WEBVTT - John Kobylt Interviews CA State Controller Candidate Herb Morgan (10/08) 0:00:03.110 --> 0:00:05.390 Hi there. Good morning and welcome. 0:00:06.050 --> 0:00:09.190 It is a special live stream of the John Kobelt show. 0:00:09.950 --> 0:00:12.610 And we have a guest that we're going to interview 0:00:12.650 --> 0:00:15.630 in just a moment. Herb Morgan is running for state 0:00:15.680 --> 0:00:19.060 controller as a Republican. And we've had Herb on the 0:00:19.079 --> 0:00:22.200 show previously on the radio. But today we're going to 0:00:22.220 --> 0:00:26.400 be able to talk more at length uninterrupted. and explain 0:00:26.420 --> 0:00:28.620 to you what a state controller does, why this is important. 0:00:28.640 --> 0:00:30.120 I wouldn't be doing this if I didn't think this 0:00:30.180 --> 0:00:32.200 was a really important office for you to pay attention 0:00:32.240 --> 0:00:34.280 to and for you to vote for Herb. 0:00:35.159 --> 0:00:39.050 Right now, the state controller is a. 0:00:39.050 --> 0:00:45.930 Woman named Malia Cohen, obviously a Democrat, and with the 0:00:46.350 --> 0:00:50.520 almost weekly reports of of massive fraud scandals coming out 0:00:50.540 --> 0:00:54.300 of Sacramento, the state controller can actually do a lot 0:00:54.360 --> 0:00:58.740 to at least investigate, audit, expose what's going on. And 0:00:59.150 --> 0:01:01.810 she does none of that. She's not even campaigning that 0:01:01.870 --> 0:01:04.649 I can see. In fact, the Sacramento Bee just wrote 0:01:04.709 --> 0:01:09.890 an editorial a week ago saying that she wants to 0:01:09.910 --> 0:01:14.200 keep quiet about her reelection bid because she knows the 0:01:14.240 --> 0:01:18.660 Republicans don't have enough registered voters. However, Those who are 0:01:18.720 --> 0:01:21.880 aware of the choice are going for Herb Morgan. For example, 0:01:21.940 --> 0:01:24.720 the editorial boards of the Sacramento Bee, the Modesto Bee, 0:01:24.760 --> 0:01:27.750 the Merced Sun Star, the Fresno Bee, the San Luis 0:01:27.810 --> 0:01:31.790 Obispo Tribune all endorsed Herb Morgan because he is so 0:01:32.069 --> 0:01:35.569 qualified for the office, way more so than Cohen. You 0:01:35.590 --> 0:01:37.459 could judge her on her resume. You could also judge 0:01:37.480 --> 0:01:41.680 her on her terrible lack of performance. She doesn't audit 0:01:42.260 --> 0:01:46.919 anything worthwhile. because she's protecting the democratic machine. That's the 0:01:46.959 --> 0:01:50.850 last thing that Newsom and the legislature wants. So I'm 0:01:50.870 --> 0:01:53.290 going to introduce, uh, Herb Morgan, give you a quick 0:01:53.330 --> 0:01:56.430 rundown of his biography. He came to California when he 0:01:56.450 --> 0:02:00.070 was a year old back in 1967, graduated with honors 0:02:00.110 --> 0:02:04.130 from UC Santa Cruz degree was in economics. And then 0:02:04.190 --> 0:02:08.980 he founded later on efficient market advisors. That's a investment 0:02:09.000 --> 0:02:12.880 firm out of San Diego, uh, that, uh, managed portfolios, uh, 0:02:13.780 --> 0:02:18.440 specializing in ETFs, exchange-traded funds, and the firm grew to 0:02:18.500 --> 0:02:22.260 manage about a billion and a half dollars. He sold 0:02:22.320 --> 0:02:25.910 it to Cantor Fitzgerald, remained as senior managing director and 0:02:25.930 --> 0:02:28.730 chief investment officer, and the mayor of San Diego at 0:02:28.750 --> 0:02:31.270 the time, Jerry Sanders, appointed him to the San Diego 0:02:31.330 --> 0:02:34.610 City Employees Retirement System Board, and he was chair of 0:02:34.669 --> 0:02:39.850 that twice. So he has an extensive education economics, extensive 0:02:40.190 --> 0:02:46.450 experience in finance, and has really good experience in government, 0:02:48.230 --> 0:02:52.350 chairing the San Diego Retirement Pension Board. So that's the 0:02:52.380 --> 0:02:55.020 guy you want keeping track of the money in Sacramento, 0:02:55.160 --> 0:03:00.280 which is flying out the window. It's like a fire 0:03:00.320 --> 0:03:02.520 hose of money, and a lot of it is stolen. 