00:00:03
Speaker 1: Hi there. Good morning and welcome.
00:00:06
Speaker 2: It is a special live stream of the John Kobelt show. And we have a guest that we're going to interview in just a moment. Herb Morgan is running for state controller as a Republican. And we've had Herb on the show previously on the radio. But today we're going to be able to talk more at length uninterrupted. and explain to you what a state controller does, why this is important. I wouldn't be doing this if I didn't think this was a really important office for you to pay attention to and for you to vote for Herb.
00:00:35
Speaker 1: Right now, the state controller is a.
00:00:39
Speaker 2: Woman named Malia Cohen, obviously a Democrat, and with the almost weekly reports of of massive fraud scandals coming out of Sacramento, the state controller can actually do a lot to at least investigate, audit, expose what's going on. And she does none of that. She's not even campaigning that I can see. In fact, the Sacramento Bee just wrote an editorial a week ago saying that she wants to keep quiet about her reelection bid because she knows the Republicans don't have enough registered voters. However, Those who are aware of the choice are going for Herb Morgan. For example, the editorial boards of the Sacramento Bee, the Modesto Bee, the Merced Sun Star, the Fresno Bee, the San Luis Obispo Tribune all endorsed Herb Morgan because he is so qualified for the office, way more so than Cohen. You could judge her on her resume. You could also judge her on her terrible lack of performance. She doesn't audit anything worthwhile. because she's protecting the democratic machine. That's the last thing that Newsom and the legislature wants. So I'm going to introduce, uh, Herb Morgan, give you a quick rundown of his biography. He came to California when he was a year old back in 1967, graduated with honors from UC Santa Cruz degree was in economics. And then he founded later on efficient market advisors. That's a investment firm out of San Diego, uh, that, uh, managed portfolios, uh, specializing in ETFs, exchange-traded funds, and the firm grew to manage about a billion and a half dollars. He sold it to Cantor Fitzgerald, remained as senior managing director and chief investment officer, and the mayor of San Diego at the time, Jerry Sanders, appointed him to the San Diego City Employees Retirement System Board, and he was chair of that twice. So he has an extensive education economics, extensive experience in finance, and has really good experience in government, chairing the San Diego Retirement Pension Board. So that's the guy you want keeping track of the money in Sacramento, which is flying out the window. It's like a fire hose of money, and a lot of it is stolen. So let's get now to Herb Morgan.
00:03:07
Speaker 3: Welcome.
00:03:07
Speaker 1: How are you?
00:03:08
Speaker 3: John, it is great to see you again. Thank you for having me here.
00:03:13
Speaker 1: Why don't we start? Thank you for coming on.
00:03:15
Speaker 2: Why don't we start by you explaining what a state controller does? I gave a quick overview, but why don't you get into some details here? What would be your daily job and what effect would you have on the government?
00:03:28
Speaker 3: There's these constitutional duties, but the current controller is not aware of the constitutional duties because she has more of a policy shop. And she has a press shop at a press team. But the reality is the state constitution defines the job of state controller as the following. Number one, pre-audit all state spending. What that means is before any dollar can go out the door, the state controller is supposed to verify the legality and the compliance, the statutory compliance of the request. And by law, by constitution, the last stamp, the last person to sign off on money going out the door, we now know she does not do that. That is the cause. Everybody knows there's so much fraud, but we don't know why. It is the job of the state controller to prevent it. She does not do the constitutionally mandated duties. Therefore, she is the cause of the fraud. That's duty number one. Duty number two, post audit to ensure we got what we were supposed to get for the money we sent. That means get in your car, drive to the Central Valley, and look at the train. If the train is not there, it means we didn't get the train. Okay, so this is called a performance audit.
00:04:44
Speaker 1: You got to be really sharp, too.
00:04:46
Speaker 2: You got to have very powerful observational skills.
00:04:51
Speaker 3: Yeah. Last thing state controller– well, there's two more things. Last major thing is manage unclaimed property, which I'm going to change the name of to property reunification. We're going to proactively return $ 15 billion to the citizens, unlike Malia Cohen, who's used it as an additional form of taxation, where she escheats property and takes it and returns very little and makes a big press announcement when she returns a de minimis amount. And then the state controller sits on 70 of our most important boards and commissions, including Chairman of the Franchise Tax Board, the State Lands Commission, the Coastal Commission, State Board of Equalization, CalPERS, CalSTRS, and the list goes on and on. It's a very, very big and powerful role in our state government.
00:05:40
Speaker 1: It sounds like a lot of work.
00:05:42
Speaker 2: And the indications I've seen is she doesn't do much of it. Now, you're probably aware of a leaked interview that some independent journalist did with Malia Cohen's deputy at lunch. And he admitted that they don't do audits because the legislature doesn't want them to. And she's a loyal supporter in the Democratic machine.
00:06:06
Speaker 3: It is. It's amazing. In fact, three weeks ago now, the eight assembly members, California assembly members led by Carl DeMaio from San Diego, sent a letter to Malia Cohen and said the following. The state constitution requires you to pre-audit all state spending. How many checks went out in each of the last three fiscal years? And how many of them did you perform the required pre-audit on? Simple question. 10 checks went out. I did 10 pre-audits, or 10 million, 10 million. Her response, they demanded a two-week response. It was signed by eight members of our legislature. Her response was, I reject your question. Now, remember, the legislature is the oversight body to the state controller. They reject your question, and by the way, I need a bigger budget. Send more money. This is a classic person who's done no other job in life government. And the knee-jerk response, when the body that oversees your office asks you, did you do the job? This is not a big request. Did you do the job? Her response was, send more money. And she never answered any of the questions. I believe she's subject to impeachment at this point. But we all know the breakdown statistically of the legislature. So the likelihood of an impeachment or a conviction, of course, is very low.
00:07:31
Speaker 2: But in a normal world, if she was doing a job like this in the private sector, she would have been long fired.
00:07:38
Speaker 3: She not only would be long fired, she never would have been hired. I mean, I'm sure she's a wonderful human being, but that's not relevant to the job. Like, I would love to be the second baseman for the Dodgers. Am I capable? Am I qualified? No. And she has no background in finance. She does have some unique financial experience, of course. If you count buying a home with no money down and two adjustable rate mortgages and having it foreclosed, that's a unique financial experience I do not have. If you count the financial experience of having two businesses shut down by the Franchise Tax Board for failure to file and pay taxes, that's another experience that I do not possess. And it's interesting and it's ironic because the state controller is the chairman of the Franchise Tax Board. I mean, this is dripping irony. Yes.
00:08:31
Speaker 1: And this is why I wanted to have you on.
00:08:33
Speaker 2: Most people don't know, first of all, that your office exists and what it is you do and how extensive your responsibilities are, how important it is. And with one of the overwhelming stories out of Sacramento in the last year being endless reports of fraud and stolen money, actually through the whole Newsom second term especially, that you could provide a valuable role in this.
00:09:00
Speaker 1: Stopping a lot of this or exposing it at the very least.
00:09:05
Speaker 2: Yeah.
