How Minnesota’s Fraud Scandal Exposes California

Fraud isn’t a theoretical problem. It’s real, it’s measurable, and it robs taxpayers of the money they work hard to earn. In recent weeks, Minnesota has become the clearest example of what happens when oversight fails, and quite frankly, no one is watching the money. Now, the federal government is signaling that Minnesota may just be the beginning, and that California could be next. After all, if this level of fraud was hiding in plain sight in Minnesota, what do you think is hiding in California?

The “Minnesota Model”

Multiple fraud scandals have been exposed in Minnesota within recent weeks. YouTuber Nick Shirley uncovered multiple daycare centers in the state that have been receiving public funds without providing the services they advertise.[1] This caught national attention, but it was only the tip of the iceberg. A group called “Feeding our Future” committed what is being called “the largest pandemic era fraud in the United States,” by claiming to distribute meals to schools and after-school programs, when in reality the group submitted fake meal count sheets and invoices and thus perpetuated a $250 million dollar fraud scheme.[2] Then, a Minnesota housing program was shut down after it was revealed to have submitted fake and inflated bills to enrich those running the program. And probably worst of all, a state program that claimed to provide services to children with autism was also exposed for fraud, as its employees submitted false claims to the state, paid kickbacks to parents to enroll their children in the program, and pocketing the extra cash. These fraud scandals put together are estimated to amount to $9 billion dollars in fraud of taxpayer money, distributed by the state.[3]

This has sparked the Trump Administration to focus on cracking down on state fraud. On January 8th, President Trump issued an announcement that he was creating a division within the Department of Justice for national fraud enforcement. It’s stated goals are to “combat the rampant and pervasive problem of fraud in the United States,” and to “investigate, prosecute, and remedy fraud affecting the Federal government, federally funded programs, and private citizens.”[4] Specifically in Minnesota, the federal government has frozen hundreds of millions of dollars in funding to various programs as they investigate the fraud. But President Trump isn’t stopping there – he has made it clear that he wants to uproot and expose fraud in other states as well. His administration has attempted to cut off $10 billion dollars in Health and Human Services funding across 5-Democrat run states in a preemptive attempt to combat potential fraud.[5]

The “Minnesota Model” has shown that fraud isn’t a hypothetical – it’s real, tangible, and does harm to taxpayers, who entrust their money to their government to manage wisely and improve their lives as their constituents. It is time to stop covering up fraud in states like Minnesota, and to start looking behind the curtain not just at fraud, but at waste and mismanagement as well. Which brings us to California – or as some have so lovingly called it, Califraudia.

Where to Look Next: Califraudia

California receives more federal funding than almost any other state, with federal funds driving nearly one-third of its state budget.[6] Wherever there are large budgets, complex programs, and low oversight, there is a high risk for fraud. And, in a state where leaders throw money at problems, yet those problems remain to be solved, it’s worth asking: where is the money going, and do we have assurance that it is being spent wisely and stewarded well? Which, let’s face it, is not likely with our government leaders in charge. California runs massive healthcare programs, expansive education financing, and homelessness funding with limited outcome tracking. This makes California the logical next place to look for fraud after what was exposed in Minnesota.

This is why President Trump, at the same time that he announced the new DOJ Fraud Division, also announced that he has frozen federal funding for various programs in California and would be launching a fraud investigation into the state.[7]

To no one’s surprise, Governor Gavin Newsom strongly disagrees with the allegation that California has hidden fraud in its state programs and has opposed the fraud investigation, saying that he “can’t stand fraud, can’t stand waste and abuse.”[8]

He is framing this as political retaliation and federal overreach, calling Trump a “deranged, habitual liar.”[9] But his response has not meaningfully addressed auditor findings, oversight failures, and abysmal program performance. In fact, in a 2025 report, a non-partisan state auditor designated eight of California’s state agencies as “high risk.”[10] This designation specifically means they are likely to have waste, fraud, abuse, and mismanagement of funds occurring. This designation isn’t a political one, it’s a genuine warning level by an independent third-party that says oversight in California’s largest programs is weak, controls are ineffective, and that ultimately, money is just not being tracked. These agencies included: the California Department of Social Services, the Employment Development Department, the State’s Management of COVID-19 Funds, the Controller’s Office for Financial Reporting and Accountability (ironic), the Department of Health Care Services, the California Department of Technology, the Department of Water Resources, and the California Governor’s Office of Emergency Services.[11]

These are massive departments, responsible for core functions of social and integral services across our state. And so, these results should be taken extremely seriously! But Gavin Newsom seems to be following the same pattern he usually does – he denies the premise that fraud could be in California, he attacks the messenger by launching personal attacks against President Trump, and he avoids specifics to answer why these fundamental state agencies are being flagged as high risk for fraud. President Trump doesn’t need to have any “special knowledge” to realize California is wasteful – we have an audit report stating publicly as much, and we can all see the waste and abuse with our own eyes. Our Governor is missing a serious reckoning with accountability and with honesty about what’s going on under his watch.