0:03:03.620 --> 0:03:07.200 So let's get now to Herb Morgan. 0:03:07.340 --> 0:03:07.680 Welcome. 0:03:07.720 --> 0:03:08.139 How are you? 0:03:08.860 --> 0:03:11.440 John, it is great to see you again. Thank you 0:03:11.460 --> 0:03:11.980 for having me here. 0:03:13.310 --> 0:03:15.530 Why don't we start? Thank you for coming on. 0:03:15.690 --> 0:03:18.690 Why don't we start by you explaining what a state 0:03:18.740 --> 0:03:21.680 controller does? I gave a quick overview, but why don't 0:03:21.700 --> 0:03:24.500 you get into some details here? What would be your 0:03:24.580 --> 0:03:27.860 daily job and what effect would you have on the government? 0:03:28.760 --> 0:03:31.940 There's these constitutional duties, but the current controller is not 0:03:32.000 --> 0:03:35.220 aware of the constitutional duties because she has more of 0:03:35.280 --> 0:03:39.120 a policy shop. And she has a press shop at 0:03:39.140 --> 0:03:42.430 a press team. But the reality is the state constitution 0:03:42.490 --> 0:03:46.910 defines the job of state controller as the following. Number one, 0:03:47.030 --> 0:03:50.150 pre-audit all state spending. What that means is before any 0:03:50.270 --> 0:03:53.280 dollar can go out the door, the state controller is 0:03:53.380 --> 0:03:57.380 supposed to verify the legality and the compliance, the statutory 0:03:57.420 --> 0:04:01.900 compliance of the request. And by law, by constitution, the 0:04:01.960 --> 0:04:04.960 last stamp, the last person to sign off on money 0:04:05.000 --> 0:04:08.650 going out the door, we now know she does not 0:04:08.870 --> 0:04:12.930 do that. That is the cause. Everybody knows there's so 0:04:12.970 --> 0:04:15.510 much fraud, but we don't know why. It is the 0:04:15.570 --> 0:04:18.930 job of the state controller to prevent it. She does 0:04:18.990 --> 0:04:22.690 not do the constitutionally mandated duties. Therefore, she is the 0:04:22.740 --> 0:04:26.650 cause of the fraud. That's duty number one. Duty number two, 0:04:26.800 --> 0:04:29.700 post audit to ensure we got what we were supposed 0:04:29.740 --> 0:04:33.159 to get for the money we sent. That means get 0:04:33.180 --> 0:04:35.880 in your car, drive to the Central Valley, and look 0:04:35.940 --> 0:04:38.800 at the train. If the train is not there, it 0:04:38.839 --> 0:04:42.620 means we didn't get the train. Okay, so this is 0:04:42.680 --> 0:04:44.440 called a performance audit. 0:04:44.940 --> 0:04:46.339 You got to be really sharp, too. 0:04:46.690 --> 0:04:51.330 You got to have very powerful observational skills. 0:04:51.370 --> 0:04:54.740 Yeah. Last thing state controller– well, there's two more things. 0:04:55.200 --> 0:04:59.420 Last major thing is manage unclaimed property, which I'm going 0:04:59.460 --> 0:05:03.800 to change the name of to property reunification. We're going 0:05:03.820 --> 0:05:09.240 to proactively return $ 15 billion to the citizens, unlike Malia Cohen, 0:05:09.380 --> 0:05:12.820 who's used it as an additional form of taxation, where 0:05:12.860 --> 0:05:16.580 she escheats property and takes it and returns very little 0:05:17.000 --> 0:05:19.610 and makes a big press announcement when she returns a 0:05:19.620 --> 0:05:22.770 de minimis amount. And then the state controller sits on 0:05:22.770 --> 0:05:26.690 70 of our most important boards and commissions, including Chairman 0:05:26.710 --> 0:05:30.420 of the Franchise Tax Board, the State Lands Commission, the 0:05:30.460 --> 0:05:34.920 Coastal Commission, State Board of Equalization, CalPERS, CalSTRS, and the 0:05:34.940 --> 0:05:37.140 list goes on and on. It's a very, very big 0:05:37.300 --> 0:05:39.339 and powerful role in our state government. 0:05:40.370 --> 0:05:41.750 It sounds like a lot of work. 0:05:42.010 --> 0:05:45.550 And the indications I've seen is she doesn't do much 0:05:45.610 --> 0:05:49.409 of it. Now, you're probably aware of a leaked interview 0:05:49.930 --> 0:05:56.169 that some independent journalist did with Malia Cohen's deputy at lunch. 