Forget Minnesota — California Under Newsom Lost $180 Billion To Fraud Since 2018
A sweeping investigation reveals California under Governor Newsom has become ground zero for taxpayer fraud, with losses dwarfing other state scandals by orders of magnitude.
A sweeping new investigation reveals California under Governor Gavin Newsom has become ground zero for taxpayer fraud, with at least $180 billion stolen from the state since 2018 — losses that dwarf the Minnesota scandal that derailed Tim Walz's presidential ambitions.
The City Journal investigation documents systematic looting across unemployment insurance, Medicaid, homeless programs and food stamps during Newsom's tenure. The estimated theft surpasses Minnesota's Feeding Our Future scandal by orders of magnitude, exposing deep rot in state government.
Unemployment insurance collapsed first, with $20 billion stolen during the pandemic. "In California, at one point, you had more people applying for unemployment insurance benefits than you had people over the age of 18," said Haywood Talcove, CEO of LexisNexis Risk Solutions for Government. The state's Employment Development Department had just two bureaucrats reviewing fraud referrals while 133 death-row inmates received benefits alongside Romanian crime rings and a Memphis rapper who bragged about his fraud in a music video.
Medi-Cal fraud exploded as Newsom expanded the program. The budget doubled from $93.5 billion to $196.7 billion annually while California's population declined 0.2 percent. Anonymous high-ranking federal Health and Human Services officials estimate a 25 percent fraud rate since 2019, implying roughly $146 billion in losses. Talcove called his own 20 percent estimate "very conservative."
Homeless programs fared no better. California spent $24 billion over five years with limited accountability, according to Bill Essayli, First Assistant U.S. Attorney for the Central District of California. Essayli called Newsom "king of fraud" on Fox & Friends in January. Federal prosecutors charged multiple operatives, including Alexander Soofer, who allegedly distributed homeless ramen noodles while purchasing a $7 million mansion, Hermes clothing and Range Rovers. His organization received $23 million in taxpayer funds.
The fraud reaches Newsom's inner circle. His former chief of staff Dana Williamson faces a 23-count federal indictment for allegedly siphoning $225,000 from a dormant campaign account and falsifying COVID-19 loan documents. Williamson received a $62,598.14 vacation payout upon leaving Newsom's office in December 2024, then claimed luxury purchases including a $15,353 Chanel purse and $150,000 birthday trip to Mexico as business expenses.
President Trump responded March 16 by creating the Task Force to Eliminate Fraud, chaired by Vice President J.D. Vance. California appears as a priority target alongside Minnesota, New York and Illinois in the White House fact sheet, which states the state has "insufficient safeguards and weak oversight." Federal prosecutors continue filing charges, including eight arrests April 2 in a $50 million hospice fraud scheme called Operation Never Say Die.
"I can tell you more charges are coming, probably as soon as this month," Essayli said.
Meanwhile, Democratic State Senator Lola Smallwood-Cuevas introduced legislation to raise California's felony welfare fraud threshold from $950 to $25,000. Assemblyman Carl DeMaio, a Republican, stated "this bill would effectively legalize welfare fraud."
Newsom's office dismissed claims as "ridiculous" and said California has "no missing homelessness funds." He accused the Trump administration of "polarization, politicalization, weaponization" and filed a civil rights complaint against baseless and racist allegations made by Dr. Oz concerning Armenian Americans.
The In-Home Supportive Services program highlights systemic issues. It accounts for 41 percent of all job gains under Newsom, with 70 percent of providers being family members of recipients. A 2021 Riverside County audit found 41 of 68 staff responsible for oversight were also IHSS providers — a direct conflict of interest.
"Gavin Newsom is definitely becoming associated with the word 'fraud,' but it's not for fighting it. It's for enabling it," said Christopher Rufo, senior fellow at the Manhattan Institute and co-author of the City Journal investigation.
As the federal task force begins work, California faces unprecedented scrutiny for what experts call the largest financial crime in American history — one that makes Minnesota's scandal look small by comparison.