Potential Sources of Fraud in California

What exactly will the Trump Administration investigate? Well, there is no shortage of places to look.

The first major category is healthcare spending. California administers massive amounts of healthcare spending, primarily through Medi-Cal. This accounts for nearly $50 billion of the general fund and is second only to K-12 education costs.[12] California uses a blend of federal and state funds to manage these costs, meaning both federal funding and taxpayer dollars are on the line. Historically, healthcare fraud has consistently been one of the largest and most costly categories of fraud in our nation’s history[13] – so it makes sense that for a state with exorbitant amounts of healthcare spending, we should have a decent level of concern about fraud risk.

In fact, as of April 2025, eligibility discrepancies for Medi-Cal/Medicaid between county and state systems remain high, previously estimated to have resulted in about $1.9 billion in questionable payments.[14] When eligibility data doesn’t match across systems, people who shouldn’t receive Medi-Cal may continue getting benefits, leading to improper or potentially fraudulent federal payments. We’ve especially seen eligibility questions in the media in recent years due to California’s policy decision in the past to pay for the healthcare of illegal immigrants – a decision that ballooned costs by $6 billion over what original estimates were.

Next is education spending, specifically as it relates to student loans and aid. It was reported in April of last year that within the preceding 12 months, California community colleges had lost more than $10 million dollars to scammers posing as students in order to receive government financial aid.[15] That number is over double what it was in previous years, evidencing a concerning rise in education fraud – and that’s just the fraud we know about. Republicans began calling on the U.S. Education Secretary, Linda McMahon, to further investigate this and conduct an independent audit to stop wasteful spending.[16]

Then there are more obvious programs where Californians should already be questioning – where has our money gone? Most notably: homelessness. Our state has spent over $24 billion dollars on alleged homelessness initiatives, and yet our leaders literally have not been able to give an account for where the money went and how it has improved outcomes.[17] Meanwhile, the homelessness problem clearly has not been resolved and only seems to grow in our major cities. In a 2024 audit, results found that the state programs it was trying to analyze didn’t even have enough data on spending for the auditors to determine the effectiveness of the programs.[18] It was so bad that a federal judge blasted Mayor Karen Bass and LA County Supervisor Kathryn Barger in court over the lack of accountability, saying, “Nobody is asking our providers what they did or what services they performed. We may have providers who committed fraud, and we may never know.”[19] He went on to place responsibility squarely on the shoulders of our beloved Governor, saying, “Get Gavin down here. He has a blog and he's busy blogging. I'll request him here and embarrass him.”[20] Oh but remember, Gain Newsom hates fraud, he said so himself! And so, there’s no fraud in California!

This program alone is absolutely ridiculous. There is no valid reason our government leaders should be allowed to take our money, waste it, show no positive outcomes of their spending, and then fail to even show us where the money went. But homelessness isn’t the only program like this – we once again have to circle back to a little project known as California’s high-speed rail project. Just to remind you, this is supposed to be a high-speed rail connecting Los Angeles to San Francisco, and it was approved all the way back in 2008. There are seven total segments of the railway, but only ONE has been actively worked on. That one stretch alone has a cost estimate of $35 billion dollars – far exceeding the initial estimates for the entire railway project![21] The other segments aren’t even funded, meaning they can’t make meaningful progress, and the total estimated cost has over tripled from where it started – including funding from federal government grants. So, if you want to talk waste, fraud, and abuse, look no further than the mythical high-speed rail project – which Gavin Newsom is just as committed to as ever.

These programs don’t even mention other examples of mismanagement, like of pandemic relief funds, of unemployment insurance fraud, of disaster relief misuse – these are areas where our state has admitted losses in the millions to billions dollar range. These are also the exact agencies called out in the independent auditor’s report as high-risk, flagging that to an outside third-party, there has definitely been abuse occurring here. 

Why Uncovering Fraud Matters

Here’s the thing: fraud isn’t victimless. It is SO easy, especially when we start to talk about millions and billions of dollars, to let that be intangible, to feel like we can’t even grasp or fathom that amount of money, and so we aren’t even going to try. It is really easy to feel like budgets and spending are confusing, that we don’t have all the information to prove fraud, and that we can’t really make a difference anyway. But every dollar stolen – from small amounts to billions – every dollar wasted is blatant disrespect to you as the taxpayer, and is failed leadership on part of our governor, our mayors, and our city leaders. You don’t pay taxes for our leaders to spend however they like – you pay taxes to fund the programs that benefit yourself, your community, and your state. If your money is NOT being spent in that way, if it is being spent on the whims and feelings of corrupt politicians – or worse, on committing fraud to enrich their pockets – then they have completely and totally failed at the responsibility they owe to you. 

There is a moral cost to hiding fraud. Failure to uproot the abuse protects the corrupt while punishing the honest, and that is fundamentally wrong. Systems that refuse to pursue transparency, that can’t explain where the money is going or what it is doing, those systems enable wickedness and reward deception. It must stop today. Accountability should be our top demand when it is so clear that our state has wasted the finances it has been entrusted to steward. Regardless of if you like President Trump or agree with him on other policies – every Californian should be outraged by the total fraud committed in our state and should applaud every attempt to root it out, expose it, and put an end to it.