0:05:56.370 --> 0:06:00.170 And he admitted that they don't do audits because the 0:06:00.210 --> 0:06:04.070 legislature doesn't want them to. And she's a loyal supporter 0:06:04.089 --> 0:06:05.130 in the Democratic machine. 0:06:06.150 --> 0:06:10.100 It is. It's amazing. In fact, three weeks ago now, 0:06:10.540 --> 0:06:14.080 the eight assembly members, California assembly members led by Carl 0:06:14.100 --> 0:06:18.180 DeMaio from San Diego, sent a letter to Malia Cohen 0:06:18.810 --> 0:06:22.190 and said the following. The state constitution requires you to 0:06:22.270 --> 0:06:26.289 pre-audit all state spending. How many checks went out in 0:06:26.330 --> 0:06:29.150 each of the last three fiscal years? And how many 0:06:29.210 --> 0:06:34.380 of them did you perform the required pre-audit on? Simple question. 0:06:34.380 --> 0:06:37.500 10 checks went out. I did 10 pre-audits, or 10 million, 0:06:37.500 --> 0:06:41.800 10 million. Her response, they demanded a two-week response. It 0:06:41.820 --> 0:06:46.090 was signed by eight members of our legislature. Her response was, 0:06:46.610 --> 0:06:49.990 I reject your question. Now, remember, the legislature is the 0:06:50.050 --> 0:06:54.089 oversight body to the state controller. They reject your question, 0:06:54.770 --> 0:06:57.750 and by the way, I need a bigger budget. Send 0:06:58.010 --> 0:07:00.810 more money. This is a classic person who's done no 0:07:00.890 --> 0:07:06.650 other job in life government. And the knee-jerk response, when 0:07:06.690 --> 0:07:10.590 the body that oversees your office asks you, did you 0:07:10.650 --> 0:07:13.600 do the job? This is not a big request. Did 0:07:13.630 --> 0:07:17.180 you do the job? Her response was, send more money. 0:07:17.880 --> 0:07:21.020 And she never answered any of the questions. I believe 0:07:21.040 --> 0:07:24.800 she's subject to impeachment at this point. But we all 0:07:24.820 --> 0:07:28.180 know the breakdown statistically of the legislature. So the likelihood 0:07:28.640 --> 0:07:30.940 of an impeachment or a conviction, of course, is very low. 0:07:31.650 --> 0:07:34.320 But in a normal world, if she was doing a 0:07:34.340 --> 0:07:36.140 job like this in the private sector, she would have 0:07:36.160 --> 0:07:37.140 been long fired. 0:07:38.340 --> 0:07:40.320 She not only would be long fired, she never would 0:07:40.340 --> 0:07:43.820 have been hired. I mean, I'm sure she's a wonderful 0:07:43.880 --> 0:07:46.730 human being, but that's not relevant to the job. Like, 0:07:47.110 --> 0:07:49.390 I would love to be the second baseman for the Dodgers. 0:07:49.570 --> 0:07:53.900 Am I capable? Am I qualified? No. And she has 0:07:54.040 --> 0:07:57.560 no background in finance. She does have some unique financial experience, 0:07:57.600 --> 0:08:00.320 of course. If you count buying a home with no 0:08:00.380 --> 0:08:03.930 money down and two adjustable rate mortgages and having it foreclosed, 0:08:04.450 --> 0:08:07.850 that's a unique financial experience I do not have. If 0:08:07.890 --> 0:08:12.540 you count the financial experience of having two businesses shut 0:08:12.600 --> 0:08:15.880 down by the Franchise Tax Board for failure to file 0:08:15.940 --> 0:08:19.800 and pay taxes, that's another experience that I do not possess. 0:08:20.320 --> 0:08:23.740 And it's interesting and it's ironic because the state controller 0:08:24.140 --> 0:08:28.020 is the chairman of the Franchise Tax Board. I mean, 0:08:28.040 --> 0:08:29.980 this is dripping irony. Yes. 0:08:31.340 --> 0:08:33.140 And this is why I wanted to have you on. 0:08:33.250 --> 0:08:36.250 Most people don't know, first of all, that your office 0:08:36.309 --> 0:08:40.810 exists and what it is you do and how extensive 0:08:40.830 --> 0:08:45.170 your responsibilities are, how important it is. And with one 0:08:45.190 --> 0:08:47.500 of the overwhelming stories out of Sacramento in the last 0:08:47.530 --> 0:08:51.380 year being endless reports of fraud and stolen money, actually 0:08:51.400 --> 0:08:57.480 through the whole Newsom second term especially, that you could 0:08:57.520 --> 0:09:00.000 provide a valuable role in this. 0:09:00.760 --> 0:09:02.980 Stopping a lot of this or exposing it at the 0:09:03.020 --> 0:09:03.559 very least. 