00:09:05
Speaker 3: In fact, we all know that the fraud story in California is ubiquitous. We know that it's national. It's even international news. I got a message from a friend in the UK this week about what the hell's going on in California with the fraud. It's proven. The arrests are being made. Now, none of these arrests have come from our own California law enforcement community. The arrests, and there's been some convictions, they've all come from federal intervention. And then people think, well, where did that come from? It came from this kid, Nick Shirley. No, it didn't. Nick's doing a great job. It actually, all of this came about because I wrote a white paper back in December at the request of Steve Hilton. He asked me to do the research on the fraud in California because after all, it's the job of the controller to prevent fraud. That's literally the job. And so we talk about the fraud and we blame Gavin Newsom, we blame the assembly, but in reality, it's the fault of Malia Cohen. This is not that she stole the money, not that she's guilty, but that she's incompetent and unable to do the job of fraud prevention. This is a highly complex financial system that we have. our wealth, we are the wealthiest state and the richest country in the history of the world. So we did the report. We gave the report to the president of the United States. He then appointed J.D. Vance to head this up. And now we're seeing arrests being made, hospices, phony daycares being shut down. But there's so, so, so much more to do. And I noticed in the last couple of weeks, Malia Cohen has updated her talking points to actually say she's for transparency and fraud prevention. Oh, now? I think she got our poll. She must have got a hold of the poll we did because 64.5% of residents of the state, not Republicans, 64.5% of all of us say that California is on the wrong track. That's the highest it's ever been. It was only 48% in 2022, which means this is a winnable race right now. 64.5% said we're on the wrong track. We then said, well, why? Is it because of immigration? Is it healthcare? Is it education? 72% said the reason we're on the wrong track is fraud. California is the capital of fraud. So we now know only 30% of the people in the survey are Republicans, but 72% say the problem is fraud. And then we go on and we ask them, what do you think of this solution? We put all state spending online every single day the moment it happens through a secure API that reads every transaction, writes it to a public database that's secure on a blockchain. And anybody who wants to look at the spending can look at the spending. That's not just the states, the counties, the cities, the dog catchers, police, everybody. I've never seen a poll with a higher response rate in history, 95%. of citizens of the state of California surveyed believe in my idea, which is radical transparency. So my state controller campaign is there is fraud. I can fix it. That's it. Fraud, I can fix it. I fix it through transparency. And that's our message. We hope everybody agrees with that. All right.
00:12:32
Speaker 2: You're listening here to a special edition. We're doing a live stream on YouTube and X. And our guest is Herb Morgan, candidate for California state controller as a Republican. And you just heard him say he can he can. The number one of the number one issues in the state is fraud. Everyone has heard about it, talks about it. The poll proves that it's a very important issue. And His campaign is about fixing it and stopping it. By the way, I see your comments coming through. If anybody has an intelligent question for Herb, then Eric will put it through. But it's got to be a smart one here because Herb is a very smart guy and I don't want to waste his time. All right, let's talk about some of the individual scandals. And then you tell me why you think this happened. And had you been in office, how differently it would have gone. And let's start with During COVID, this is famous, the unemployment fraud. The agency is called EDD, which is the Employment Development Department.
00:13:33
Speaker 1: Basically, it's the unemployment department.
00:13:36
Speaker 2: And as soon as they knew some shut down the state, they said, well, everybody with a job can apply. And lots of people applied, a tremendous number who live out of state and out of the country, many of them criminals. And estimates range all the way up to $ 32 billion stolen.
00:14:01
Speaker 1: How did this happen? And what could you have done to stop it or slow it down?
00:14:07
Speaker 3: It's actually worse than $ 32 billion. They have since updated the data. Not Herb hasn't updated it. The EDD officials themselves have updated the data. It is now $ 55 billion stolen. And here's how it happened. We shut down our economy because of COVID. That was a mistake. I'm an economist. I was very vocal at the time. No, isolate people with cancer and the elderly and the weak and all of that, and let the rest of us go to work and develop immunities. That was not the choice of Gavin Newsom and Malia Cohen. Fine. So when they shut down the economy, you had millions of people that were unemployed. We have an unemployment trust fund that we pay into from our paychecks. Well, so many people applied that they looked at it and said, wow, it'll take us forever to approve all these and verify the eligibility of the participants. Let's just not verify anybody's eligibility. And let's advertise to the public that we are not verifying eligibility. So that'd be like you going on vacation, leaving your front door wide open, posting on Facebook, hi, my wife and I have gone to Hawaii. Our jewelry, our watches, her handbags, everything is in the house and the front door is open. It's literally the same thing. So- gang members, prisoners, everybody applied and received unemployment insurance in California. We have a massive trust fund for this purpose for when we have a recession. That fund ran down to zero. We took all of the money out of the fund. Of course, there was nothing to spend it on because all the businesses were shut down. So people went online and tried to buy things. So then, this is where it gets amazing. We are one of 20 states who then applied for and received a loan from the Federal Unemployment Trust Fund. We received a $ 20 billion loan. Now, 19 states repaid that loan to the Federal Unemployment Trust Fund. One state did not repay the loan. Guess which state? Now, we have had... We have had seven budgets with which we could have budgeted repayment of the loan. Seven years. We never, ever included a single line item in any state budget, which comes from the governor, is approved by the legislature, to repay the loan. Every other state repaid the loan. California defaulted. And by the way, $ 20 billion, our budget this year is $ 350 billion. We could have repaid $ 5 billion a year for four years, right? Not a problem. We could have done that.
00:16:59
Speaker 1: They're refusing to pay it?
00:17:01
Speaker 3: California is refusing to pay the loan back. Now, the federal government has something called collateral. They're not going to let you stiff them out of $ 20 billion. And by the way, when people scream that Donald Trump stopped funding and all of that stuff, he can't stop funding unless you've done something wrong. The president is not a dictator. And so if we fail to give our annual reports, our single file audit reports, they can withhold funding. If we default on a loan, they can withhold funding. So we defaulted. And so now effective January 1st of 2026, so nine months ago, 10 months ago now, every employer in the state of California had their federal unemployment tax go up. And it will remain up and higher preventing wage increases, causing the price of consumer goods to go higher still, And it will stay up until that $ 20 billion loan is repaid. Now, we are 10 months in. We are still over $ 19 billion owed. And year to date, we're over $ 500 million in total. We're over $ 500 million in interest.
00:18:12
Speaker 1: So this is going to take decades to pay back.
00:18:15
Speaker 3: This will take decades, and they just don't want it to come out of their money, the general funds, where they borrowed it from. They borrowed it from the feds, and then they stuck it on the employers. So we had a fundraising event at a restaurant last night, and I was talking about this, and the owner of the restaurant was there. And he said, yes, I delayed cost of living wage increases to my employees. I had no choice. Because I was forced to pay higher taxes. So in other words, the reality is who paid it? His employees, right? The waiters, the busboys, the dishwashers, anybody there. California is the most expensive place in the world to live. And Malia Cohen and Gavin Newsom and their ilk every day seek to make it more expensive simply because they don't want to repay a loan.
00:19:06
Speaker 2: If you were the state controller at the time this was happening, what could you have done?
00:19:11
Speaker 1: You would have detected quickly.
00:19:13
Speaker 2: I mean, the whole world knew that we had an open door for people around the world to come in and steal tens of billions of dollars. What could you have done about it if you were the controller back in 2020?
00:19:25
Speaker 3: Well, as the state controller, you're the final sign-off. So I would have said, listen, guys, no, you cannot just give away money. There has to be statutory compliance here. And the compliance piece is you must verify that the individuals are eligible. So if that means repositioning some staff from one office to another, after all, most of the offices were shut down. People were home because of COVID, right? Mm-hmm. not just reposition some people and figure out ways to process the applications faster, verify the eligibility, and get the money out the door? But the idea of stopping eligibility verification and then advertising that you are doing it I cannot think of a dumber way to run a government.
00:20:12
Speaker 1: No, it's incredibly stupid.
00:20:14
Speaker 2: So could you, I mean, could you have legally stopped the payments until they?
00:20:18
Speaker 3: Oh, absolutely. The state controller is the most powerful. Absolutely. Now, would they have tried to sue me or maybe? Maybe they would take me in front of a judge and try to find a liberal judge, but no money can go out without the state controller. The state controller can just say, no, we're going to do that with high-speed rail because high-speed rail is currently operating illegally outside of Prop 1A compliance. My plan in January is to stop all payments on that project, which I am sure will put me in front of a judge.
