Trump Announces Federal Fraud Investigation Into CA After Minnesota Scandal

President Donald Trump announced Tuesday that a federal investigation into alleged fraud in California is now underway, signaling a widening crackdown as his administration moves aggressively to confront what it says is systemic abuse of taxpayer-funded social programs in Democratic-run states.

“California, under Governor Gavin Newscum, is more corrupt than Minnesota, if that’s possible,” Trump wrote on Truth Social, using a mocking nickname for Gov. Gavin Newsom. “The fraud investigation of California has begun.”

While the president did not immediately outline the full scope of the California probe, the announcement comes less than 24 hours after his administration froze all federal childcare payments to Minnesota amid explosive reports that Somali-run daycare and healthcare operators siphoned more than $9 billion in taxpayer funds.

Trump’s declaration marks the first time California has been formally tied to the expanding federal effort to root out fraud in government welfare programs. The move follows a series of warnings from the president aimed at Democratic governors he has accused of gross mismanagement and corruption.

“Tim Walz destroyed Minnesota,” Trump said Monday. “But Newsom, Pritzker, and Hochul have done, in my opinion, an even more dishonest and incompetent job.”

Federal officials have not yet released detailed information about the California investigation, but multiple law enforcement and oversight agencies have been mobilized in recent days following the Department of Health and Human Services’ announcement of a nationwide anti-fraud sweep.

HHS Deputy Secretary Jim O’Neill confirmed Tuesday that the agency has already “turned off the money spigot” to Minnesota and implemented new verification requirements nationwide to prevent further abuse of federal childcare funds.

“You have probably read the serious allegations that the state of Minnesota has funneled millions of taxpayer dollars to fraudulent daycares across Minnesota over the past decade,” O’Neill said. “Today we have taken three actions against the blatant fraud that appears to be rampant in Minnesota and across the country.”

Under the new HHS directives:

• All federal childcare payments will now require receipts or photo evidence before funds are released to states.
• Individuals identified in investigative journalist Nick Shirley’s viral video — which documented nearly empty daycare centers receiving millions in public funds — have been flagged for comprehensive audits.
• A dedicated fraud-reporting hotline and email system has been launched through ChildCare.gov for parents and whistleblowers.

“We have turned off the money spigot and we are finding the fraud,” O’Neill said.

The federal response escalated further in Minnesota on Monday, when Homeland Security Investigations agents conducted door-to-door operations in Minneapolis targeting businesses suspected of laundering welfare funds through fraudulent childcare and healthcare programs.

“Homeland Security Investigations @ICEgov are on the ground in Minneapolis right now conducting a massive investigation on childcare and other rampant fraud,” Homeland Security Secretary Kristi Noem confirmed in a post on X. “More coming.”

The crackdown follows the viral release of Shirley’s footage from Minneapolis’s so-called “Quality Learning Center,” which appeared largely vacant despite receiving millions in public funding. The video sparked nationwide outrage and bipartisan calls for accountability.

In one clip, a woman at the facility can be heard shouting, “Don’t open up! It’s ICE!” as investigators approached. Observers also noted the daycare’s sign misspelled “learning” as “learing,” a detail that quickly became symbolic of the alleged fraud’s audacity.

Subsequent federal audits found that the center and similar operations continued receiving large sums of money despite repeated state violations and minimal oversight under Gov. Tim Walz’s administration.

Officials now believe the Minnesota case — potentially the largest welfare fraud scheme in U.S. history — may have diverted as much as $9 billion in federal and state funds. Authorities say some of the money may have been funneled overseas, including to terrorist-linked networks in Somalia.

Trump’s decision to publicly link California to the expanding investigation reflects mounting concern inside the administration that similar fraud networks may be operating in other blue states with expansive welfare systems and weak enforcement.

“California has a long history of corruption in its social spending programs,” one senior administration official said on background. “The president is making it clear that this investigation won’t stop with Minnesota.”