0:09:05.010 --> 0:09:05.170 Yeah. 0:09:05.230 --> 0:09:08.690 In fact, we all know that the fraud story in 0:09:08.730 --> 0:09:11.829 California is ubiquitous. We know that it's national. It's even 0:09:11.929 --> 0:09:14.589 international news. I got a message from a friend in 0:09:14.630 --> 0:09:16.960 the UK this week about what the hell's going on 0:09:16.980 --> 0:09:21.060 in California with the fraud. It's proven. The arrests are 0:09:21.080 --> 0:09:23.099 being made. Now, none of these arrests have come from 0:09:23.220 --> 0:09:26.939 our own California law enforcement community. The arrests, and there's 0:09:26.980 --> 0:09:31.140 been some convictions, they've all come from federal intervention. And 0:09:31.160 --> 0:09:32.980 then people think, well, where did that come from? It 0:09:33.179 --> 0:09:35.959 came from this kid, Nick Shirley. No, it didn't. Nick's 0:09:35.980 --> 0:09:39.180 doing a great job. It actually, all of this came 0:09:39.260 --> 0:09:42.710 about because I wrote a white paper back in December 0:09:42.730 --> 0:09:45.309 at the request of Steve Hilton. He asked me to 0:09:45.370 --> 0:09:48.429 do the research on the fraud in California because after all, 0:09:49.150 --> 0:09:52.090 it's the job of the controller to prevent fraud. That's 0:09:52.309 --> 0:09:55.370 literally the job. And so we talk about the fraud 0:09:55.410 --> 0:09:58.350 and we blame Gavin Newsom, we blame the assembly, but 0:09:58.390 --> 0:10:02.940 in reality, it's the fault of Malia Cohen. This is 0:10:03.280 --> 0:10:05.740 not that she stole the money, not that she's guilty, 0:10:06.320 --> 0:10:10.570 but that she's incompetent and unable to do the job 0:10:10.630 --> 0:10:14.590 of fraud prevention. This is a highly complex financial system 0:10:14.630 --> 0:10:19.809 that we have. our wealth, we are the wealthiest state 0:10:19.850 --> 0:10:21.630 and the richest country in the history of the world. 0:10:22.429 --> 0:10:24.770 So we did the report. We gave the report to 0:10:24.790 --> 0:10:27.050 the president of the United States. He then appointed J.D. 0:10:27.110 --> 0:10:29.969 Vance to head this up. And now we're seeing arrests 0:10:30.030 --> 0:10:35.670 being made, hospices, phony daycares being shut down. But there's so, so, 0:10:35.770 --> 0:10:39.250 so much more to do. And I noticed in the 0:10:39.270 --> 0:10:42.420 last couple of weeks, Malia Cohen has updated her talking 0:10:42.480 --> 0:10:51.010 points to actually say she's for transparency and fraud prevention. Oh, now? 0:10:52.590 --> 0:10:55.250 I think she got our poll. She must have got 0:10:55.270 --> 0:10:59.670 a hold of the poll we did because 64.5% of 0:11:00.010 --> 0:11:04.150 residents of the state, not Republicans, 64.5% of all of 0:11:04.309 --> 0:11:08.150 us say that California is on the wrong track. That's 0:11:08.190 --> 0:11:12.300 the highest it's ever been. It was only 48% in 2022, 0:11:12.300 --> 0:11:15.800 which means this is a winnable race right now. 64.5% 0:11:15.800 --> 0:11:18.900 said we're on the wrong track. We then said, well, why? 0:11:18.960 --> 0:11:23.559 Is it because of immigration? Is it healthcare? Is it education? 72% 0:11:23.559 --> 0:11:26.960 said the reason we're on the wrong track is fraud. 0:11:27.820 --> 0:11:30.540 California is the capital of fraud. So we now know 0:11:30.700 --> 0:11:33.420 only 30% of the people in the survey are Republicans, 0:11:34.120 --> 0:11:38.120 but 72% say the problem is fraud. And then we 0:11:38.140 --> 0:11:41.010 go on and we ask them, what do you think 0:11:41.030 --> 0:11:44.800 of this solution? We put all state spending online every 0:11:44.860 --> 0:11:48.220 single day the moment it happens through a secure API 0:11:48.260 --> 0:11:51.580 that reads every transaction, writes it to a public database 0:11:51.620 --> 0:11:55.420 that's secure on a blockchain. And anybody who wants to 0:11:55.440 --> 0:11:57.480 look at the spending can look at the spending. That's 0:11:57.500 --> 0:12:01.420 not just the states, the counties, the cities, the dog catchers, police, everybody. 