00:20:51
Speaker 1: Let's talk about Homelessness spending.
00:20:54
Speaker 3: Yeah.
00:20:55
Speaker 1: This is a real hot button with people.
00:20:57
Speaker 3: Yeah.
00:20:57
Speaker 2: Newsom even admits that $ 24 billion over the last four years he spent, he either doesn't know where it went or it went somewhere and he doesn't know what it did.
00:21:12
Speaker 1: What could you have done in this case?
00:21:14
Speaker 3: This is actually a pretty easy one. And it's true, the number is about $ 24 billion. Much of that went into Los Angeles County through a service entity called LASA, LA Homeless Services. This organization was so inept, so corrupt, that Karen Bass resigned recently, just a couple of weeks ago. I mean, how bad does it have to be for Karen Bass to say, no, no, no, no, no, no, I can't be associated with what you all are doing? So here's the problem, and then I'll give you the solution. The problem is we're so rich. We have so much money. We have such a vibrant economy. We tax it so heavily that we want to solve problems. I call it funding our programs of compassion. We actually have all the money we need to deliver whatever service we want, but we should be ranked top five in the nation because we're the richest. So our homeless services should be top five. Instead, we're 50th out of 50. Because we send all the money out in blocks and we never hold anybody accountable. If you and I are building a construction project together, and we have a construction loan, the money's coming from a bank, they have something called fund control. We have to show them progress every single day before money is released. Okay, we framed. Okay, we pay the framer. Okay, the wiring's in. We'll pay the electrician, the roofer. And it goes along like that. But what California has done is they just, here's the money. And people go, well, do I have to prove anything? Do I have to fill out any forms? Do I have to show you what I did with the money? Are you going to audit me? And they literally don't do any of those things. So we could have put it in tranches. We could have verified progress along the way. We could have halted payment where there was no ability to verify. For example, the hospice centers. And in nowhere was it bigger. As a percentage of the spend, the biggest by far was homeless services. And think about who they're stealing from, right? Guy gets a $ 23 or $ 4 million grant. He buys a hotel for $ 20 million that he had under contract for $ 10 million, double escrowed, put $ 10 million in his pocket. We have people arrested for taking the homeless money grant, wiring $ 1 million to their American Express bill. buying Range Rovers. There was a guy who bought a $ 7 million house in Bel Air, private jets with his family to Hawaii. I fly private jets all the time. It's called Southwest Airlines. They're private, me and 149 other people on these planes. And we have our own little private jet, I call it all the time. But so what you have is because we push out so much money, we've doubled our budget in 10 years, $ 185 billion to $ 352 billion. And we push the money out the door, but we don't know how to do that. It's like if you're running– if you're the controller of Apple or Microsoft or Google or iHeartRadio, whatever, if you're one of those, you know how to do this. And we elected a person to the job. She's never done anything like that. She wouldn't even know how to do it because she's not trained.
00:24:24
Speaker 2: What you describe here is intense work and complicated. And you have to be very persistent over a long period of time because there are a lot of forces who want to hide the evidence from you.
00:24:39
Speaker 1: And I've hardly ever heard of this woman.
00:24:45
Speaker 2: Does she literally do nothing all day?
00:24:47
Speaker 1: Does she even show up?
00:24:49
Speaker 3: My understanding, and I could be wrong, my understanding is she spends an awful lot of time at home in San Francisco and not particularly in the state capitol. And that really staff is kind of running the show. And she's more of a ceremonial, pretty face, go speak at the chicken dinners in front of the different groups and talk about everything. If you look at her website, I've had so much fun doing this on our social media. As we bring up her website, it says what her issue, why she's running for state controller. And she has things on there like retirement security. What? Your job is to prevent fraud. She has one called reproductive access control. That's her main objective, a state controller. And I said, well, I would like access to reproduction, but I'm ugly. I don't get that access. You know what I'm saying? So I asked a doctor. I play golf with a guy. He's a doctor. I said, what is reproductive access? He says, I have no idea what that is. And she has environment. It's all of the– The progressive talking points.
00:25:55
Speaker 2: Right. That's what it sounds like is all the hot button things that gets far left people excited.
00:26:02
Speaker 3: But why the job? If I was a communist or a libertarian, my job is still the same. Prevent theft.
00:26:11
Speaker 1: Well, yeah, it's not a political job. It's a numbers job here.
00:26:17
Speaker 2: And if you're just joining us, Herb Morgan is a speaking candidate for California state controller Republican. And we've been discussing his opponent, Malia Cohen, who is a Malia Malia.
00:26:28
Speaker 3: I believe it's Malia.
00:26:30
Speaker 1: Malia Cohen.
00:26:31
Speaker 2: And she has allowed all the massive fraud that you hear about from the unemployment debacle during COVID to the homelessness, money disappearing to, well, I guess talk about my favorite thing, high-speed rail, $ 15.
00:26:49
Speaker 3: Billion in.
00:26:53
Speaker 2: No passengers because there's no trains because there's no track. And there isn't going to be anything built anytime soon.
00:27:01
Speaker 1: And it would be comical. But this is.
00:27:06
Speaker 2: Tragic that they've blown this much money. And they're continuing to blow the money. And nobody is stopping them. If you were the state controller, you would have gotten a handle on this thing probably 15 years ago, right?
00:27:19
Speaker 3: Yeah, it's very, very easy because the law is clear. High-speed rail was authorized by Prop 1A. We voted. And what we said is we're going to build an 800-mile train. It's going to cost $ 30 billion. And we're going to borrow $ 10 million, not project bond debt, general obligation debt, because we don't want to hide the actual credit of the project because that debt would never get sold if it was tied to the train itself, right? So it's geo debt. It's no longer 800 miles. It's now down to 171 miles. Now, it's no longer $ 30 billion. It's now $ 230 billion. But Prop 1A was very clear. There may not be any operating subsidy after the project is built. We have a big problem in California. One of our financial problems is that all of our rails from BART to San Diego Metro to LA, all of them require massive subsidy. Rail is a very inefficient way to move people because track maintenance and train maintenance, it's very, very fixed cost intensive project. So the citizens were asked, well, how about if we do a high speed rail as long as it doesn't require an operating subsidy? Well, about eight months ago, the CEO of the high-speed rail updated his business plan, and he posted it on his website. That's a good thing. He should do that. In there, he laid out that it will require an operating subsidy of roughly $ 0. 50 on the dollar infinitum, which is where your cap and trade tax from your gasoline, one of the reasons your gasoline, folks, is $ 6. 50 and the rest of the country is $ 4, is because there's a very large, what they call a cap and invest now, not cap and trade, cap and invest tax. And then they take that money and they're funneling it into the high-speed rail project. But that is illegal. Because Prop 1A specifically says, no. So I held a press conference.
00:29:17
Speaker 1: Why isn't it stopped by a judge? Why isn't somebody sued? I don't understand that.
00:29:23
Speaker 3: It's a great question. I've already announced publicly we did a press conference at Deerdon Station in San Jose. Steve Hilton and I did it together. January 3rd, when I'm sworn in, hello, high-speed rail contractors, be careful. Your invoices will not be paid after January. 3rd. They will not be paid. You will have to force me in front of a judge to get those paid. So think twice before you continue work on this BS project. And what it is, is this is a great example of how all capital projects work in our state. Here's another one Malia Cohen is working on right now. Our payroll system. We have about 300,000 employees in the state. We have a payroll software system. It was written in the 1970s.
00:30:08
Speaker 1: Okay.
