President Trump Announces Fraud Investigation Of California

President Donald Trump announced today that his administration is launching a comprehensive investigation into widespread fraud in California. Posting on Truth Social, Trump declared, “California, under Governor Gavin Newscum, is more corrupt than Minnesota, if that’s possible??? The Fraud Investigation of California has begun. Thank you for your attention to this matter!”  

The announcement comes amid escalating tensions between the White House and Governor Gavin Newsom  whom Trump has repeatedly targeted as a symbol of Democratic mismanagement and malfeasance.

Just yesterday, California Republican gubernatorial candidate Steve Hilton and comptroller candidate Herb Morgan alleged uncovering $250 billion in potential welfare fraud through a tip-line investigation, demanding an FBI probe in a letter to Attorney General Pam Bondi. Their claims align with years of reporting by the California Globe exposing systemic failures under Newsom’s watch.

SAN FRANCISCO: Employment development department

Democrats have FAILED us. Here we are, about to talk about the $250 BILLION they have wasted, and we see a syringe floating in the street. NO MORE! pic.twitter.com/xw9kPOXYBh

— steve hilton (@SteveHiltonx) January 5, 2026

The federal probe appears to stem from recent allegations of massive fraud in federal programs administered by the state, drawing parallels to the ongoing scandal in Minnesota where over $1 billion—and potentially up to $9 billion—was siphoned from Medicaid and child care funds.

In Minnesota, 90 individuals, many from the Somali community, face charges for billing nonexistent services and using the proceeds on luxury cars, vacations, real estate, and alleged funding of Islamic terrorist groups in Somalia and the Middle East.

Trump has suggested California’s issues dwarf those in the Minnesota, pointing to a developing pattern of widespread abuse in blue states. The Trump administration has already frozen $10 billion in social services and child care funding to California and four other Democratic strongholds—Colorado, Illinois, Minnesota, and New York—citing fraud risks. 

For California, this includes $7.35 billion from the Temporary Assistance for Needy Families (TANF) program and $869 million from the Social Services Block Grant. The freeze underscores the administration’s zero-tolerance stance on waste, especially as Republicans in the state ramp up calls for accountability.

Last month, California Rep. Kevin Kiley (R) named California as “the fraud capital of America.” 

As the Globe has detailed, the state’s Employment Development Department (EDD) alone hemorrhaged between $39 billion and $50 billion to fraud during the pandemic—nearly a third of the national total of $135 billion. Shockingly, experts estimate 80 percent of these funds flowed overseas, potentially fueling adversarial regimes like North Korea’s nuclear program.

Cybersecurity analyst Brett Johnson has warned that ignored vulnerabilities, including outdated systems and a failure to implement basic identity checks, turned EDD into a global ATM for criminals. Pre-loaded debit cards worth up to $17,000 were mailed to foreign addresses without red flags, and tutorials on the dark web continue to exploit similar programs like EBT and FEMA aid.

In September 2024, we reported:

At the direction of then-California labor secretary Julie Su, now acting federal Secretary of Labor, the EDD adopted a policy of “pay and chase.”  And that means what you think – shove the money out the door and then see if you can get any of it back if the claim was fraudulent.

Gov. Gavin Newsom’s Social Security number was used in at least one fraudulent claim, irking the governor’s office to no end, though not enough to wonder why the EDD let it go through and to try to fix the agency.

And someone named Mr. Poopy Pants got California unemployment benefits.  

Those are just a few of the startling facts sprinkled through a House of Representatives Committee on Oversight and Accountability report on the disaster that was the EDD during the pandemic.

The California State Auditor’s December 2025 report further paints a damning picture, designating eight state agencies as “high-risk” for waste, fraud, and abuse. The “high risk” agencies having doubled under Governor Newsom’s watch. 

Among the culprits: EDD’s persistent improper unemployment payments and poor claimant service; the Department of Social Services’ errors in CalFresh benefits, which could cost taxpayers an additional $2.5 billion annually under new federal rules; and the Department of Health Care Services’ $4 billion in questionable Medi-Cal disbursements due to eligibility mismatches.

As the Globe first reported, The auditor’s report exposed that welfare fraud has reached a breaking point. “The Auditor has officially designated the California Department of Social Services (CDSS) as a “High-Risk” agency due to chronic failures in the administration of the CalFresh (SNAP) program.”

The auditor highlighted mismanagement of $285 billion in federal COVID-19 funds, with unjustified allocations and unimplemented recommendations leaving billions vulnerable. Delayed financial reports from the Department of Finance and Controller’s Office have compounded these issues, potentially harming the state’s credit rating. The Department of Finance was found by the state auditor to be “High Risk.”

The report ultimately concludes that Gavin Newsom while in his final year as California governor, has upended the state’s financial structure, compromised public safety, and left the state’s infrastructure in far worse condition.

Adding to the litany of financial scandals is the U.S. Department of Housing and Urban Development (HUD) fiasco, where we reported that HUD uncovered $5.8 billion in improper rental assistance payments nationwide in FY 2024—11 percent of the total disbursed. California is featured prominently in the 185 page HUD report with payments to 30,000 deceased tenants, ineligible non-citizens, and over-income recipients.

HUD Secretary Scott Turner has paused funds, issued criminal referrals, and rolled out AI-driven fraud detection. This crackdown extends to homelessness programs, where Newsom has squandered $37 billion since 2019, per the California Legislative Analyst’s Office. The state now risks losing $250-300 million in Continuum of Care funding due to new HUD rules emphasizing accountability over the failed “Housing First” model. A related probe by U.S. Attorney Bill Essayli into homelessness fund corruption has already yielded initial indictments.

Newsom’s office swiftly dismissed the federal investigation as “MAGA made-up numbers,” touting the governor’s supposed blocking of $125 billion in fraud and labeling Trump a “deranged, habitual liar.”  Yet, the sophomoric name-calling and continued deflections ring hollow against the mountain of evidence provided by the nonpartisan State Auditor and Legislative Analyst’s office.

Newsom’s administration has doubled the number of high-risk agencies, ignored auditor recommendations and corrective actions, and sued HUD over reforms—actions that smack of desperation to preserve single-part rule and a a bloated, unaccountable, and opaque bureaucracy.