0:12:02.429 --> 0:12:05.570 I've never seen a poll with a higher response rate 0:12:06.670 --> 0:12:12.730 in history, 95%. of citizens of the state of California 0:12:12.790 --> 0:12:17.630 surveyed believe in my idea, which is radical transparency. So 0:12:18.250 --> 0:12:22.290 my state controller campaign is there is fraud. I can 0:12:22.350 --> 0:12:25.200 fix it. That's it. Fraud, I can fix it. I 0:12:25.240 --> 0:12:29.959 fix it through transparency. And that's our message. We hope 0:12:30.120 --> 0:12:32.950 everybody agrees with that. All right. 0:12:32.970 --> 0:12:35.670 You're listening here to a special edition. We're doing a 0:12:35.710 --> 0:12:38.290 live stream on YouTube and X. And our guest is 0:12:38.320 --> 0:12:42.660 Herb Morgan, candidate for California state controller as a Republican. 0:12:42.920 --> 0:12:45.760 And you just heard him say he can he can. 0:12:46.059 --> 0:12:47.579 The number one of the number one issues in the 0:12:47.620 --> 0:12:51.650 state is fraud. Everyone has heard about it, talks about it. 0:12:51.840 --> 0:12:54.380 The poll proves that it's a very important issue. And 0:12:54.860 --> 0:12:58.040 His campaign is about fixing it and stopping it. By 0:12:58.059 --> 0:13:00.870 the way, I see your comments coming through. If anybody 0:13:00.880 --> 0:13:03.870 has an intelligent question for Herb, then Eric will put 0:13:03.910 --> 0:13:05.550 it through. But it's got to be a smart one 0:13:05.570 --> 0:13:07.490 here because Herb is a very smart guy and I 0:13:07.530 --> 0:13:10.890 don't want to waste his time. All right, let's talk 0:13:10.910 --> 0:13:13.790 about some of the individual scandals. And then you tell 0:13:13.870 --> 0:13:18.370 me why you think this happened. And had you been 0:13:18.410 --> 0:13:22.910 in office, how differently it would have gone. And let's 0:13:22.950 --> 0:13:27.680 start with During COVID, this is famous, the unemployment fraud. 0:13:28.260 --> 0:13:33.319 The agency is called EDD, which is the Employment Development Department. 0:13:33.559 --> 0:13:35.220 Basically, it's the unemployment department. 0:13:36.020 --> 0:13:40.179 And as soon as they knew some shut down the state, 0:13:40.960 --> 0:13:44.360 they said, well, everybody with a job can apply. And 0:13:45.260 --> 0:13:48.420 lots of people applied, a tremendous number who live out 0:13:48.460 --> 0:13:51.719 of state and out of the country, many of them criminals. 0:13:52.660 --> 0:13:59.350 And estimates range all the way up to $ 32 billion stolen. 0:14:01.090 --> 0:14:03.949 How did this happen? And what could you have done 0:14:03.970 --> 0:14:06.210 to stop it or slow it down? 0:14:07.000 --> 0:14:10.340 It's actually worse than $ 32 billion. They have since updated 0:14:10.380 --> 0:14:14.580 the data. Not Herb hasn't updated it. The EDD officials 0:14:14.640 --> 0:14:18.220 themselves have updated the data. It is now $ 55 billion stolen. 0:14:20.310 --> 0:14:25.380 And here's how it happened. We shut down our economy 0:14:25.840 --> 0:14:28.880 because of COVID. That was a mistake. I'm an economist. 0:14:29.020 --> 0:14:32.120 I was very vocal at the time. No, isolate people 0:14:32.140 --> 0:14:34.280 with cancer and the elderly and the weak and all 0:14:34.320 --> 0:14:36.040 of that, and let the rest of us go to 0:14:36.080 --> 0:14:39.180 work and develop immunities. That was not the choice of 0:14:39.220 --> 0:14:43.580 Gavin Newsom and Malia Cohen. Fine. So when they shut 0:14:43.620 --> 0:14:48.000 down the economy, you had millions of people that were unemployed. 0:14:48.540 --> 0:14:51.200 We have an unemployment trust fund that we pay into 0:14:51.260 --> 0:14:56.210 from our paychecks. Well, so many people applied that they 0:14:56.250 --> 0:14:58.090 looked at it and said, wow, it'll take us forever 0:14:58.120 --> 0:15:01.950 to approve all these and verify the eligibility of the participants. 