California has lost at least $180 billion to fraud, officials and experts say, a staggering toll that covers the years of Gavin Newsom’s governorship and reaches back to the state’s pandemic response. The money flowed through programs meant to cushion the blow of Covid-19, and one former investigator says the theft was obvious almost from the start.
Fourteen months after Newsom began his first term, the pandemic swept the world and roughly 2.7 million Californians eventually lost their jobs. The state’s Employment Development Department began sending unemployment insurance payments, and criminals from around the world reportedly started siphoning cash almost immediately.
Haywood Talcove, who pressed federal officials to stop the flow, said he was begging them not to let the money go out like that because it was going to be the biggest fraud in the history of the country. He said the state “literally suspended all of the rules” for the unemployment insurance program, making it possible for anyone to get the benefit even if they were not entitled to it. “It was very intentional,” Talcove said. “They knew what they were doing.”
California’s unemployment insurance system was built to move fast in an emergency, but that speed became an open door when the state turned on the cash machine. The estimate of at least $180 billion is part of a broader picture of fraud that officials and experts say has also touched Medicaid, failed homeless initiatives and welfare programs.
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The loss lands hard in a state that collects some of the nation’s highest income, business and fuel taxes and still spends more than $300 billion a year. Roads are crumbling, wildfires have left neighborhoods in ash, and drug addiction and homelessness remain widespread, while billions more go to welfare programs that never seem to lift anyone out of poverty. Talcove said the scale of the damage eventually overwhelmed the system. “But it caught up to them because it just got so out of control,” he said.
The question now is not whether the fraud happened. It is how much more was lost while California was trying to keep its economy alive, and whether the state can close the gaps that let so much money leave so fast.
For readers tracking the fallout from a system that lost control, the scale here is the story: billions vanished in plain sight, and the bill is still being counted.
