A federal prosecutor announced Thursday that more than half of the roughly $18 billion in federal money that has supported 14 Minnesota-run programs since 2018 may have been stolen.
The Scale of the Fraud
First Assistant U.S. Attorney Joe Thompson described the schemes as “industrial-scale fraud” and warned that the magnitude “cannot be overstated.” He said the fraud threatens services for people who need them, from adults leaving addiction treatment centers to children with autism seeking therapy.
Companies were created to provide zero services while submitting claims to Medicaid and pocketing federal funds for international travel, luxury vehicles and lavish lifestyles.
Impact on Services
Thompson noted that the fraud puts people at risk: adults who have just finished addiction treatment are left without stable housing, and children with autism are deprived of one-on-one therapy. “What we see in Minnesota is not a handful of bad actors committing crimes,” he said.
Federal and State Responses
The new findings could bolster President Donald Trump’s claims that Minnesota is a “hub of fraudulent money-laundering activity” under Gov. Tim Walz. Trump has used the cases to target the Somali diaspora, which has the largest Somali population in the U.S.
Eighty-two of the 92 defendants in the child nutrition, housing services and autism program schemes are Somali Americans, according to the U.S. Attorney’s Office for Minnesota.
In October, Walz initiated a third-party audit and paused payments to the 14 high-risk Medicaid programs for 90 days. He said, “We will not tolerate fraud, and we will continue to work with federal partners to ensure fraud is stopped and fraudsters are caught.”
Last week, Walz appointed a director of program integrity, tasked with finding and preventing fraud statewide.
Origins in the Feeding Our Future Scheme
The investigation into the autism program grew out of the $300 million Feeding Our Future scheme, for which 57 defendants have been convicted. Prosecutors said the nonprofit was at the center of the country’s largest COVID-19-related fraud scam.
Thompson explained that roughly two dozen Feeding Our Future defendants were receiving money from autism clinics. “That’s how we learned about the autism fraud,” he said.
A new defendant was named Thursday for defrauding the autism program. Court filings say he approached parents in the Somali community to “recruit their children” for the clinic and paid them kickbacks to drive up enrollment. His clinic ultimately submitted $6 million worth of claims for Medicaid reimbursement.
One woman previously charged for exploiting that program pleaded guilty Thursday morning. Prosecutors allege she received $14 million in Medicaid reimbursements.
Housing Services Fraud and New Charges
Five new defendants were charged Thursday in connection with a Minnesota housing services fraud. They stole the money instead of helping Medicaid recipients find stable housing. One defendant fled the country after his company received a federal grand jury subpoena.
The five charged include two Philadelphia residents accused of “fraud tourism,” because they saw the Minnesota Housing Stability Services Program as a source of “easy money.” They are accused of submitting $3.5 million in fraudulent claims.
They join eight others who were charged in September for their alleged roles in the scheme to defraud the program, which has been shuttered entirely.
Integrated Community Supports Investigation
Authorities served a search warrant Thursday in an investigation of a third state-run program, Integrated Community Supports, intended to help adults with disabilities live independently. Payments to providers are on track to reach $180 million this year-far more than when the program was introduced in 2021-leading prosecutors to believe it has also been abused.
“Every day, we look under a rock and find a new $50 million fraud scheme,” Thompson said.
International Money and Terrorism Claims
Trump’s rhetoric against Somalis has intensified since a conservative outlet, City Journal, claimed last month that taxpayer dollars from defrauded programs have flowed to the Somali militant group al-Shabab. Thompson said money sent to Somalia might have indirectly gotten into the hands of al-Shabab, but emphasized that there was no evidence defendants were sending money to or supporting terrorist organizations.
He noted a significant amount of the fraudulently obtained funds have been sent abroad and used to purchase real estate in Nairobi, Kenya’s capital, which has a large Somali diaspora. “There’s no indication that the defendants that we’ve charged were radicalized or seeking to fund al-Shabab or other terrorist groups,” Thompson said.
Examples include:
- A Feeding Our Future defendant who spent hundreds of thousands of dollars on an aircraft in Nairobi.
- Another who wired $1.5 million to China and Kenya and texted claiming to have invested $6 million in Kenya.
- A man who bought Mediterranean coastal property in Alanya, Turkey.
Key Takeaways
- Half of the $18 billion in federal funds for 14 Minnesota programs may have been stolen.
- 82 of 92 defendants in the schemes are Somali Americans, fueling political rhetoric.
- New charges involve autism, housing services, and a third state program, with money being sent abroad.
Fingerhut reported from Des Moines, Iowa.
The fraud investigation continues to expand, revealing a network of schemes that siphoned millions from programs designed to help the most vulnerable in Minnesota.