0:15:02.930 --> 0:15:09.860 Let's just not verify anybody's eligibility. And let's advertise to 0:15:09.920 --> 0:15:14.240 the public that we are not verifying eligibility. So that'd 0:15:14.260 --> 0:15:17.740 be like you going on vacation, leaving your front door 0:15:17.840 --> 0:15:21.350 wide open, posting on Facebook, hi, my wife and I 0:15:21.400 --> 0:15:26.770 have gone to Hawaii. Our jewelry, our watches, her handbags, 0:15:26.930 --> 0:15:29.270 everything is in the house and the front door is open. 0:15:29.830 --> 0:15:35.840 It's literally the same thing. So- gang members, prisoners, everybody 0:15:35.900 --> 0:15:40.480 applied and received unemployment insurance in California. We have a 0:15:40.620 --> 0:15:43.340 massive trust fund for this purpose for when we have 0:15:43.360 --> 0:15:47.700 a recession. That fund ran down to zero. We took 0:15:47.920 --> 0:15:50.500 all of the money out of the fund. Of course, 0:15:50.520 --> 0:15:52.230 there was nothing to spend it on because all the 0:15:52.260 --> 0:15:56.010 businesses were shut down. So people went online and tried 0:15:56.030 --> 0:15:59.650 to buy things. So then, this is where it gets amazing. 0:16:00.350 --> 0:16:04.200 We are one of 20 states who then applied for 0:16:04.280 --> 0:16:08.350 and received a loan from the Federal Unemployment Trust Fund. 0:16:09.150 --> 0:16:17.240 We received a $ 20 billion loan. Now, 19 states repaid 0:16:17.320 --> 0:16:21.800 that loan to the Federal Unemployment Trust Fund. One state 0:16:22.200 --> 0:16:26.700 did not repay the loan. Guess which state? Now, we 0:16:26.760 --> 0:16:31.280 have had... We have had seven budgets with which we 0:16:31.320 --> 0:16:36.609 could have budgeted repayment of the loan. Seven years. We never, 0:16:37.030 --> 0:16:39.830 ever included a single line item in any state budget, 0:16:39.870 --> 0:16:42.210 which comes from the governor, is approved by the legislature, 0:16:42.710 --> 0:16:45.470 to repay the loan. Every other state repaid the loan. 0:16:45.990 --> 0:16:49.980 California defaulted. And by the way, $ 20 billion, our budget 0:16:50.000 --> 0:16:55.960 this year is $ 350 billion. We could have repaid $ 5 0:16:55.580 --> 0:16:57.970 billion a year for four years, right? Not a problem. 0:16:57.990 --> 0:16:58.730 We could have done that. 0:16:59.370 --> 0:17:00.710 They're refusing to pay it? 0:17:01.450 --> 0:17:06.190 California is refusing to pay the loan back. Now, the 0:17:06.490 --> 0:17:10.149 federal government has something called collateral. They're not going to 0:17:10.170 --> 0:17:13.010 let you stiff them out of $ 20 billion. And by 0:17:13.030 --> 0:17:15.770 the way, when people scream that Donald Trump stopped funding 0:17:15.810 --> 0:17:19.120 and all of that stuff, he can't stop funding unless 0:17:19.130 --> 0:17:22.000 you've done something wrong. The president is not a dictator. 0:17:22.480 --> 0:17:25.400 And so if we fail to give our annual reports, 0:17:25.560 --> 0:17:28.869 our single file audit reports, they can withhold funding. If 0:17:28.900 --> 0:17:32.450 we default on a loan, they can withhold funding. So 0:17:32.470 --> 0:17:37.469 we defaulted. And so now effective January 1st of 2026, 0:17:37.470 --> 0:17:42.190 so nine months ago, 10 months ago now, every employer 0:17:42.230 --> 0:17:45.670 in the state of California had their federal unemployment tax 0:17:45.770 --> 0:17:50.830 go up. And it will remain up and higher preventing 0:17:51.210 --> 0:17:54.870 wage increases, causing the price of consumer goods to go 0:17:54.930 --> 0:17:58.409 higher still, And it will stay up until that $ 20 0:17:58.350 --> 0:18:01.990 billion loan is repaid. Now, we are 10 months in. 0:18:02.710 --> 0:18:06.609 We are still over $ 19 billion owed. And year to date, 0:18:07.030 --> 0:18:10.500 we're over $ 500 million in total. We're over $ 500 million 0:18:10.660 --> 0:18:11.320 in interest. 