Federal Authorities Unseal Indictment Against 12 for $10 Million Childcare Assistance Fraud in California

More than $10 million—a sum capable of subsidizing a full year of care for hundreds of working families—was instead diverted into twelve "ghost daycares" across San Diego County, federal prosecutors allege. On Thursday, a coordinated sweep involving 250 law enforcement officers dismantled the network, arresting 12 individuals accused of billing the government for children who were never present.[1][2]

The enforcement action marks a major intervention to protect the integrity of California's childcare subsidy system, which relies on state and federal funds to help low-income parents work or attend school. The defendants allegedly obtained state licenses to operate home childcare facilities, then registered with local administrators like Child Development Associates and the YMCA to receive direct reimbursements.[1][3][4]

Instead of providing care, prosecutors say the operators submitted fabricated monthly attendance records under penalty of perjury. The financial scale of the alleged deception was substantial: each defendant received between $538,000 and $1.2 million over periods ranging from months to years. One operator, Abdulrahman Alawad, allegedly collected more than $300,000 in 2025 alone.[1][2][5]

Investigators relied heavily on surveillance and border crossing records to unravel the claims. In Alawad's case, attendance logs stated he cared for 23 children in March 2026 and 25 children in April 2026. However, over 57 days of surveillance, cameras recorded children at the facility on only a single day—which coincided exactly with an unannounced state inspection.[2][5]

Other defendants were not even in the United States when they claimed to be actively supervising children. Turkiya Mamdouh Alawad allegedly submitted attendance records and collected $14,970 in direct deposits for January 2024, despite border records confirming she was abroad for nearly the entire month.[3][5]

"By following the money, IRS Criminal Investigation uncovered patterns of deceit that revealed twelve ghost daycare operations billing for children who were never present," stated IRS Criminal Investigation Chief Jarod Koopman. He emphasized that the scheme directly deprived working parents of critical support and eroded trust in community safety nets.

The arrests represent the first major enforcement action of its type since the Justice Department formed its National Fraud Enforcement Division earlier this year. "These charges underscore a simple truth: anyone who steals from programs meant to support children will face swift and uncompromising accountability," said Assistant Attorney General Colin M. McDonald.[1][3][5]

All 12 defendants face federal wire fraud charges, which carry a maximum penalty of 20 years in prison and a $500,000 fine, while several also face money laundering counts. As the cases move toward trial, federal and local agencies are reviewing the oversight mechanisms that allowed the ghost facilities to bypass waitlists and siphon community funds for years.[2][3][5]