Audit Records, Indictments Show $180 Billion ‘Empire of Fraud’ In California: Report

A stunning report from City Journal alleges that while California collects some of the nation’s highest taxes to fuel a $300 billion annual budget, a mounting body of evidence suggests that systematic fraud has siphoned off at least $180 billion during Governor Gavin Newsom’s tenure.

From the collapse of the unemployment system to “ghost” healthcare providers and embezzled homelessness funds, public records paint a picture of a state government that has allegedly frequently suspended basic oversight, creating a vacuum filled by international crime rings and opportunistic scammers.

The most documented alleged failure occurred within the Employment Development Department (EDD) during the pandemic. According to fraud specialist Haywood Talcove and subsequent state admissions, the Newsom administration “suspended all of the rules” for eligibility to expedite payments.

The state officially admitted to paying out $20 billion in fraudulent claims, though independent experts like Talcove place the figure at $32.6 billion. State records confirmed the EDD paid out hundreds of millions in claims to active prisoners, including 133 inmates on death row. Memphis rapper “Nuke Bizzle” pleaded guilty to federal charges after recording a music video bragging about exploiting the EDD; he successfully obtained $700,000 using stolen identities.

California’s Medicaid program (Medi-Cal) has seen its budget double to nearly $197 billion under Newsom. However, the California State Auditor has designated “Medi-Cal Eligibility” as a “high-risk” issue every year since 2007, noting “eligibility discrepancies” that the state has failed to fix.

In 2025, the DOJ announced charges against three individuals for using Monte Vista Pharmacy to process fraudulent prescriptions by exploiting loosened pandemic-era restrictions. Sources at the U.S. Department of Health and Human Services estimate a 25% fraud rate in Medi-Cal since 2019. Using a more conservative 15% rate, experts calculate a loss of $146 billion on Newsom’s watch.

The In-Home Supportive Services (IHSS) program, which pays family members to care for the elderly, lacks basic oversight like unannounced home visits. Recent federal prosecutions have targeted caregivers who claimed hours for recipients who were actually incarcerated or deceased.

Despite spending $24 billion on homelessness in five years, California’s state auditor reported in 2024 that the government lacked sufficient data to even assess if the programs were working.

Cody Holmes, CFO of a state-funded developer, was charged with embezzling $2.2 million in homelessness funds to pay for exotic cars and a 6,500-square-foot mansion.

In 2024 and 2025, federal authorities charged over 50 individuals—many with alleged ties to Romanian organized crime—for using “skimming” devices to steal millions from the state’s Electronic Benefit Transfer (EBT) system.

In November 2025, Newsom’s former chief of staff, Dana Williamson, was charged with fraud for allegedly siphoning campaign and COVID-19 recovery funds. While Williamson has pleaded not guilty, two other well-connected aides struck plea deals.