California Fiscal Watchdog Candidate Faces Heat Over Finances | Politics

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On her campaign website, Malia Cohen, the Democratic candidate running to become California’s chief financial officer, promises to “uplift California’s women and working families,” and ensure that “addressing equity is the cornerstone priority of her office.” 

In the “issues” section, however, Cohen makes no mention of the biggest accounting and fraud scandal in the state’s history and one that has yet to be fully addressed. During pandemic lockdowns that forced millions out of work, California’s Employment Development Department, or EDD, sent out an estimated $20 billion and $30 billion in fraudulent unemployment checks while more than a million deserving out-of-work business owners and workers were denied funds the state government had promised. 

The system was so dysfunctional that more than $140 million in checks went to at least 20,000 prisoners, including well-known convicted murderers on death row. 

Cohen is running for the role of controller, which acts as the state’s accountant, issues reports on the financial condition of the state, and audits public funds spent by myriad agencies. The job would have a direct role in overseeing funds directed to fix the EDD system. She’s broadly pledged to do so while also ensuring that taxpayer money spent on the state’s homelessness programs is decreasing the number of people living on California’s streets.

A former member of the San Francisco Board of Supervisors, Cohen currently chairs the state Board of Equalization, which is responsible for tax administration and fee collection.

With so much controversy over the EDD and the state’s homeless problem over the past two years, any candidate for controller would be hard-pressed to avoid reporters’ questions on both issues.

As late as this summer, the state was still experiencing aftershocks from the massive unemployment fraud. Meanwhile, taxpayer funds channeled to fighting homelessness haven’t helped curb the problem. Recent reports show the state’s homeless numbers on the rise. 

While Cohen has pledged to reform the EDD system in part through technology improvements the state auditor has recommended for years, she has been more reticent on other pressing issues in the news, such as state Democrats’ decision to send out “inflation relief” checks to all California residents before the election and whether or not they should have hit pause on the gas tax, the second highest in the nation, to help bring down costs at the pump. (She has, however, agreed with Chen’s call for a gas tax audit.)

How can a candidate for a job overseeing more than $100 billion in receipts and disbursements each year avoid taking detailed positions on at least some of the issues generating the biggest headlines across the state? 

In California, where Democrats control every aspect of state government and Democratic voter registrations outnumber Republicans 2 to 1, Democrats can more easily stonewall questions from reporters, as well as their opponents. They also can easily duck out of calls to debate, as Cohen has all year. 

But Lanhee Chen, the Republican in the race, isn’t making it easy. Chen, a lawyer who served in both the George W. Bush and Obama administrations and teaches at Stanford University, has managed to pull off a rare political coup in the Golden State. Despite his GOP credentials, more than a dozen California newspapers, including the biggest and most influential – the Los Angeles Times, the Sacramento Bee, and the San Jose Mercury News – have endorsed him. 

Also backing Chen: 2020 Democratic presidential primary candidate Andrew Yang and Anne Marie Schubert, Sacramento County’s district attorney who prosecuted the Golden State killer and investigated the massive EDD fraud. (A former Republican turned independent, Schubert earlier this year lost her race against Attorney General Rob Bonta.)

The Los Angeles Times has called Chen, “the best choice for this position” because he is a “sharp thinker with experience analyzing large financial systems and because the controller should be as independent from the party in power as possible.” 

Cohen endorsements include a Who’s Who list of the California Democratic Party: Speaker Nancy Pelosi, Sens. Dianne Feinstein and Alex Padilla, and numerous members of the California Democratic Congressional delegation, along with several environmental groups and big unions. 

Chen, who has managed to raise $5.2 million compared to Cohen’s $4 million, is running ads in recent weeks questioning Cohen’s fitness for the financial watchdog office after new information has emerged about her personal and business finances. The ads started airing a week after Cohen started running ads casting Chen, who says he is pro-choice, as a threat to abortion rights. 

Chen’s ads against Cohen are based on reporting in the Los Angeles Times in early October raising questions over a recent license suspension of Cohen’s consulting business for failing to pay taxes and file required paperwork, as well as the foreclosure of her San Francisco condo more than a decade ago. 