So, when Gavin Newsom says “there’s no fraud in California” – Governor, we don’t believe you! We are seeing truth come to light in Minnesota, and it is time to see it come to light here in California. Because fraud matters, deeply. And truth is the prerequisite for justice.

References:

[1] Kaplan, Jonah. “How a Viral Video Prompted Investigations Into Alleged Fraud at Day Care Centers in Minnesota.” CBS News, December 30, 2025. https://www.cbsnews.com/news/minnesota-fraud-nick-shirley-video-day-care-investigation/.

[2] Kaplan, Jonah, and Joe Walsh. “Everything We Know About Minnesota’s Massive Fraud Schemes.” CBS News, January 5, 2026. https://www.cbsnews.com/news/minnesota-fraud-schemes-what-we-know/.

[3] Ibid.

[4] The White House. “Fact Sheet: President Donald J. Trump Establishes New Department of Justice Division for National Fraud Enforcement,” January 8, 2026. https://www.whitehouse.gov/fact-sheets/2026/01/fact-sheet-president-donald-j-trump-establishes-new-department-of-justice-division-for-national-fraud-enforcement/.

[5] The National News Desk. “Trump Administration Freezes $129M in Minnesota Food Stamp Funding Amid Fraud Scandal.” KATV, January 13, 2026. https://katv.com/news/nation-world/trump-administration-freezes-129m-in-minnesota-food-stamp-funding-amid-fraud-scandal.

[6] California Budget & Policy Center. “Federal Funds Drive One-Third of California’s State Budget - California Budget &Amp; Policy Center,” September 15, 2025. https://calbudgetcenter.org/resources/federal-funds-drive-one-third-of-californias-state-budget/.

[7] Carbonaro, Giulia. “Donald Trump Issues Ultimatum to California Amid Major Fraud Probe.” Newsweek, January 13, 2026. https://www.newsweek.com/donald-trump-issues-ultimatum-to-california-amid-major-fraud-probe-11328692.

[8] Gutierrez, Melody. “California Pushes Back as Trump Moves to Withhold Child-Care Funding.” Governing, January 7, 2026. https://www.governing.com/finance/california-pushes-back-as-trump-moves-to-withhold-child-care-funding#:~:text=The%20president%20cites%20fraud%20concerns,the%20accusation%20as%20%22deranged.%22.

[9] Ibid.

[10] Grimes, Katy. “California State Auditor: Governor Newsom and 8 Agencies Named ‘High-Risk’ – California Globe.” California Globe, December 15, 2025. https://californiaglobe.com/articles/california-state-auditor-governor-newsom-and-8-agencies-named-high-risk/.

[11] Alig, Anthony. “2025-601 State High-Risk Audit Program.” California State Auditor, December 18, 2025. https://www.auditor.ca.gov/reports/2025-601/#contents.

[12] California Legislative Analyst’s Office. “The 2025-26 California Spending Plan: Health,” October 16, 2025. https://lao.ca.gov/Publications/Report/5075#:~:text=Overview,significant%20General%20Fund%20budget%20program.

[13] National Health Care Anti-Fraud Association. “The Challenge of Health Care Fraud,” n.d. https://www.nhcaa.org/tools-insights/about-health-care-fraud/the-challenge-of-health-care-fraud/#:~:text=Everyone%20Shares%20the%20Burden%20of,as%20reduced%20benefits%20or%20coverage.

[14] Alig, “2025-601 State High-Risk Audit Program.”

[15] Echelman, Adam. “Fake Student Aid: California Colleges Detect More Fraudsters Stealing Millions.” CalMatters, April 9, 2025. https://calmatters.org/education/higher-education/2025/04/financial-aid-fraud-2/.

[16] Echelman, Adam. “Fraud in California Community Colleges Triggers Call for Trump Investigation,” CalMatters, April 25, 2025, https://calmatters.org/education/higher-education/2025/04/community-college/.

[17] Mason, Dave. “Prosecutor Calls Newsom ‘king of Fraud’ for Oversight Failures.” The Center Square, January 8, 2026. https://www.thecentersquare.com/california/article_09959d77-522e-4ed5-bfef-65ebf695fb69.html.

[18] Kendall, Marisa. “California Fails to Track Its Homelessness Spending or Results, a New Audit Says.” CalMatters, April 10, 2024. https://calmatters.org/housing/homelessness/2024/04/california-homelessness-spending/.

[19] Haskell, Josh. “Federal Judge Questions LA Leaders About Wasteful Homeless Spending Following Audit.” ABC7 Los Angeles, March 28, 2025. https://abc7.com/post/federal-judge-questions-los-angeles-leaders-wasteful-homeless-spending-following-audit/16092988/.

[20] Ibid.

[21] Nicholls, Flynn. “How California’s High-Speed Rail Line Will Advance in 2025.” Newsweek, December 25, 2024. https://www.newsweek.com/how-california-high-speed-rail-line-will-advance-2025-2004792.