Fraud, waste, and abuse in California could hit $250 billion, according to a new analysis of hundreds of whistleblower tips commissioned by Republican gubernatorial candidate Steve Hilton and state controller candidate Herb Morgan.
The “Califraudia” preliminary report alleges a systematic looting from state agencies. The duo claimed Monday that the eye-popping, multibillion-dollar estimate underscores the “urgent need for formal investigation and audit” as a matter of “basic fiscal responsibility.”
Some of the areas they claim are fraught with abuse include housing and homelessness programs, including grant-funded nonprofit and intermediary organizations receiving billions in public funds. They also cited issues at the California Health and Human Services Agency, including Medi-Cal, the state’s Medicaid program, and CalFresh, the state’s food stamp program, noting “known eligibility, verification, and payment weaknesses.”
The California state auditor’s recent High Risk Report had already flagged problems across CalFresh, Medi-Cal’s eligibility, and financial reporting. Hilton and Morgan also allege widespread pay-to-play abuse within the state’s K–12 education system and noted fake community college applications were created to steal student aid funds.
They also spotlighted unemployment insurance grifting during the pandemic. The state has already admitted to being defrauded of more than $55 billion in recent years by people who may not have been eligible for jobless claims. A state audit painted the California Employment Development Department as chaotic in its handling of overpayments. Most of the money will likely never be recovered. Some of the overpayments were the result of massive pandemic-related fraud, estimated at $20 billion.
It is unclear whether Hilton and Morgan have actually found anything new or are recycling reported issues. The information used for the preliminary report came from tips submitted by whistleblowers, citizens, contractors, and service providers on Califraud.com, a live intake platform Hilton launched a month ago.
Hilton blamed the state’s problems on Gov. Gavin Newsom (D-CA) and Democrats, who he accused of single-handedly destroying the state. Hilton told the Washington Examiner that 16 years of one-party rule have led to a culture of corruption and complacency on an “epic scale” and a tolerance for mismanagement and incompetence.
“Gavin Newsom and the corrupt Democrat machine have stolen our money and handed it out to corrupt cronies and political front groups,” Hilton said at an event announcing his report findings. “As usual, we see in California this terrible combination of corruption, ideological extremism, and incompetence. It’s the worst fraud in America, by far, and Newsom is now, on every possible measure: ‘MUGA’ – the Most Useless Governor in America.”
Hilton and Morgan have called for a top-to-bottom independent audit of Medi-Cal, CalFresh, and housing and homelessness programs.
“Audits in California tend to happen after the money is already gone,” Morgan said. “That is not accountability. That is a post-mortem. Absent decisive executive leadership, professional financial stewardship, and comprehensive audits, these failures will continue.”
The duo has also written a letter to Attorney General Pam Bondi and the federal inspectors general, demanding that the FBI’s Public Corruption and Complex Fraud units investigate their allegations. If elected in November, Hilton and Morgan pledge to create a joint federal-state task force with authority to recover assets.
“Who is Steve Hilton? We don’t respond to MAGA-made-up numbers,” Newsom spokeswoman Izzy Gardon told the Washington Examiner in a statement.
“In the actual world where adults govern, Governor Newsom has been cleaning house,” Gardon said. “Since taking office, he’s blocked over $125 BILLION in fraud, arrested criminal parasites leaching off of taxpayers, and protected taxpayers from the exact kind of scam artists Trump celebrates, excuses, and pardons.”
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The race to succeed Newsom, who is term-limited, has already attracted a large and diverse field. More than 95 candidates have submitted paperwork indicating their intention to run, though the filing period does not begin until Feb. 9.
Hilton is among the Republican candidates gaining traction. He has spent the past few years touring California and hammering home affordability issues in a state that already has the highest gas prices in the nation, a crippling housing crisis, and widespread economic instability.
