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The full scale of federal fraud schemes targeting Minnesota-run programs remains unknown, but prosecutors now say losses could reach billions.
First Assistant U.S. Attorney Joe Thompson told reporters Thursday that half or more of the $18 billion in federal funds supporting 14 programs run by Minnesota since 2018 has been stolen. Fraud was found in programs for things like child nutrition, housing services and autism.
“I’m sure everyone is wondering how much of this $18 billion was fraud,” Thompson said. “That’s the $18 billion question.”
The sweeping case has also become politically and culturally complex, according to the U.S. Attorney’s Office, because 82 of the 92 defendants charged so far are Somali Americans. minnesota,
chairman donald trump This fact has been exploited to target the Somali diaspora in Minnesota, which has the largest Somali population in the US, as well as the state’s democratic Leadership. Local community leaders have urged officials and the public not to stigmatize Somali Americans in the state, while cautioning against linking the alleged crimes of a handful of defendants to the more than 80,000 people of Somali descent in the Twin Cities.
“Fraud is an issue of individual wrongdoing, not community identity,” said Yusuf Abdulle, a Minneapolis-based imam who directs the Islamic Association of North America.
The new fraud estimate comes after a several-year investigation that began with the Feeding Our Future scandal, first announced in 2022 under the Biden administration, when 47 defendants were accused of allegedly pocketing $250 million in federal funds meant to feed children during the pandemic.
Minnesota fraud cases have increased, and Thompson said more charges are expected.
How big are the losses?
While prosecutors previously accused the defendants of stealing hundreds of millions of dollars, rather than the billions announced Thursday, they say they are finding new depths in the pattern of fraud.
The Minnesota Department of Human Services identified 14 state-run programs as high risk due to program weaknesses, evidence of fraudulent activity or suspicious billing patterns. Thompson said investigators are seeing more red flags than legitimate claims and that many of the suspects have created entities that billed multiple programs at once.
Because fraud is inherently a “hidden crime,” Rebecca Shea of the U.S. Government Accountability Office said investigators use inaccurate estimates. He said that a lot of fraud goes undetected.
Attempts to scam government programs are rare but likely to be common nationwide, according to Linda Miller, president and co-founder of the Program Integrity Alliance, a nonprofit focused on preventing fraud in the public sector.
Fraudsters saw during the pandemic “how easy it was to just submit these fake invoices and get paid millions of dollars,” Miller said. “There are probably people all over the country trying to cheat these programs.”
blame game
The risk of fraud increases when programs expand rapidly without adequate staffing, modern technology or strong data verification systems, said Miller, a former assistant director of GAO.
“We still have programs that are based on trust, and we don’t have anything like the infrastructure to deal with all the people who are taking advantage of that most basic vulnerability,” he said. “It’s a ‘trust and don’t verify’ system.”
In response to the investigation, Minnesota Gov. tim waltz A third-party audit was ordered in October and payments to 14 programs were halted for 90 days. One program has since been discontinued entirely.
Walz says the state has aggressively increased resources for fraud detection and prevention, and recently appointed a statewide director of program integrity to oversee those efforts.
Nevertheless, Trump and other Republicans have blamed Walz’s administration, with Trump calling Minnesota a “hotbed of fraudulent money laundering activity” under the Democratic governor.
Fraud beyond Minnesota
The Minnesota cases are unfolding against a broader backdrop of federal concern about fraud in government programs, especially since the COVID-19 pandemic, when there was “unprecedented fraud,” Shea said.
Based on data from 2018 to 2022, GAO estimated that fraudulent activities cost the U.S. government $233 billion to $521 billion each year, which is about 3% to 7% of the federal budget. In their report, GAO investigators said, “No reliable estimate of the fraud losses affecting the federal government previously existed.”
In March 2023, the White House Office of Management and Budget cast doubt on those figures, saying they indicated “unimaginably high” levels of fraud. Shea said the GAO analysis intentionally included years with and without pandemic spending, and the wide range of annual deficits reflects those changing conditions.
Other examples of pandemic-era fraud include scammed unemployment aid, which the GAO said is likely to cost at least $100 billion. The Small Business Administration’s Office of Inspector General estimates that the agency distributed more than $200 billion in pandemic relief loans to potential fraud actors.
Earlier this year, federal prosecutors announced what they described as the Justice Department’s largest health care fraud case by loss amount. Nineteen people were charged with allegedly submitting nearly $11 billion in false Medicare claims for urinary catheters, activity that prosecutors attributed to an international criminal organization.
recovery of stolen money
Even when authorities identify fraud, recovery of stolen taxpayer money can be slow and incomplete.
Thompson said authorities have seized between $60 million and $70 million linked to the Feeding Our Future case. Of that amount, about $30 million is liquid cash or funds obtained from bank accounts.
The remaining assets include real estate and vehicles that must often be sold at auction, and this process can take months or years.
Court records show Feeding Our Future defendants spent millions on homes minneapolis Real estate in the metro area, lakefront property elsewhere in Minnesota, and other states including Ohio and Kentucky. Prosecutors said the luxury purchases included more than $88,000 on a GMC truck, $93,250 on a Porsche and more than $100,000 on a Mercedes.
However, some funds are lost permanently. Prosecutors said the defendants spent money on travel, entertainment and services that could not be recouped, including a lavish honeymoon trip to a private villa in the Maldives and the purchase of a suite at a Minnesota Timberwolves game.
Authorities also face hurdles in recovering money stuck in foreign accounts or foreign assets. In a plea agreement, a defendant forfeited an apartment in Nairobi and a seaside resort in Kenya, court records show.
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Associated Press reporter Giovanna Dell’Orto contributed from Minneapolis.