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By Joshua Rhett Miller
Senior Reporter
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Fraud, waste and abuse of taxpayer funds in California is likely to exceed $250 billion, a Republican gubernatorial candidate claims, but Newsom’s office flatly dismissed the report, which was not supplied to Newsweek prior to publication.
Steve Hilton, who is vying to replace Governor Gavin Newsom in November, said the preliminary review of massive purported fraud across California’s government programs follows hundreds of tips submitted via Califraud.com, a website he launched a month ago along with Herb Morgan, a fellow Republican running for state controller.
The report, dubbed “CALIFRAUDIA,” uncovered recurring allegations of fraud, waste, and abuse across several areas of state government based on evidence from whistleblowers, contractors, and service providers, Hilton said.
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“That’s been a month now,” he told Newsweek of the ongoing probe during an interview on Tuesday. “And it was all done on the basis on anonymity. And we’ve had hundreds of replies on that — not all of them you would say would be serious examples of what we’re looking for — but enough that we’re able to start to paint a picture of the scale of this.”
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Hilton alleges widespread abuse in California’s public pension and retirement systems, claiming practices like “double-dipping” and “spiking” allow some government workers to unlawfully bilk state coffers.
“We had lots of stories about contracting and contracts that are inflated, and corruption in the contracting system — again, another example of taxpayer money being spent in ways that it was never intended to,” Hilton said.
The review also found allegations of pay abuse within the state’s K-12 education system, including instances of unneeded job reclassifications for higher salaries. All told, the malfeasance among state programs is expected to exceed $250 billion, Hilton said.
“What we’re trying to do is paint a picture,” he explained. “With, you know, a heavy caveat as to the accuracy of the number, but we think it’s going to be at least $250 billion … and probably more than that once you get into it.”
Newsom spokeswoman Izzy Gardon told Newsweek in a statement Tuesday, “Who is Steve Hilton? We don’t respond to MAGA made-up numbers...In the actual world where adults govern, Governor Newsom has been cleaning house. 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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Hilton, a former Fox News host who previously served as director of strategy for British Prime Minister David Cameron, said he and Morgan held a press conference Monday outside the Employment Development Department in San Francisco to highlight California’s unemployment insurance losses totaling more than $55 billion.
The review also found potential wrongdoing in housing and homelessness programs, including grant-funded nonprofits and intermediary organizations that receive billions in public funds.
Hilton said the purported $250 billion fraud in California occurred within the last five years, roughly coinciding with the height of the COVID-19 pandemic.
“What’s actually happened is the pandemic spending has been baked into the regular spending trajectory,” he said. “That’s what’s happened. So my estimate is that we’re really talking about the explosion of spending around the pandemic which has been carried into normal budgeting.”
President Trump, meanwhile, dubbed California “more corrupt than Minnesota” while announcing a federal probe into alleged fraud in the state early Tuesday. Minnesota Governor Walz announced he planned to abandon his quest for a third term amid an ongoing multibillion-dollar fraud scandal. A day earlier, Hilton and Morgan wrote a letter to Attorney General Pam Bondi requesting an investigation into purported “systemic fraud and fiduciary negligence” in state-funded programs.
“We are writing to you today in our capacities as candidates for Governor and State Controller of California to formally request an immediate and comprehensive federal investigation into the widespread fraud, waste, and systemic mismanagement of taxpayer funds within the State of California,” the January 4 letter reads. “For too long, California’s one-party government has operated without the necessary checks and balances to protect both state and federal taxpayers.”
State auditors recently identified eight high-risk state agencies, including the California Department of Social Services, indicating the alleged fraud has reached a “breaking point,” the letter claims.
Hilton and Morgan asked Bondi to deploy inspectors from the FBI’s Public Corruption and Complex Fraud units to audit the flow of federal funds within California.
“We’re just at the beginning of this process,” Hilton told Newsweek. “What we’re doing with our analysis is laying out the kind of roadmap of how we will get to a detailed breakdown by saying these are the categories will need to look into.”
Hilton said he had informed the Trump administration of the findings prior to publication, but declined to discuss specifics.
"The truth is there's a lot of attention on this," he said. "There's a lot of people looking into it, quite rightly, so I wouldn't want to overclaim anything in terms of our part in that."
Newsom, for his part, countered Trump's announcement of a federal probe in a post late Tuesday.
"If Trump is serious about fraud, great — he’s got a partner in California in wanting to tackle it," Newsom's office posted on X. "But Trump is the biggest fraudster there is — $100s of millions wasted on illegal activity."
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