California Fraud Allegations Against Newsom: Separating Fact from Fiction

The political battle over California’s alleged fraud has escalated dramatically in 2024, with President Trump declaring that “the fraud investigation of California has begun.” This announcement has thrust Governor Gavin Newsom and California’s Democratic leadership into the center of a heated national debate over government waste and mismanagement.

Newsom has dismissed these accusations as politically motivated, arguing that the Trump administration is deliberately targeting Democratic-led states while overlooking similar issues in Republican-governed regions. The governor has responded by highlighting fraud cases in GOP-controlled states and criticizing Trump’s business record.

In this highly polarized environment, separating genuine fraud from politically motivated claims has become increasingly challenging. According to Dan Schnur, who teaches political communications at USC and UC Berkeley, California represents a prime target for Republican criticism because Democrats have maintained control of both the state legislature and governor’s office for years.

“There is no shared responsibility here for Republicans,” Schnur explained. “If you had a state in which Republicans were actually competitive, they would bear some responsibility for these problems.”

California has indeed experienced documented cases of fraud, particularly in complex programs involving emergency assistance, healthcare, and unemployment insurance. During the COVID-19 pandemic, the state paid out billions in fraudulent unemployment claims, and the California State Auditor has repeatedly warned about state agencies at high risk for waste and mismanagement.

The Trump administration recently elevated child-care funding concerns as a major issue. In January, federal officials moved to freeze $10 billion in child-care funding to five Democrat-led states—California, New York, Colorado, Illinois, and Minnesota—citing “serious concerns about widespread fraud and misuse of taxpayer dollars.”

However, the Department of Health and Human Services’ letters to Newsom provided little evidence to support these claims. Newsom’s office called the accusations “deranged,” and a federal judge subsequently blocked the funding freeze. During the hearing, U.S. District Judge Vernon Broderick questioned the government’s approach, saying, “It just seems like the cart before the horse.”

Hospice funding has emerged as another contentious issue. Dr. Mehmet Oz, administrator for the Centers for Medicare & Medicaid Services, and Bill Essayli, the top federal prosecutor in Los Angeles, held a press conference accusing “foreign actors” of draining billions from public healthcare programs in California. They referenced fraudulent hospice providers that were first exposed by the Los Angeles Times in 2020 and later investigated by California Attorney General Rob Bonta.

Essayli directly blamed Newsom, labeling him “the fraud king.” Oz later released a controversial video blaming the “Russian Armenian Mafia” while pointing to an Armenian bakery, prompting accusations of racism from the Armenian community.

Bonta’s office has responded by highlighting its efforts against hospice fraud, noting that it has filed criminal charges against 109 individuals and launched dozens of civil investigations. Newsom defended his administration’s record at a recent event in San Francisco, stating, “Hospice, we’ve been after that for years and years before Oz was even on the scene. In 2021, we did a moratorium on new hospice programs, 280 we shuttered.”

Perhaps California’s most significant documented fraud case involves its Employment Development Department (EDD), which reported approximately $20 billion lost to fraud during the pandemic, primarily through the federal Pandemic Unemployment Assistance program. The state acknowledged in 2021 that it failed to implement precautions used by other states, including software to identify suspicious applications and cross-checking claims against prison inmate data.

Rep. Kevin Kiley (R-Rocklin) has criticized the department’s management, saying, “When there is a lack of internal controls, a lack of diligence of how funds are used, that makes it easier for those who want to take advantage of the system to profit.”

The EDD reports recovering more than $6 billion in stolen funds and opening over 2,300 fraud investigations since the pandemic began. However, mismanagement concerns persist, with a recent audit finding the department wasted $4.6 million on unused cell phones.

Looking ahead, Newsom maintains that the Trump administration’s focus on Democratic-led states reveals the political nature of these investigations. “This is about polarization, politicalization, weaponization,” Newsom said.

State auditors continue to identify vulnerabilities, particularly in Medi-Cal eligibility discrepancies that expose California to questionable payments. With California facing fiscal challenges—the nonpartisan Legislative Analyst’s Office warns of an $18 billion budget shortfall—the fight against waste and fraud has taken on increased urgency.

Despite the partisan nature of the current debate, Kiley suggests that reducing fraud should unite both parties as the “easiest” way to address budget problems and improve government services for taxpayers.