That is the title of a City Journal article by Chris Rufo and others. Exposure of industrial-scale fraud in Minnesota has led to heightened awareness of theft of taxpayer funds in other states, with California at the top of the list. The City Journal article is long and detailed; here are just a few highlights:
California is a cash machine. The state collects some of the country’s highest income, business, and fuel taxes, and now spends more than $300 billion per year. And yet, everywhere you look, California seems to be falling apart.
$300 billion a year is an astonishing amount, but, as the authors write, California’s infrastructure (highways, bridges, etc.) is among the worst in the country. Much of California’s spending is simply being stolen by criminals.
Californians are beginning to ask: Where is all this money going? On paper, it funds hospitals, universities, schools, prisons, infrastructure, and other public services. But beneath the surface, something else is happening that California Governor Gavin Newsom does not want you to see: massive, systematic, brazen fraud.
This is really a key point. Advocates of sky-high state spending will claim that it all goes to good causes–schools, health care for the poor, homelessness, etc.–but the reality is that those benign-sounding categories are largely a cover for corruption and crime.
Welfare fraud in California is so easy that foreign criminal gangs have gotten in on the action:
The scams began almost immediately, with criminals from around the world reportedly siphoning cash from the [unemployment insurance] program. In one case, a Romanian-led fraud ring orchestrated a $5 million unemployment-insurance scheme. Members allegedly “recruited potential [EDD-benefit] applicants through Facebook” and met them at “parks throughout Southern California to complete the application process,” according to the U.S. Attorney’s Office for the Southern District of California. “Applicants paid . . . a partial fee up front for assisting with fraudulent applications and another fee after applicants received EDD payments,” the office said. Many of the fraudsters wired the stolen funds to Romania.
One program after another has been a money machine for criminals. Health care, for example:
In one instance, Paul Richard Randall, Kyrollos Mekail, and Patricia Anderson allegedly “took advantage” of Medi-Cal’s loosened restrictions as part of a scheme that defrauded taxpayers of more than $178 million. The conspirators allegedly used a business called Monte Vista Pharmacy to process fraudulent prescriptions; Randall and others allegedly laundered the proceeds through third parties to fund kickbacks to Anderson and obscure the operation from law enforcement, according to a 2025 Department of Justice press release. Mekail had pleaded guilty to criminal charges in August 2024, and Randall is reportedly expected to do the same this year.
In another case, Terry Patton was charged with accepting more than $2.3 million in kickbacks and bribes from addiction-treatment facilities in exchange for patient referrals. Prosecutors say the patients were paid to attend the treatment facilities to which Patton had referred them.
In-Home Supportive Services, part of Medi-Cal, is another source of brazen fraud:
Between Newsom’s first budget and his most recent proposal, the state legislative analyst estimates that total IHSS costs will have swollen by around 170 percent, with $33.4 billion proposed for the next fiscal year, including $12.5 billion from the state. According to recent estimates, taxpayers are funding nearly 800,000 IHSS providers, who offer caregiving, cooking, shopping, cleaning, and laundry services to elderly and disabled people. In about 70 percent of cases, providers and recipients are family members. According to co-author Schrupp’s reporting, the IHSS program is responsible for 41 percent of all “job gains” during the Newsom administration.
The IHSS program almost seems designed to facilitate scams. According to sworn testimony summarized in the Sacramento report, IHSS participants have falsely represented recipients’ needs; misrepresented hours worked timecards; and even secured payment after a recipient has died. The system operates largely on trust, with providers “working” in the privacy of the recipient’s home. The state’s IHSS protocols explicitly prohibit random unannounced home visits, which would be the best tool to uncover any potential rackets.
The following is an extraordinary story; the dollars involved were supposedly combating homelessness:
In a separate case, Steven Taylor was charged for having allegedly used “fake bank statements and false cash representations” to secure loans to fund his real-estate business. Taylor then allegedly used those illegitimately obtained loans to purchase an $11.2 million home, which he sold for $27.3 million to a publicly funded homeless-housing developer.
And of course, Medicaid is the biggest of all frauds. Experts estimate that at least 15% of all Medicaid spending nationwide–around $1 trillion annually–is stolen. In California, the figure is probably 20%.
Comparing the California case with our experience in Minnesota, the common denominator is that state officials have zero interest in preventing or punishing fraud. State governments are awash in money, and in states like California and Minnesota, they really don’t care where it goes. Writing checks means buying influence, so from their point of view, the more checks they write the better.
Consequently, any effective enforcement activity has been federal:
Federal prosecutors, however, are stepping up enforcement. Last year, Bill Essayli, first assistant U.S. attorney for the Central District of California, announced the creation of a federal task force to combat fraud and corruption in the state’s homelessness programs. The task force has already brought charges in several multimillion-dollar homelessness-fraud cases—and Essayli has vowed that more are coming. “California has spent $24 billion in the last five years on homelessness, and no one can account for where that money has really gone,” Essayli said in January. Gavin Newsom, he added, is the “king of fraud.”
As the authors note, Tim Walz’s political career ended because of public exposure of his administration’s corruption. Is it too much to hope that the same will happen to Gavin Newsom? Probably. But across the country, voters are becoming aware that their tax dollars have largely gone to finance crime. Are we honest taxpayers nothing but suckers? is a question that is being asked frequently. It appears that the answer is Yes. How much impact that will have at the polls remains to be seen.