00:30:09
Speaker 3: So this is a very old 50-year-old payroll system. And Malia Cohen wants to build a new system. So she first said, I need a billion dollars. Well, now she says she needs $ 3 billion. Okay. Well, what project has ever come in under budget? We spent a billion on open fiscal. It didn't work. We spent 500 million on the 911 system, and we deleted it. It's 500, just poof, gone. We got the Annenberg Wildlife Crossing. I drove under that twice last week, where it's a bridge with no sides, right, on the 101 near, right, just north of Thousand Oaks. And then, so she's going to build software. Now, think about this. If I'm the state controller, and I know we need a payroll system, I'm going to put together an RFP, request for proposal, and I'm going to put it out on the internet, and I'm going to let ADP and Paychex and Liberty and all the different companies that do payroll, I'm going to let them bid. But here's what I'm going to say. I don't really need you to write me new software. I need your software, white-labeled. For the state of California, with all the features I need that are unique, my certain collective bargaining agreements, all of these different things, I will not lay out a penny of state money. You are going to do a major investment. And if you do that major investment, I will give you a 10-year contract to process payroll for the state of California. And I'll pay you $ 5 per employee per month. Take it or leave it. And you know what? I'm going to get a lot of bids. But Malia Cohen doesn't want to do it that way. Why? Why? Because there's power in the ability to hand out that $ 3 billion, right? And so everybody's friends get to be part of the contract. And well, I'm going to give you this contract. But my friend John, he's got to be a consultant over here on the side. And this is the level of corruption that exists in the state of California. It exists in the homeless. It exists in the high-speed rail. It exists in home health services. It exists in CalFresh, CalWorks. Everybody looks the other way because everybody's pulling money out of the pie.
00:32:15
Speaker 1: My plan ends it.
00:32:17
Speaker 3: Yeah. Well, my plan will end that. Yeah. Yeah.
00:32:21
Speaker 2: I mean, you can do this regardless of who the governor is, right? I know you're part of Steve Hilton's golden ticket. But if Becerra were to win, you could still operate independently and– Oh, 100%.
00:32:33
Speaker 3: The state controller– The state controller is elected by the people, does not report to the governor. I really hope Steve Hilton is the governor. He's my friend, and I think he'd be an excellent governor because he's actually very smart and works hard. But if for some reason he's not, then I don't report to Javier Becerra. I do the job. I report to the Constitution. Now, the legislature has some oversight. They can demand answers and ask questions, and they should, and I should provide those answers, but they can't tell me how to run the office. I have to run it according to the Constitution.
00:33:11
Speaker 2: I remember there was an outside audit done of high-speed rail. I don't remember if it was a state or a federal audit or what, but I remember they had been looking at the books and And they said that they at some point in the chain, they couldn't find where the money went. There was no paperwork. There was no invoices. They know the money was spent. But on who or for what it the information vanished.
00:33:37
Speaker 3: Yeah, there was also going to jail for that. They should be going to jail for that, and they should be going to jail for all of the different instances of fraud that we have identified, whether it was the solar panels on the Section 8 housing, whether it's the homeless, the phony daycares, the phony hospice centers, the high-speed rail, the Annenberg Wildlife Crossing. But the state controller doesn't prosecute. Who prosecutes? Well, that's the attorney general. How many fraud cases has Rob Bonta prosecuted as attorney general of fraud of state money? It's a big bagel. How many have the local district attorneys prosecuted? That's a big bagel. So you sit there and go, huh, he's the chief law enforcement officer of the state, and he's not prosecuting financial crime. Maybe I should commit some financial crimes because they're not arresting anybody. Maybe you and I should go form a nonprofit tomorrow called the Herb and John Center for Love and Understanding, and we should apply and receive a $ 50 million grant. What color do you want your Range Rover to be? Right. I mean, that's that it gets worse. It gets worse. I don't know if you saw this guy, Corey Jackson. He's an assembly member out of Marino Valley. Have you heard about this guy?
00:34:51
Speaker 1: Oh, yes. I believe we've talked about this guy.
00:34:54
Speaker 3: Yes. The center, the Citizens Against Racism and Trauma. I guess somewhere there's a citizens that are for trauma and for racism. Right. But apparently, he had to form a nonprofit entity, resigned from the board, didn't want a conflict of interest, gave himself $ 250, 000 last year. It worked so well. Three weeks ago in the middle of the night, he awarded his nonprofit entity, his former. He's no longer affiliated. I don't want to accuse him of any wrongdoing. He awarded them $ 6 million. Now, contrast that with my daughter-in-law, sweet Sarah, the nicest, kindest, gentlest woman in the history of the planet. She is a teacher in the public schools in California. And she teaches mentally and physically disabled children. I mean, this is God's– you and I are nothing compared to somebody who does this, right? She told me a few weeks ago, yeah, new school year is going great. Love my kids. Everything is great. But I don't have a desk in my classroom because we're out of budget. We're going to spend $ 27, 411 per kid in California public schools this year. Corey Jackson's nonprofit got $ 6 million so they could pay an honorarium to Angela Davis to speak at an online seminar. But there's no desk for the special ed teacher in California.
00:36:17
Speaker 1: And she was a killer terrorist.
00:36:19
Speaker 3: How can anybody continue to vote for these people? You notice you and I have been on for however long we've been on now. We've not had a single policy discussion. Not one. Because the job has nothing to do with policy. It has to do with money. And that's something I know very well. After 39 years in finance, multiple boards of directors, audit committees, over and over and over, I sit on one board still currently of a venture fund. And I tell you, I've never seen a higher level of incompetence in any organization I've ever been affiliated with than the executive members of California state government, all of them are uniquely unqualified for the jobs that they hold. I mean, Ricardo Lara, I mean, oh my goodness. I mean, I guess we don't have a Republican running there. The school's chief, the secretary of state. I mean, I am flabbergasted by the skillset, the lack of acumen that these people have. Who cares about policy? Honestly, I go around and I talk. I had 800,000 non-Republican votes in the primary.
00:37:37
Speaker 1: 800,000.
00:37:37
Speaker 3: That's pretty darn good. And our poll, now, my party only has 28% or 29% of the voter registration in the state. But my poll from last week shows me at 48%. 48-52, from where I'm sitting, that's dead even. And I think there's a very good chance that we shock the world because this concept that Californians are not fiscally sane is wrong. I've been here my whole life. We don't like wasting money. We don't like theft. We don't like throwing money away. But you know what? We also have our own unique views of other parts of the world that have nothing to do with the state controller's office. And I'm good with all of that. Yeah. That's who we are.
00:38:29
Speaker 2: I think people should look at you as extremely qualified to stop a lot of this fraud from happening, expose what's going on. And that's a practical matter in our lives to balance budgets, to keep track of our money. That is not a political issue. There's not an ideology attached to it. And that we need this desperately. And you can do this no matter who wins the governor's race or any of the other offices. And so this this to me is one of the most important races. And I'm urging everybody to vote for Herb Morgan, candidate for California state controller. This one vote will go a long way to changing things in Sacramento. Herb, I could talk with you forever. Thank you very much for coming on. And let's talk again before election day as well.
00:39:20
Speaker 1: And good luck.
00:39:21
Speaker 3: You got it. Thank you for all you do. I really appreciate being here. All right.
00:39:24
Speaker 2: And you deserve to win. That's Herb Morgan. And this videos, going to be available on YouTube and X, obviously. We're going to put this on the audio podcast. That'll be posted soon. So tell people about this. You know, we didn't run too long. I think we're almost at 40 minutes. It's very necessary that anybody who votes votes. listens to this for 40 minutes. And if Malia Cohen wants to come on, we'll do it with her as well. I think it would go differently, but the invitation's always there. Now, today on the radio show, we're going to have Bill Asseli on at three o'clock. I don't know if you heard, but there was a huge bust on Skid Row, gigantic drug bust. And Bill's going to explain what happened at three o'clock. So talk with you then. Thanks for watching. Thanks for listening.