0:18:12.780 --> 0:18:15.200 So this is going to take decades to pay back. 0:18:15.970 --> 0:18:18.350 This will take decades, and they just don't want it 0:18:18.390 --> 0:18:22.040 to come out of their money, the general funds, where 0:18:22.080 --> 0:18:24.540 they borrowed it from. They borrowed it from the feds, 0:18:24.660 --> 0:18:28.540 and then they stuck it on the employers. So we 0:18:28.560 --> 0:18:30.760 had a fundraising event at a restaurant last night, and 0:18:30.780 --> 0:18:32.500 I was talking about this, and the owner of the 0:18:32.540 --> 0:18:36.550 restaurant was there. And he said, yes, I delayed cost 0:18:36.609 --> 0:18:39.770 of living wage increases to my employees. I had no choice. 0:18:40.830 --> 0:18:43.950 Because I was forced to pay higher taxes. So in 0:18:44.020 --> 0:18:48.740 other words, the reality is who paid it? His employees, right? 0:18:48.859 --> 0:18:53.320 The waiters, the busboys, the dishwashers, anybody there. California is 0:18:53.340 --> 0:18:56.520 the most expensive place in the world to live. And 0:18:56.660 --> 0:19:00.690 Malia Cohen and Gavin Newsom and their ilk every day 0:19:00.750 --> 0:19:03.470 seek to make it more expensive simply because they don't 0:19:03.650 --> 0:19:05.110 want to repay a loan. 0:19:06.070 --> 0:19:09.010 If you were the state controller at the time this 0:19:09.070 --> 0:19:11.370 was happening, what could you have done? 0:19:11.750 --> 0:19:13.090 You would have detected quickly. 0:19:13.109 --> 0:19:16.040 I mean, the whole world knew that we had an 0:19:16.119 --> 0:19:18.939 open door for people around the world to come in 0:19:19.000 --> 0:19:21.320 and steal tens of billions of dollars. What could you 0:19:21.359 --> 0:19:23.780 have done about it if you were the controller back 0:19:23.820 --> 0:19:25.040 in 2020? 0:19:25.040 --> 0:19:27.420 Well, as the state controller, you're the final sign-off. So 0:19:27.440 --> 0:19:31.180 I would have said, listen, guys, no, you cannot just 0:19:31.340 --> 0:19:34.940 give away money. There has to be statutory compliance here. 0:19:35.380 --> 0:19:38.480 And the compliance piece is you must verify that the 0:19:38.570 --> 0:19:42.890 individuals are eligible. So if that means repositioning some staff 0:19:43.590 --> 0:19:45.790 from one office to another, after all, most of the 0:19:45.830 --> 0:19:49.570 offices were shut down. People were home because of COVID, right? Mm-hmm. 0:19:50.160 --> 0:19:54.320 not just reposition some people and figure out ways to 0:19:54.440 --> 0:19:59.040 process the applications faster, verify the eligibility, and get the 0:19:59.080 --> 0:20:04.360 money out the door? But the idea of stopping eligibility 0:20:04.400 --> 0:20:09.159 verification and then advertising that you are doing it I 0:20:09.340 --> 0:20:12.400 cannot think of a dumber way to run a government. 0:20:12.440 --> 0:20:14.060 No, it's incredibly stupid. 0:20:14.359 --> 0:20:16.640 So could you, I mean, could you have legally stopped 0:20:16.810 --> 0:20:18.469 the payments until they? 0:20:18.570 --> 0:20:23.930 Oh, absolutely. The state controller is the most powerful. Absolutely. Now, 0:20:24.310 --> 0:20:26.230 would they have tried to sue me or maybe? Maybe 0:20:26.250 --> 0:20:27.690 they would take me in front of a judge and 0:20:27.730 --> 0:20:30.930 try to find a liberal judge, but no money can 0:20:30.970 --> 0:20:33.770 go out without the state controller. The state controller can 0:20:33.810 --> 0:20:36.150 just say, no, we're going to do that with high-speed 0:20:36.170 --> 0:20:40.760 rail because high-speed rail is currently operating illegally outside of 0:20:40.820 --> 0:20:44.460 Prop 1A compliance. My plan in January is to stop 0:20:44.720 --> 0:20:48.140 all payments on that project, which I am sure will 0:20:48.180 --> 0:20:49.100 put me in front of a judge. 0:20:51.400 --> 0:20:54.139 Let's talk about Homelessness spending. 0:20:54.880 --> 0:20:55.110 Yeah. 0:20:55.220 --> 0:20:57.050 This is a real hot button with people. 