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Official: Half of $18B in federal funds for Minnesota-run programs may have been defrauded

MINNEAPOLIS — Half or more of the roughly $18 billion in federal funds that supported 14 Minnesota-run programs since 2018 may have been stolen, a federal prosecutor said Thursday, describing the massive and multilayered fraud schemes as staggering.

First Assistant U.S. Attorney Joe Thompson said the scale of fraud puts services at risk for people who need them, including adults leaving addiction treatment centers who needed help finding a stable place to live and children with autism who were seeking one-on-one therapy.

While prosecutors typically see fraud manifest as providers overbilling, Thompson said during a news conference in Minneapolis that companies have been created to provide zero services while submitting claims to Medicaid and pocketing federal funds for international travel, luxury vehicles and lavish lifestyles.

“The magnitude cannot be overstated,” Thompson said. “What we see in Minnesota is not a handful of bad actors committing crimes. It’s staggering, industrial-scale fraud.”

The investigators’ new findings may bolster President Donald Trump in his claims that Minnesota is a “hub of fraudulent money laundering activity” under Gov. Tim Walz, who was the Democrats’ vice presidential nominee in last year’s election.

Trump has capitalized on the fraud cases to target the Somalia diaspora in Minnesota, 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 of and paused payments to the 14 high-risk Medicaid programs for 90 days.

“We will not tolerate fraud, and we will continue to work with federal partners to ensure fraud is stopped and fraudsters are caught,” Walz said in a statement Thursday.

Walz last week appointed a director of program integrity, who is tasked with finding and preventing fraud statewide. It’s not stopped his Republican counterparts from criticizing his administration for failure to protect Minnesota’s taxpayer dollars.

The announcements Thursday follow years of investigation that began with the $300 million Feeding Our Future scheme, for which 57 defendants have been convicted. Prosecutors said the Feeding Our Future nonprofit was at the center of the country’s largest COVID-19-related fraud scam, when defendants exploited a state-run, federally funded program intended to provide food for children.

Thompson said the investigation into a state program to support children on the autism spectrum, the Early Intensive Developmental and Behavioral Intervention benefit, grew out of Feeding Our Future.

“Roughly two dozen or so Feeding Our Future defendants were getting money from autism clinics,” Thompson said. “That’s how we learned about the autism fraud.”

Prosecutors on Thursday named a new defendant accused of defrauding the program, alleging he approached parents in the Somali community to “recruit their children” for the clinic and paid them kickbacks to drive up enrollment, according to court filings.

His clinic ultimately submitted $6 million worth of claims for Medicaid reimbursement, prosecutors say.

One woman previously charged for exploiting that program pleaded guilty Thursday morning. Prosecutors allege she received $14 million in Medicaid reimbursements.

Five new defendants were charged Thursday in connection with a Minnesota housing services fraud, in which they stole the money instead of helping Medicaid recipients find stable housing, Thompson said.

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