Speaker 1: Hi there. Good morning and welcome.
00:00:06
Speaker 2: It is a special live stream of the John Kobelt show. And we have a guest that we're going to interview in just a moment. Herb Morgan is running for state controller as a Republican. And we've had Herb on the show previously on the radio. But today we're going to be able to talk more at length uninterrupted. and explain to you what a state controller does, why this is important. I wouldn't be doing this if I didn't think this was a really important office for you to pay attention to and for you to vote for Herb.
00:00:35
Speaker 1: Right now, the state controller is a.
00:00:39
Speaker 2: Woman named Malia Cohen, obviously a Democrat, and with the almost weekly reports of of massive fraud scandals coming out of Sacramento, the state controller can actually do a lot to at least investigate, audit, expose what's going on. And she does none of that. She's not even campaigning that I can see. In fact, the Sacramento Bee just wrote an editorial a week ago saying that she wants to keep quiet about her reelection bid because she knows the Republicans don't have enough registered voters. However, Those who are aware of the choice are going for Herb Morgan. For example, the editorial boards of the Sacramento Bee, the Modesto Bee, the Merced Sun Star, the Fresno Bee, the San Luis Obispo Tribune all endorsed Herb Morgan because he is so qualified for the office, way more so than Cohen. You could judge her on her resume. You could also judge her on her terrible lack of performance. She doesn't audit anything worthwhile. because she's protecting the democratic machine. That's the last thing that Newsom and the legislature wants. So I'm going to introduce, uh, Herb Morgan, give you a quick rundown of his biography. He came to California when he was a year old back in 1967, graduated with honors from UC Santa Cruz degree was in economics. And then he founded later on efficient market advisors. That's a investment firm out of San Diego, uh, that, uh, managed portfolios, uh, specializing in ETFs, exchange-traded funds, and the firm grew to manage about a billion and a half dollars. He sold it to Cantor Fitzgerald, remained as senior managing director and chief investment officer, and the mayor of San Diego at the time, Jerry Sanders, appointed him to the San Diego City Employees Retirement System Board, and he was chair of that twice. So he has an extensive education economics, extensive experience in finance, and has really good experience in government, chairing the San Diego Retirement Pension Board. So that's the guy you want keeping track of the money in Sacramento, which is flying out the window. It's like a fire hose of money, and a lot of it is stolen. So let's get now to Herb Morgan.
00:03:07
Speaker 3: Welcome.
00:03:07
Speaker 1: How are you?
00:03:08
Speaker 3: John, it is great to see you again. Thank you for having me here.
00:03:13
Speaker 1: Why don't we start? Thank you for coming on.
00:03:15
Speaker 2: Why don't we start by you explaining what a state controller does? I gave a quick overview, but why don't you get into some details here? What would be your daily job and what effect would you have on the government?
00:03:28
Speaker 3: There's these constitutional duties, but the current controller is not aware of the constitutional duties because she has more of a policy shop. And she has a press shop at a press team. But the reality is the state constitution defines the job of state controller as the following. Number one, pre-audit all state spending. What that means is before any dollar can go out the door, the state controller is supposed to verify the legality and the compliance, the statutory compliance of the request. And by law, by constitution, the last stamp, the last person to sign off on money going out the door, we now know she does not do that. That is the cause. Everybody knows there's so much fraud, but we don't know why. It is the job of the state controller to prevent it. She does not do the constitutionally mandated duties. Therefore, she is the cause of the fraud. That's duty number one. Duty number two, post audit to ensure we got what we were supposed to get for the money we sent. That means get in your car, drive to the Central Valley, and look at the train. If the train is not there, it means we didn't get the train. Okay, so this is called a performance audit.
00:04:44
Speaker 1: You got to be really sharp, too.
00:04:46
Speaker 2: You got to have very powerful observational skills.
00:04:51
Speaker 3: Yeah. Last thing state controller– well, there's two more things. Last major thing is manage unclaimed property, which I'm going to change the name of to property reunification. We're going to proactively return $ 15 billion to the citizens, unlike Malia Cohen, who's used it as an additional form of taxation, where she escheats property and takes it and returns very little and makes a big press announcement when she returns a de minimis amount. And then the state controller sits on 70 of our most important boards and commissions, including Chairman of the Franchise Tax Board, the State Lands Commission, the Coastal Commission, State Board of Equalization, CalPERS, CalSTRS, and the list goes on and on. It's a very, very big and powerful role in our state government.
00:05:40
Speaker 1: It sounds like a lot of work.
00:05:42
Speaker 2: And the indications I've seen is she doesn't do much of it. Now, you're probably aware of a leaked interview that some independent journalist did with Malia Cohen's deputy at lunch. And he admitted that they don't do audits because the legislature doesn't want them to. And she's a loyal supporter in the Democratic machine.
00:06:06
Speaker 3: It is. It's amazing. In fact, three weeks ago now, the eight assembly members, California assembly members led by Carl DeMaio from San Diego, sent a letter to Malia Cohen and said the following. The state constitution requires you to pre-audit all state spending. How many checks went out in each of the last three fiscal years? And how many of them did you perform the required pre-audit on? Simple question. 10 checks went out. I did 10 pre-audits, or 10 million, 10 million. Her response, they demanded a two-week response. It was signed by eight members of our legislature. Her response was, I reject your question. Now, remember, the legislature is the oversight body to the state controller. They reject your question, and by the way, I need a bigger budget. Send more money. This is a classic person who's done no other job in life government. And the knee-jerk response, when the body that oversees your office asks you, did you do the job? This is not a big request. Did you do the job? Her response was, send more money. And she never answered any of the questions. I believe she's subject to impeachment at this point. But we all know the breakdown statistically of the legislature. So the likelihood of an impeachment or a conviction, of course, is very low.
00:07:31
Speaker 2: But in a normal world, if she was doing a job like this in the private sector, she would have been long fired.
00:07:38
Speaker 3: She not only would be long fired, she never would have been hired. I mean, I'm sure she's a wonderful human being, but that's not relevant to the job. Like, I would love to be the second baseman for the Dodgers. Am I capable? Am I qualified? No. And she has no background in finance. She does have some unique financial experience, of course. If you count buying a home with no money down and two adjustable rate mortgages and having it foreclosed, that's a unique financial experience I do not have. If you count the financial experience of having two businesses shut down by the Franchise Tax Board for failure to file and pay taxes, that's another experience that I do not possess. And it's interesting and it's ironic because the state controller is the chairman of the Franchise Tax Board. I mean, this is dripping irony. Yes.
00:08:31
Speaker 1: And this is why I wanted to have you on.
00:08:33
Speaker 2: Most people don't know, first of all, that your office exists and what it is you do and how extensive your responsibilities are, how important it is. And with one of the overwhelming stories out of Sacramento in the last year being endless reports of fraud and stolen money, actually through the whole Newsom second term especially, that you could provide a valuable role in this.
00:09:00
Speaker 1: Stopping a lot of this or exposing it at the very least.
00:09:05
Speaker 2: Yeah.
