A Federal Probe Takes Shape
A sweeping federal fraud investigation into California has officially begun, placing Governor Gavin Newsom at the center of a growing political and legal storm. The probe is being driven by the Trump administration and led on the prosecutorial side by First Assistant U.S. Attorney Bill Essayli, who has openly accused California leadership of enabling massive fraud in taxpayer funded programs.
Essayli, speaking on Fox and Friends, labeled Newsom the “king of fraud,” arguing that California has spent roughly $24 billion on homelessness over the past five years without being able to clearly account for where the money went. According to Essayli, the investigation has already produced federal charges involving millions of dollars and he says those cases represent only the beginning.
Essayli launched a specialized task force in April focused on corruption in California programs, with an emphasis on homelessness and social services. The task force has already charged two individuals accused of exploiting real estate projects tied to the homelessness system for personal profit.
He has stated that millions of dollars in fraud have already been charged and that additional indictments are expected soon, possibly within the month. Essayli directly accused Newsom and Democratic leadership in California of allowing fraud to persist through weak oversight and lack of accountability.
Funds Frozen and Federal Actions Against California
The investigation has already triggered concrete financial consequences. The Trump administration has paused more than $10 billion in federal funding to five Democrat led states, including California.
Programs affected include the Child Care Development Fund, Temporary Assistance for Needy Families known in California as CalWORKS, and the Social Services Block Grant. Altogether, more than $7.3 billion in TANF funding, nearly $2.4 billion in child care funds, and about $869 million in social services funding are at stake.
Federal officials confirmed that additional verification and documentation will now be required before funds are released, citing concerns that taxpayer money has been fraudulently diverted and in some cases provided to noncitizens.
What Fraud Is Being Investigated
The probe centers on alleged misuse of federal and state funds in homelessness services, child care subsidies, welfare programs, and other social services. Federal prosecutors say recent cases uncovered schemes where providers billed for services never delivered and redirected money for personal use.
The investigation is also informed by the massive fraud uncovered in Minnesota, where prosecutors estimate that up to half of roughly $18 billion paid through state run programs since 2018 may have been fraudulent. Federal officials believe similar networks may extend into California.
California has acknowledged past failures, most notably during the COVID era when billions in unemployment payments were later deemed potentially fraudulent due to weakened safeguards at the Employment Development Department.
Why the Administration Demanded Recipient Lists
As part of the funding pause, federal agencies demanded that California provide detailed lists of individuals and organizations receiving benefits. Letters from the Administration for Children and Families requested verified attendance records for subsidized child care, including logs of hours and payment details.
Another letter requested names, addresses, Social Security numbers, and dates of birth for TANF recipients. Federal officials said these demands stem from heightened concerns following recent prosecutions and allegations that funds were diverted away from eligible American families.
Officials also cited concerns that California may be providing benefits intended for citizens and lawful permanent residents to illegal immigrants.
Trump and Allies Turn Up the Heat
President Donald Trump has been blunt in his assessment. Posting on Truth Social, Trump declared that a fraud investigation of California had begun and claimed the state is “more corrupt than Minnesota,” using a derogatory nickname for Newsom.
Vice President JD Vance echoed those concerns, accusing California of openly advertising welfare benefits regardless of immigration status and arguing that political corruption has allowed people to profit from taxpayer generosity.
Homeland Security Secretary Kristi Noem went further, warning Newsom directly that federal authorities are “coming” to California and promising arrests tied to fraud networks linked to public programs.
Conservative activists and commentators have also rallied behind the investigation, arguing that California represents years of unchecked one party rule and systemic abuse of taxpayer funds that only federal intervention can expose.
Newsom and Democratic Leaders Push Back
Newsom’s press office dismissed the investigation as politically motivated, calling Trump a habitual liar and accusing him of using fraud claims as a pretext to punish blue states. Newsom himself has said he welcomes investigations into fraud but argues that freezing funds harms working families who rely on child care and social services.
California officials insist the state aggressively investigates fraud and say there is no immediate cutoff of funding. They also note that California has blocked what it claims is more than $125 billion in fraud over time and has arrested numerous individuals accused of abusing public programs.
Democratic lawmakers have called the funding pause an illegal and ideologically driven attack, arguing that similar or worse fraud has occurred in red states without triggering comparable punishment.
From a political perspective, the investigation lands at a critical moment for Newsom, who has acknowledged he is considering a future presidential run. Supporters of the probe argue that the scrutiny is long overdue and that California’s scale of waste and mismanagement demands accountability at the highest level.
At the same time, even critics acknowledge that the investigation is also a powerful political weapon. Tying Newsom to fraud narratives, frozen funds, and federal raids serves to damage his national image before a potential campaign can begin.
Whether the probe ultimately produces sweeping indictments or becomes mired in court battles, one thing is clear. Newsom’s brand as a competent national leader is being aggressively challenged. For his opponents, tarnishing that image is not collateral damage. It is the point.
