end derailing the political profession of Tim Walz.
It could seem unlikely right now, however a related end result is feasible for Newsom in California.
Newsom shouldn’t be untouchable, and the size of fraud in California seems far bigger than in Minnesota.
Despite his declare to have taken “decisive action” in opposition to one kind of fraud, the broader drawback is actual and ongoing, and taxpayers, in California and throughout the nation, have cause to be livid.
Newsom will no doubt depend on charisma and partisan appeal to downplay the extent of these abuses. But pay attention intently, and you’ll nonetheless hear the California money machine, steadily shelling out untold billions to criminals, scammers, and arranged crime rings — funds taken from taxpayers and diverted from these most in need.
Christopher F. Rufo is a senior fellow on the Manhattan Institute, a contributing editor of City Journal, and the creator of America’s Cultural Revolution. Ryan Thorpe is an investigative reporter on the Manhattan Institute. Kenneth Schrupp and Haley Strack are investigative reporters at City Journal.
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