00:09:05
Speaker 3: In fact, we all know that the fraud story in California is ubiquitous. We know that it's national. It's even international news. I got a message from a friend in the UK this week about what the hell's going on in California with the fraud. It's proven. The arrests are being made. Now, none of these arrests have come from our own California law enforcement community. The arrests, and there's been some convictions, they've all come from federal intervention. And then people think, well, where did that come from? It came from this kid, Nick Shirley. No, it didn't. Nick's doing a great job. It actually, all of this came about because I wrote a white paper back in December at the request of Steve Hilton. He asked me to do the research on the fraud in California because after all, it's the job of the controller to prevent fraud. That's literally the job. And so we talk about the fraud and we blame Gavin Newsom, we blame the assembly, but in reality, it's the fault of Malia Cohen. This is not that she stole the money, not that she's guilty, but that she's incompetent and unable to do the job of fraud prevention. This is a highly complex financial system that we have. our wealth, we are the wealthiest state and the richest country in the history of the world. So we did the report. We gave the report to the president of the United States. He then appointed J.D. Vance to head this up. And now we're seeing arrests being made, hospices, phony daycares being shut down. But there's so, so, so much more to do. And I noticed in the last couple of weeks, Malia Cohen has updated her talking points to actually say she's for transparency and fraud prevention. Oh, now? I think she got our poll. She must have got a hold of the poll we did because 64.5% of residents of the state, not Republicans, 64.5% of all of us say that California is on the wrong track. That's the highest it's ever been. It was only 48% in 2022, which means this is a winnable race right now. 64.5% said we're on the wrong track. We then said, well, why? Is it because of immigration? Is it healthcare? Is it education? 72% said the reason we're on the wrong track is fraud. California is the capital of fraud. So we now know only 30% of the people in the survey are Republicans, but 72% say the problem is fraud. And then we go on and we ask them, what do you think of this solution? We put all state spending online every single day the moment it happens through a secure API that reads every transaction, writes it to a public database that's secure on a blockchain. And anybody who wants to look at the spending can look at the spending. That's not just the states, the counties, the cities, the dog catchers, police, everybody. I've never seen a poll with a higher response rate in history, 95%. of citizens of the state of California surveyed believe in my idea, which is radical transparency. So my state controller campaign is there is fraud. I can fix it. That's it. Fraud, I can fix it. I fix it through transparency. And that's our message. We hope everybody agrees with that. All right.
00:12:32
Speaker 2: You're listening here to a special edition. We're doing a live stream on YouTube and X. And our guest is Herb Morgan, candidate for California state controller as a Republican. And you just heard him say he can he can. The number one of the number one issues in the state is fraud. Everyone has heard about it, talks about it. The poll proves that it's a very important issue. And His campaign is about fixing it and stopping it. By the way, I see your comments coming through. If anybody has an intelligent question for Herb, then Eric will put it through. But it's got to be a smart one here because Herb is a very smart guy and I don't want to waste his time. All right, let's talk about some of the individual scandals. And then you tell me why you think this happened. And had you been in office, how differently it would have gone. And let's start with During COVID, this is famous, the unemployment fraud. The agency is called EDD, which is the Employment Development Department.
00:13:33
Speaker 1: Basically, it's the unemployment department.
00:13:36
Speaker 2: And as soon as they knew some shut down the state, they said, well, everybody with a job can apply. And lots of people applied, a tremendous number who live out of state and out of the country, many of them criminals. And estimates range all the way up to $ 32 billion stolen.
00:14:01
Speaker 1: How did this happen? And what could you have done to stop it or slow it down?
00:14:07
Speaker 3: It's actually worse than $ 32 billion. They have since updated the data. Not Herb hasn't updated it. The EDD officials themselves have updated the data. It is now $ 55 billion stolen. And here's how it happened. We shut down our economy because of COVID. That was a mistake. I'm an economist. I was very vocal at the time. No, isolate people with cancer and the elderly and the weak and all of that, and let the rest of us go to work and develop immunities. That was not the choice of Gavin Newsom and Malia Cohen. Fine. So when they shut down the economy, you had millions of people that were unemployed. We have an unemployment trust fund that we pay into from our paychecks. Well, so many people applied that they looked at it and said, wow, it'll take us forever to approve all these and verify the eligibility of the participants. Let's just not verify anybody's eligibility. And let's advertise to the public that we are not verifying eligibility. So that'd be like you going on vacation, leaving your front door wide open, posting on Facebook, hi, my wife and I have gone to Hawaii. Our jewelry, our watches, her handbags, everything is in the house and the front door is open. It's literally the same thing. So- gang members, prisoners, everybody applied and received unemployment insurance in California. We have a massive trust fund for this purpose for when we have a recession. That fund ran down to zero. We took all of the money out of the fund. Of course, there was nothing to spend it on because all the businesses were shut down. So people went online and tried to buy things. So then, this is where it gets amazing. We are one of 20 states who then applied for and received a loan from the Federal Unemployment Trust Fund. We received a $ 20 billion loan. Now, 19 states repaid that loan to the Federal Unemployment Trust Fund. One state did not repay the loan. Guess which state? Now, we have had... We have had seven budgets with which we could have budgeted repayment of the loan. Seven years. We never, ever included a single line item in any state budget, which comes from the governor, is approved by the legislature, to repay the loan. Every other state repaid the loan. California defaulted. And by the way, $ 20 billion, our budget this year is $ 350 billion. We could have repaid $ 5 billion a year for four years, right? Not a problem. We could have done that.
00:16:59
Speaker 1: They're refusing to pay it?
00:17:01
Speaker 3: California is refusing to pay the loan back. Now, the federal government has something called collateral. They're not going to let you stiff them out of $ 20 billion. And by the way, when people scream that Donald Trump stopped funding and all of that stuff, he can't stop funding unless you've done something wrong. The president is not a dictator. And so if we fail to give our annual reports, our single file audit reports, they can withhold funding. If we default on a loan, they can withhold funding. So we defaulted. And so now effective January 1st of 2026, so nine months ago, 10 months ago now, every employer in the state of California had their federal unemployment tax go up. And it will remain up and higher preventing wage increases, causing the price of consumer goods to go higher still, And it will stay up until that $ 20 billion loan is repaid. Now, we are 10 months in. We are still over $ 19 billion owed. And year to date, we're over $ 500 million in total. We're over $ 500 million in interest.
00:18:12
Speaker 1: So this is going to take decades to pay back.
00:18:15
Speaker 3: This will take decades, and they just don't want it to come out of their money, the general funds, where they borrowed it from. They borrowed it from the feds, and then they stuck it on the employers. So we had a fundraising event at a restaurant last night, and I was talking about this, and the owner of the restaurant was there. And he said, yes, I delayed cost of living wage increases to my employees. I had no choice. Because I was forced to pay higher taxes. So in other words, the reality is who paid it? His employees, right? The waiters, the busboys, the dishwashers, anybody there. California is the most expensive place in the world to live. And Malia Cohen and Gavin Newsom and their ilk every day seek to make it more expensive simply because they don't want to repay a loan.
00:19:06
Speaker 2: If you were the state controller at the time this was happening, what could you have done?
00:19:11
Speaker 1: You would have detected quickly.
00:19:13
Speaker 2: I mean, the whole world knew that we had an open door for people around the world to come in and steal tens of billions of dollars. What could you have done about it if you were the controller back in 2020?
00:19:25
Speaker 3: Well, as the state controller, you're the final sign-off. So I would have said, listen, guys, no, you cannot just give away money. There has to be statutory compliance here. And the compliance piece is you must verify that the individuals are eligible. So if that means repositioning some staff from one office to another, after all, most of the offices were shut down. People were home because of COVID, right? Mm-hmm. not just reposition some people and figure out ways to process the applications faster, verify the eligibility, and get the money out the door? But the idea of stopping eligibility verification and then advertising that you are doing it I cannot think of a dumber way to run a government.
00:20:12
Speaker 1: No, it's incredibly stupid.
00:20:14
Speaker 2: So could you, I mean, could you have legally stopped the payments until they?
00:20:18
Speaker 3: Oh, absolutely. The state controller is the most powerful. Absolutely. Now, would they have tried to sue me or maybe? Maybe they would take me in front of a judge and try to find a liberal judge, but no money can go out without the state controller. The state controller can just say, no, we're going to do that with high-speed rail because high-speed rail is currently operating illegally outside of Prop 1A compliance. My plan in January is to stop all payments on that project, which I am sure will put me in front of a judge.