0:20:57.690 --> 0:20:57.910 Yeah. 0:20:57.950 --> 0:21:03.530 Newsom even admits that $ 24 billion over the last four 0:21:03.590 --> 0:21:08.129 years he spent, he either doesn't know where it went 0:21:08.850 --> 0:21:11.150 or it went somewhere and he doesn't know what it did. 0:21:12.230 --> 0:21:13.650 What could you have done in this case? 0:21:14.750 --> 0:21:18.630 This is actually a pretty easy one. And it's true, 0:21:18.670 --> 0:21:21.810 the number is about $ 24 billion. Much of that went 0:21:21.850 --> 0:21:25.090 into Los Angeles County through a service entity called LASA, 0:21:25.330 --> 0:21:30.800 LA Homeless Services. This organization was so inept, so corrupt, 0:21:31.380 --> 0:21:35.780 that Karen Bass resigned recently, just a couple of weeks ago. 0:21:36.100 --> 0:21:38.440 I mean, how bad does it have to be for 0:21:38.500 --> 0:21:40.900 Karen Bass to say, no, no, no, no, no, no, 0:21:40.980 --> 0:21:43.060 I can't be associated with what you all are doing? 0:21:43.960 --> 0:21:46.480 So here's the problem, and then I'll give you the solution. 0:21:46.960 --> 0:21:50.090 The problem is we're so rich. We have so much money. 0:21:50.130 --> 0:21:52.270 We have such a vibrant economy. We tax it so 0:21:52.350 --> 0:21:55.270 heavily that we want to solve problems. I call it 0:21:55.590 --> 0:21:59.810 funding our programs of compassion. We actually have all the 0:21:59.869 --> 0:22:03.689 money we need to deliver whatever service we want, but 0:22:03.730 --> 0:22:05.980 we should be ranked top five in the nation because 0:22:06.000 --> 0:22:09.659 we're the richest. So our homeless services should be top five. Instead, 0:22:09.700 --> 0:22:13.750 we're 50th out of 50. Because we send all the 0:22:13.810 --> 0:22:17.880 money out in blocks and we never hold anybody accountable. 0:22:18.520 --> 0:22:21.620 If you and I are building a construction project together, 0:22:21.920 --> 0:22:23.920 and we have a construction loan, the money's coming from 0:22:23.960 --> 0:22:27.490 a bank, they have something called fund control. We have 0:22:27.530 --> 0:22:31.570 to show them progress every single day before money is released. Okay, 0:22:31.609 --> 0:22:35.119 we framed. Okay, we pay the framer. Okay, the wiring's in. 0:22:35.130 --> 0:22:37.930 We'll pay the electrician, the roofer. And it goes along 0:22:37.970 --> 0:22:40.710 like that. But what California has done is they just, 0:22:41.570 --> 0:22:44.739 here's the money. And people go, well, do I have 0:22:44.760 --> 0:22:47.350 to prove anything? Do I have to fill out any forms? 0:22:47.390 --> 0:22:48.609 Do I have to show you what I did with 0:22:48.630 --> 0:22:52.450 the money? Are you going to audit me? And they 0:22:52.510 --> 0:22:56.330 literally don't do any of those things. So we could 0:22:56.350 --> 0:23:00.119 have put it in tranches. We could have verified progress 0:23:00.340 --> 0:23:02.459 along the way. We could have halted payment where there 0:23:02.480 --> 0:23:05.980 was no ability to verify. For example, the hospice centers. 0:23:07.010 --> 0:23:09.530 And in nowhere was it bigger. As a percentage of 0:23:09.570 --> 0:23:14.310 the spend, the biggest by far was homeless services. And 0:23:14.369 --> 0:23:17.909 think about who they're stealing from, right? Guy gets a 0:23:17.910 --> 0:23:21.230 $ 23 or $ 4 million grant. He buys a hotel for 0:23:21.230 --> 0:23:23.730 $ 20 million that he had under contract for $ 10 million, 0:23:23.800 --> 0:23:26.940 double escrowed, put $ 10 million in his pocket. We have 0:23:27.180 --> 0:23:30.800 people arrested for taking the homeless money grant, wiring $ 1 0:23:30.680 --> 0:23:35.350 million to their American Express bill. buying Range Rovers. There 0:23:35.369 --> 0:23:37.470 was a guy who bought a $ 7 million house in 0:23:37.530 --> 0:23:41.010 Bel Air, private jets with his family to Hawaii. I 0:23:41.050 --> 0:23:43.649 fly private jets all the time. It's called Southwest Airlines. 0:23:43.990 --> 0:23:48.160 They're private, me and 149 other people on these planes. 0:23:48.280 --> 0:23:51.040