Cohen’s failure to file proper business documents doesn’t end there. According to records maintained by the California secretary of state and reviewed by RealClearPolitics, another business where Cohen served as president, MobiJuice USA, was twice cited in 2020 and 2021 for failing to file its annual statements of information. 

Cohen described MobiJuice USA as a “digital lifestyle platform and mobile charging network” in her 2020 Statement of Economic Interest, a required financial disclosure form for state officials. State records show that an initial statement of information was filed for the business in October 2019. Documents with the secretary of state’s office state that the business was delinquent in filing its Statement of Information in February 2002 and November 2021 before the entity was dissolved in December 2021. 

David Beltran, a consultant with Bearstar Strategies who was quoted as a spokesman for Cohen in the Los Angeles Times’ article, did not return multiple requests for comment from RealClearPolitics. There is no contact information for the Cohen campaign listed on her website. The California Democratic Party also didn’t return inquiries from RCP asking for a contact number or email for the Cohen campaign. 

In the Los Angeles Times’ story, Cohen first said she could not remember why the business license of her social media consulting firm, Power Forward, was suspended by the state’s Franchise Tax Board for failure to file a tax return and failure to pay taxes in March 2021. 

“I cannot explain what happened there because I don’t recall,” Cohen told the Times. “I filed a closure for that before – I think it was in 2019 – because Power Forward wasn’t in operation.”

Beltran later said the business license was suspended because Cohen has missed mail after a move. In an interview with local television station KCRA she insisted that she has “never been in default on my taxes, my business is paid in full, my personal taxes are paid in full,” calling it “another ugly lie that is inaccurate.” 

Cohen again blamed the suspension of the license because of failure to pay taxes on “an administrative mishap” because she moved, so the Franchise Tax Board had the wrong address for the business, and she was not receiving the mail. 

Yet, the California Franchise Tax Board rules hold sole proprietors responsible for all business filings and functions, including address changes. According to IRS rules, Cohen would be considered a “sole proprietor” because she owned Power Forward by herself and is its only manager, as she indicated on the forms filed with the California secretary of state’s website. The website outlines how businesses can change their addresses. She also never changed Power Forward’s address on her 2020 or 2021 Statements of Economic Interests. 

Beltran didn’t respond to RCP’s question about how much Power Forward owed in taxes when the state suspended its license. In a Friday interview with San Francisco PBS station KQED, Cohen denied that the license was suspended and said she never owed any taxes. 

“The license was not suspended … the license, I think. There was an administrative error where the renewal papers was mailed to an old address, and it has since been corrected when it was brought to my attention,” she said. “But that attack says that I owe taxes, and I want you to be very clear that I don’t owe taxes, and I want you to be very clear that I don’t owe taxes and never have.” 

The Chen campaign points to the Los Angeles Times story, which cites state documents showing that the business was suspended for failing to pay taxes. 

“Malia Cohen is lying to voters and to the media,” Chen campaign manager Matt Ciepielowski said in a statement. “Californians can’t afford to have a controller who doesn’t tell the truth and can’t even manage her own financial obligations. If Malia won’t come clean about her record of financial failure, how is she going to delivery transparency and accountability for taxpayer dollars in Sacramento?”

“California voters are too smart to believe Malia when she claims that the Los Angeles Times reporting on her financial history is fake news,” he added. 

Darry Sragow, a longtime California Democratic strategist, said Chen raising Cohen’s financial history is fair game for any political candidate. “It would be political malpractice for him not to bring this up,” he told RealClearPolitics. “It’s an issue that he’s gonna want to exploit.” 

But, he argued, California voters, for the most part, “don’t wake up in the morning thinking about politics” and paying attention to details of down-ticket races, even one for an important fiscal watchdog position. 

“Most California voters are not likely to even know about this when they go to vote,” he said. Even if Cohen agreed to a debate, many Californians wouldn’t watch it or read media coverage of it because they aren’t that tuned into politics, Sragow added. 

Martin Wilson, executive vice president of public affairs at the California Chamber of Commerce, disagrees. He calls Chen the “most credible Republican candidate” running in more than a decade and says he “has a legitimate shot at winning.” 

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