00:20:51
Speaker 1: Let's talk about Homelessness spending.
00:20:54
Speaker 3: Yeah.
00:20:55
Speaker 1: This is a real hot button with people.
00:20:57
Speaker 3: Yeah.
00:20:57
Speaker 2: Newsom even admits that $ 24 billion over the last four years he spent, he either doesn't know where it went or it went somewhere and he doesn't know what it did.
00:21:12
Speaker 1: What could you have done in this case?
00:21:14
Speaker 3: This is actually a pretty easy one. And it's true, the number is about $ 24 billion. Much of that went into Los Angeles County through a service entity called LASA, LA Homeless Services. This organization was so inept, so corrupt, that Karen Bass resigned recently, just a couple of weeks ago. I mean, how bad does it have to be for Karen Bass to say, no, no, no, no, no, no, I can't be associated with what you all are doing? So here's the problem, and then I'll give you the solution. The problem is we're so rich. We have so much money. We have such a vibrant economy. We tax it so heavily that we want to solve problems. I call it funding our programs of compassion. We actually have all the money we need to deliver whatever service we want, but we should be ranked top five in the nation because we're the richest. So our homeless services should be top five. Instead, we're 50th out of 50. Because we send all the money out in blocks and we never hold anybody accountable. If you and I are building a construction project together, and we have a construction loan, the money's coming from a bank, they have something called fund control. We have to show them progress every single day before money is released. Okay, we framed. Okay, we pay the framer. Okay, the wiring's in. We'll pay the electrician, the roofer. And it goes along like that. But what California has done is they just, here's the money. And people go, well, do I have to prove anything? Do I have to fill out any forms? Do I have to show you what I did with the money? Are you going to audit me? And they literally don't do any of those things. So we could have put it in tranches. We could have verified progress along the way. We could have halted payment where there was no ability to verify. For example, the hospice centers. And in nowhere was it bigger. As a percentage of the spend, the biggest by far was homeless services. And think about who they're stealing from, right? Guy gets a $ 23 or $ 4 million grant. He buys a hotel for $ 20 million that he had under contract for $ 10 million, double escrowed, put $ 10 million in his pocket. We have people arrested for taking the homeless money grant, wiring $ 1 million to their American Express bill. buying Range Rovers. There was a guy who bought a $ 7 million house in Bel Air, private jets with his family to Hawaii. I fly private jets all the time. It's called Southwest Airlines. They're private, me and 149 other people on these planes. And we have our own little private jet, I call it all the time. But so what you have is because we push out so much money, we've doubled our budget in 10 years, $ 185 billion to $ 352 billion. And we push the money out the door, but we don't know how to do that. It's like if you're running– if you're the controller of Apple or Microsoft or Google or iHeartRadio, whatever, if you're one of those, you know how to do this. And we elected a person to the job. She's never done anything like that. She wouldn't even know how to do it because she's not trained.
00:24:24
Speaker 2: What you describe here is intense work and complicated. And you have to be very persistent over a long period of time because there are a lot of forces who want to hide the evidence from you.
00:24:39
Speaker 1: And I've hardly ever heard of this woman.
00:24:45
Speaker 2: Does she literally do nothing all day?
00:24:47
Speaker 1: Does she even show up?
00:24:49
Speaker 3: My understanding, and I could be wrong, my understanding is she spends an awful lot of time at home in San Francisco and not particularly in the state capitol. And that really staff is kind of running the show. And she's more of a ceremonial, pretty face, go speak at the chicken dinners in front of the different groups and talk about everything. If you look at her website, I've had so much fun doing this on our social media. As we bring up her website, it says what her issue, why she's running for state controller. And she has things on there like retirement security. What? Your job is to prevent fraud. She has one called reproductive access control. That's her main objective, a state controller. And I said, well, I would like access to reproduction, but I'm ugly. I don't get that access. You know what I'm saying? So I asked a doctor. I play golf with a guy. He's a doctor. I said, what is reproductive access? He says, I have no idea what that is. And she has environment. It's all of the– The progressive talking points.
00:25:55
Speaker 2: Right. That's what it sounds like is all the hot button things that gets far left people excited.
00:26:02
Speaker 3: But why the job? If I was a communist or a libertarian, my job is still the same. Prevent theft.
00:26:11
Speaker 1: Well, yeah, it's not a political job. It's a numbers job here.
00:26:17
Speaker 2: And if you're just joining us, Herb Morgan is a speaking candidate for California state controller Republican. And we've been discussing his opponent, Malia Cohen, who is a Malia Malia.
00:26:28
Speaker 3: I believe it's Malia.
00:26:30
Speaker 1: Malia Cohen.
00:26:31
Speaker 2: And she has allowed all the massive fraud that you hear about from the unemployment debacle during COVID to the homelessness, money disappearing to, well, I guess talk about my favorite thing, high-speed rail, $ 15.
00:26:49
Speaker 3: Billion in.
00:26:53
Speaker 2: No passengers because there's no trains because there's no track. And there isn't going to be anything built anytime soon.
00:27:01
Speaker 1: And it would be comical. But this is.
00:27:06
Speaker 2: Tragic that they've blown this much money. And they're continuing to blow the money. And nobody is stopping them. If you were the state controller, you would have gotten a handle on this thing probably 15 years ago, right?
00:27:19
Speaker 3: Yeah, it's very, very easy because the law is clear. High-speed rail was authorized by Prop 1A. We voted. And what we said is we're going to build an 800-mile train. It's going to cost $ 30 billion. And we're going to borrow $ 10 million, not project bond debt, general obligation debt, because we don't want to hide the actual credit of the project because that debt would never get sold if it was tied to the train itself, right? So it's geo debt. It's no longer 800 miles. It's now down to 171 miles. Now, it's no longer $ 30 billion. It's now $ 230 billion. But Prop 1A was very clear. There may not be any operating subsidy after the project is built. We have a big problem in California. One of our financial problems is that all of our rails from BART to San Diego Metro to LA, all of them require massive subsidy. Rail is a very inefficient way to move people because track maintenance and train maintenance, it's very, very fixed cost intensive project. So the citizens were asked, well, how about if we do a high speed rail as long as it doesn't require an operating subsidy? Well, about eight months ago, the CEO of the high-speed rail updated his business plan, and he posted it on his website. That's a good thing. He should do that. In there, he laid out that it will require an operating subsidy of roughly $ 0. 50 on the dollar infinitum, which is where your cap and trade tax from your gasoline, one of the reasons your gasoline, folks, is $ 6. 50 and the rest of the country is $ 4, is because there's a very large, what they call a cap and invest now, not cap and trade, cap and invest tax. And then they take that money and they're funneling it into the high-speed rail project. But that is illegal. Because Prop 1A specifically says, no. So I held a press conference.
00:29:17
Speaker 1: Why isn't it stopped by a judge? Why isn't somebody sued? I don't understand that.
00:29:23
Speaker 3: It's a great question. I've already announced publicly we did a press conference at Deerdon Station in San Jose. Steve Hilton and I did it together. January 3rd, when I'm sworn in, hello, high-speed rail contractors, be careful. Your invoices will not be paid after January. 3rd. They will not be paid. You will have to force me in front of a judge to get those paid. So think twice before you continue work on this BS project. And what it is, is this is a great example of how all capital projects work in our state. Here's another one Malia Cohen is working on right now. Our payroll system. We have about 300,000 employees in the state. We have a payroll software system. It was written in the 1970s.
00:30:08
Speaker 1: Okay.
