Real, Fake or Overblown? Sorting Fact From Fiction in Fraud Allegations Surrounding Newsom, California

The year opened with President Trump declaring that “the fraud investigation of California has begun,” a move that quickly set off a barrage of allegations from his administration and Republican allies questioning the integrity of state programs and the leadership of Gov. Gavin Newsom.

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Newsom has dismissed the claims as politically driven, arguing that the administration is singling out Democratic-led states while ignoring similar problems elsewhere. The governor also responded by highlighting fraud cases in Republican-led states and by criticizing Trump’s own record and business dealings.

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Audits and prosecutions show that California has experienced its share of fraud, particularly in complex programs involving emergency aid, healthcare and unemployment insurance. The state paid out billions of dollars in fraudulent unemployment claims during the COVID-19 pandemic, and the California State Auditor has issued repeated warnings about state agencies that are “at high risk for waste, fraud, abuse, or mismanagement.”

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In a trio of Jan. 6 letters addressed to Newsom, the U.S. Department of Health and Human Services said it was concerned there had been “potential for extensive and systemic fraud” in child care and other social services programs that rely on federal funding, and had “reason to believe” that the state was “illicitly providing illegal aliens” with benefits.

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A federal judge subsequently blocked the Trump administration temporarily from freezing those funds. In that ruling, U.S. District Judge Vernon Broderick said he didn’t understand why the government was making it harder for states to access child-care money before any wrongdoing had been discovered.

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Days after Trump’s social media post about alleged corruption under Newsom’s watch, Dr. Mehmet Oz, administrator for the Centers for Medicare & Medicaid Services, and Bill Essayli, the top federal prosecutor in Los Angeles, held a joint news conference on public benefits fraud, but offered few details about the scope of their investigation.

The officials accused “foreign actors” of draining billions from public healthcare programs in California, referencing bogus hospice providers first exposed by The Times in 2020 and later investigated by California Atty. Gen. Rob Bonta.

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Bonta’s office said it has filed criminal charges against 109 individuals over hospice fraud-related offenses and launched dozens of civil investigations.

Newsom, speaking at a Bloomberg event Thursday in San Francisco, said the allegations have been recycled and misrepresented. Later that day, he filed a civil rights complaint against “baseless and racist allegations against Armenian Americans in California” made by Oz.

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The state’s Employment Development Department, known as EDD, reported in 2021 that approximately $20 billion was lost due to fraud, largely in the federal Pandemic Unemployment Assistance (PUA) program.

While unemployment fraud was rampant across country during the pandemic as governments rushed to provide support, California’s problems stood out.

The state itself admitted in 2021 that it failed to take precautions that had been implemented in other states, including using software to identify suspicious applications and cross-checking benefit claims against personal data on state prison inmates.

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EDD’s own tracker said the state has recovered more than $6 billion in stolen funds and opened more than 2,300 unemployment fraud investigations since the pandemic began, leading to nearly 1,000 arrests and more than 670 convictions.

The department said it has expanded fraud enforcement through partnerships with law enforcement, new identity-verification technology and a dedicated fraud task force.

But, reports of mismanagement at EDD have continued. A recent audit also found EDD wasted $4.6 million by paying monthly service fees for more than 6,200 cellphones that went unused for at least four consecutive months between November 2020 and April 2025 — including some devices that were inactive for more than four years.

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State audits show vulnerabilities persist. The California State Auditor has repeatedly flagged Medi-Cal eligibility discrepancies that have exposed the state to billions of dollars in questionable payments, while also warning that weaknesses in information security across state agencies remain a high-risk issue.

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Who deserves credit when fraud is prosecuted has also become a point of contention. After a man was arrested last month for fleecing L.A.’s homeless services program for $23 million, critics of Newsom were quick to blame the governor. Newsom responded by saying the case was uncovered by local investigators working with law enforcement, which he added is “exactly the kind of accountability and oversight the state has pushed for.” (The Los Angeles district attorney’s office ran a parallel, independent investigation.)

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