Is Minnesota or California the Fraud Capital of America?

Massive fraud in Minnesota, allegedly running into the billions, has caught the attention of California Rep. Kevin Kiley, who proclaims the Golden State “the fraud capital of America.” First on his list is $32 billion in unemployment fraud, which took place under Harvard Law alum Julie Su, former head of California’s Labor and Workforce Development Agency (LWDA), which oversees the state Employment Development Department (EDD).

On Su’s watch, the Golden State became an open door for fraudsters nationwide. A Northern California woman filed 100 fake claims, including one in the name of U.S. Sen. Dianne Feinstein. California prison inmates filed 35,000 claims totaling $140 million in benefits. 

Convicted murderers Scott Peterson and Cary Stayner filed fraudulent claims, and death row inmates, whose sentences Governor Gavin Newsom reprieved in 2019, filed 158 claims for $420,000 in benefits.

Fontrell Antonio Baines of Memphis, Tenn., better known as rapper “Nuke Bizzle,” filed 92 fraudulent claims resulting in more than $1 million in losses to EDD and the United States Treasury. While Bizzle “got rich off EDD,” as he said in his EDD video, legitimate claimants waited months for their benefits. In December 2022, Baines was sentenced to 77 months in federal prison on fraud charges and ordered to pay $704,760 in restitution to the EDD.

Julie Su was never held accountable and wound up being rewarded. Joe Biden tapped her for federal labor secretary, and a Sept. 21, 2023, ruling by the Government Accountability Office (GAO) enabled Su to continue serving without confirmation by the U.S. Senate.

Over in Minnesota, Governor Tim Walz touts his “aggressive” record of combating fraud. Pepperdine University professor Steven F. Hayward thinks Walz is lying, and explains the dynamics behind the massive fraud:

The thing to be understood is that while the left has mostly abandoned old-fashioned industrial-union socialism — that is, government ownership of the means of production and/or rigid and detailed central planning of the economy — they have not given up on radical redistribution. And if our political system won’t deliver on a universal basic income (and confiscatory taxes on “the rich” who pay the majority share of income taxes already), then the hodge-podge of social service programs with porous eligibility standards and lax oversight is a good proxy for income redistribution. In other words, leftists don’t recognize what’s going on as fraud at all. It’s not a bug, it is a feature. The imperative of the left is “redistribution by any means necessary.” Things like the COVID “emergency” are ideal for ratcheting up income transfers.

It was during that “emergency” that Julie Su looked the other way at $32 billion in unemployment fraud. Rep. Kiley also cites $24 billion in homeless funds “lost,” $18 billion on a nonexistent bullet train, and $650 million on a scrapped 911 system. Consider also the state’s Community College System.

As CalMatters reports, in 2021, about 20 percent of the applications were fake. By 2024, the rate had risen to 25 percent, and by 2025, the fakes accounted for 34 percent. Over 12 months in 2024-25, community colleges gave away “more than $10 million in federal dollars to fake students and over $3 million in state money.” Last June, the Los Angeles Times reported, “12 million fake students applied to California Community Colleges Last Year. What is being done?” By all indications, not much, if anything.

In December, California’s state auditor issued a report citing “updates to the seven existing high-risk state agencies and statewide issues that include the Employment Development Department, the State’s management of federal COVID funds, the State’s financial reporting and accountability, the Department of Health Care Services, information security, the California Department of Technology, and water infrastructure and availability.” The “high-risk” designation involves waste, fraud and mismanagement, and the audit also “initiated more in-depth high-risk audits of Medi-Cal eligibility determinations and the State’s financial reporting and accountability.”

Back in 2017, State Auditor Elaine Howle uncovered a secret slush fund of $175 million in the office of University of California President Janet Napolitano, at a time when she was pushing for tuition hikes. State Attorney General Xavier Becerra declined to investigate, and nobody was held accountable. Maybe Professor Hayward and Rep. Kiley are both right. The fraud is part of the redistributionist plan, and California is the nation’s fraud capital. In 2026, we’ll have to see what happens.

Now, New York Mayor Zohran Mamdani has tapped Julie Su as “deputy mayor for economic justice,” a newly created position. “I’m aware of the deputy mayor’s record, and I’m very excited to have her,” Mamdani told reporters. In 2026, we’ll have to see what happens.