00:30:09
Speaker 3: So this is a very old 50-year-old payroll system. And Malia Cohen wants to build a new system. So she first said, I need a billion dollars. Well, now she says she needs $ 3 billion. Okay. Well, what project has ever come in under budget? We spent a billion on open fiscal. It didn't work. We spent 500 million on the 911 system, and we deleted it. It's 500, just poof, gone. We got the Annenberg Wildlife Crossing. I drove under that twice last week, where it's a bridge with no sides, right, on the 101 near, right, just north of Thousand Oaks. And then, so she's going to build software. Now, think about this. If I'm the state controller, and I know we need a payroll system, I'm going to put together an RFP, request for proposal, and I'm going to put it out on the internet, and I'm going to let ADP and Paychex and Liberty and all the different companies that do payroll, I'm going to let them bid. But here's what I'm going to say. I don't really need you to write me new software. I need your software, white-labeled. For the state of California, with all the features I need that are unique, my certain collective bargaining agreements, all of these different things, I will not lay out a penny of state money. You are going to do a major investment. And if you do that major investment, I will give you a 10-year contract to process payroll for the state of California. And I'll pay you $ 5 per employee per month. Take it or leave it. And you know what? I'm going to get a lot of bids. But Malia Cohen doesn't want to do it that way. Why? Why? Because there's power in the ability to hand out that $ 3 billion, right? And so everybody's friends get to be part of the contract. And well, I'm going to give you this contract. But my friend John, he's got to be a consultant over here on the side. And this is the level of corruption that exists in the state of California. It exists in the homeless. It exists in the high-speed rail. It exists in home health services. It exists in CalFresh, CalWorks. Everybody looks the other way because everybody's pulling money out of the pie.
00:32:15
Speaker 1: My plan ends it.
00:32:17
Speaker 3: Yeah. Well, my plan will end that. Yeah. Yeah.
00:32:21
Speaker 2: I mean, you can do this regardless of who the governor is, right? I know you're part of Steve Hilton's golden ticket. But if Becerra were to win, you could still operate independently and– Oh, 100%.
00:32:33
Speaker 3: The state controller– The state controller is elected by the people, does not report to the governor. I really hope Steve Hilton is the governor. He's my friend, and I think he'd be an excellent governor because he's actually very smart and works hard. But if for some reason he's not, then I don't report to Javier Becerra. I do the job. I report to the Constitution. Now, the legislature has some oversight. They can demand answers and ask questions, and they should, and I should provide those answers, but they can't tell me how to run the office. I have to run it according to the Constitution.
00:33:11
Speaker 2: I remember there was an outside audit done of high-speed rail. I don't remember if it was a state or a federal audit or what, but I remember they had been looking at the books and And they said that they at some point in the chain, they couldn't find where the money went. There was no paperwork. There was no invoices. They know the money was spent. But on who or for what it the information vanished.
00:33:37
Speaker 3: Yeah, there was also going to jail for that. They should be going to jail for that, and they should be going to jail for all of the different instances of fraud that we have identified, whether it was the solar panels on the Section 8 housing, whether it's the homeless, the phony daycares, the phony hospice centers, the high-speed rail, the Annenberg Wildlife Crossing. But the state controller doesn't prosecute. Who prosecutes? Well, that's the attorney general. How many fraud cases has Rob Bonta prosecuted as attorney general of fraud of state money? It's a big bagel. How many have the local district attorneys prosecuted? That's a big bagel. So you sit there and go, huh, he's the chief law enforcement officer of the state, and he's not prosecuting financial crime. Maybe I should commit some financial crimes because they're not arresting anybody. Maybe you and I should go form a nonprofit tomorrow called the Herb and John Center for Love and Understanding, and we should apply and receive a $ 50 million grant. What color do you want your Range Rover to be? Right. I mean, that's that it gets worse. It gets worse. I don't know if you saw this guy, Corey Jackson. He's an assembly member out of Marino Valley. Have you heard about this guy?
00:34:51
Speaker 1: Oh, yes. I believe we've talked about this guy.
00:34:54
Speaker 3: Yes. The center, the Citizens Against Racism and Trauma. I guess somewhere there's a citizens that are for trauma and for racism. Right. But apparently, he had to form a nonprofit entity, resigned from the board, didn't want a conflict of interest, gave himself $ 250, 000 last year. It worked so well. Three weeks ago in the middle of the night, he awarded his nonprofit entity, his former. He's no longer affiliated. I don't want to accuse him of any wrongdoing. He awarded them $ 6 million. Now, contrast that with my daughter-in-law, sweet Sarah, the nicest, kindest, gentlest woman in the history of the planet. She is a teacher in the public schools in California. And she teaches mentally and physically disabled children. I mean, this is God's– you and I are nothing compared to somebody who does this, right? She told me a few weeks ago, yeah, new school year is going great. Love my kids. Everything is great. But I don't have a desk in my classroom because we're out of budget. We're going to spend $ 27, 411 per kid in California public schools this year. Corey Jackson's nonprofit got $ 6 million so they could pay an honorarium to Angela Davis to speak at an online seminar. But there's no desk for the special ed teacher in California.
00:36:17
Speaker 1: And she was a killer terrorist.
00:36:19
Speaker 3: How can anybody continue to vote for these people? You notice you and I have been on for however long we've been on now. We've not had a single policy discussion. Not one. Because the job has nothing to do with policy. It has to do with money. And that's something I know very well. After 39 years in finance, multiple boards of directors, audit committees, over and over and over, I sit on one board still currently of a venture fund. And I tell you, I've never seen a higher level of incompetence in any organization I've ever been affiliated with than the executive members of California state government, all of them are uniquely unqualified for the jobs that they hold. I mean, Ricardo Lara, I mean, oh my goodness. I mean, I guess we don't have a Republican running there. The school's chief, the secretary of state. I mean, I am flabbergasted by the skillset, the lack of acumen that these people have. Who cares about policy? Honestly, I go around and I talk. I had 800,000 non-Republican votes in the primary.
00:37:37
Speaker 1: 800,000.
00:37:37
Speaker 3: That's pretty darn good. And our poll, now, my party only has 28% or 29% of the voter registration in the state. But my poll from last week shows me at 48%. 48-52, from where I'm sitting, that's dead even. And I think there's a very good chance that we shock the world because this concept that Californians are not fiscally sane is wrong. I've been here my whole life. We don't like wasting money. We don't like theft. We don't like throwing money away. But you know what? We also have our own unique views of other parts of the world that have nothing to do with the state controller's office. And I'm good with all of that. Yeah. That's who we are.
00:38:29
Speaker 2: I think people should look at you as extremely qualified to stop a lot of this fraud from happening, expose what's going on. And that's a practical matter in our lives to balance budgets, to keep track of our money. That is not a political issue. There's not an ideology attached to it. And that we need this desperately. And you can do this no matter who wins the governor's race or any of the other offices. And so this this to me is one of the most important races. And I'm urging everybody to vote for Herb Morgan, candidate for California state controller. This one vote will go a long way to changing things in Sacramento. Herb, I could talk with you forever. Thank you very much for coming on. And let's talk again before election day as well.
00:39:20
Speaker 1: And good luck.
00:39:21
Speaker 3: You got it. Thank you for all you do. I really appreciate being here. All right.
00:39:24
Speaker 2: And you deserve to win. That's Herb Morgan. And this videos, going to be available on YouTube and X, obviously. We're going to put this on the audio podcast. That'll be posted soon. So tell people about this. You know, we didn't run too long. I think we're almost at 40 minutes. It's very necessary that anybody who votes votes. listens to this for 40 minutes. And if Malia Cohen wants to come on, we'll do it with her as well. I think it would go differently, but the invitation's always there. Now, today on the radio show, we're going to have Bill Asseli on at three o'clock. I don't know if you heard, but there was a huge bust on Skid Row, gigantic drug bust. And Bill's going to explain what happened at three o'clock. So talk with you then. Thanks for watching. Thanks for listening.
