Whistleblower estimates over $170M taken by California ‘fraudsters … with no consequences’

After drawing national attention to the scale of welfare fraud in Minnesota, Nick Shirley said California may be even worse.

“California may have the largest amount of fraud in the country,” Shirley said in a video posted on X. “California is the state with the highest taxes and collects more money than any other state in America.”

He said he found more than $170 million in alleged fraud, including daycare fraud, “as these fraudsters live in luxury with no consequences.”

A report by the Pacific Research Institute explains how loopholes may make California’s daycare system vulnerable to abuse.

According to the institute, daycare subsidies in California do not go directly to families. Instead, families enroll in an approved program, and the state sends money directly to the daycare provider.

The problem is that California daycares receive funding based on enrollment, not verified attendance.

“That reasoning makes sense on paper, but when public money flows based on names on a roster rather than children in a room, the system depends almost entirely on honest self-reporting and occasional inspections to catch abuse,” PRI said.

To make matters worse, the Biden administration required states to follow an enrollment-based system in 2024.

The result is what critics describe as widespread fraud, as documented by Shirley and state agencies.

“The California Department of Social Services publishes inspection reports for every licensed childcare facility in the state. Those reports show a pattern that is hard to ignore,” PRI said. “Multiple facilities with 14, 21, or even 28 children listed as enrolled were found to have zero children present during unannounced inspections conducted during normal operating hours.

“Some of those same facilities had missing enrollment records, incomplete vaccination documentation, and no infant sleep logs. Several were visited more than once within days of each other with the same result. The paperwork said the rooms were full, but the rooms were empty.”

For example, in 2024, Mohamed Muriidi Mohamed, president of a San Diego-based childcare provider, was sentenced to prison for fraud and ordered to pay $3.7 million in restitution.

Mohamed was caught through a Homeland Security investigation, not a state agency, according to PRI.

As of January, President Donald Trump took action against such fraud, freezing federal daycare funding for California, Minnesota, Colorado, Illinois and New York.

While most daycare subsidies come from the federal government, state agencies administer the programs, meaning state policies can either prevent or enable abuse.

“For too long, Democrat-led states and governors have been complicit in allowing massive amounts of fraud to occur under their watch,” said Andrew Nixon, a spokesperson for the U.S. Department of Health and Human Services.

“[The Trump administration is] ensuring that federal taxpayer dollars are being used for legitimate purposes. We will ensure these states are following the law and protecting hard-earned taxpayer money.”