Minnesota is facing social services fraud schemes that federal prosecutors say have cost taxpayers more than $1 billion in recent years.
The scandal exposed significant gaps in state oversight during a period of rapid emergency spending.
The investigations began with a 2022 case involving a nonprofit tied to the federal child nutrition program; defendants were accused of billing for tens of thousands of nonexistent meals.
Prosecutors called it one of the largest pandemic-era fraud schemes in the country. As investigators reviewed financial records and interviewed witnesses, they uncovered additional schemes involving housing assistance and autism therapy programs.
In a housing program created in 2020, providers were reimbursed for services federal authorities say were never delivered to people at risk of homelessness, driving annual costs from a projected $2.6 million to more than $104 million.
Another scheme involved falsely certifying children for autism therapy and paying parents kickbacks, with prosecutors alleging more than $14 million was stolen.
Federal authorities say 59 people have been convicted across three major plots so far, with most defendants connected to Minnesota's Somali community.
State officials have faced questions about why the schemes persisted for years.
Minnesota's Department of Education raised concerns early in the pandemic about implausible meal program invoices, but reimbursement continued as the agency struggled with a surge of applications.
A report from the state's Office of the Legislative Auditor later said the threat of litigation and accusations of racism influenced how aggressively state officials exercised oversight authority.
Critics argue that state agencies hesitated to challenge questionable claims out of concern for political backlash.
Former fraud investigators and community leaders said those fears contributed to a climate in which fraudulent billing continued unchecked.
Gov. Tim Walz has defended the state's actions. But he also acknowledged that the rush to distribute aid during the pandemic may have created gaps.
The state has since established a fraud task force, expanded information-sharing between agencies, and adopted technology aimed at identifying suspicious billing patterns.
It has also begun shutting down one of the programs most heavily affected by fraud and hired an outside auditor to review additional high-risk areas.
State officials testified that abuse of social services had become systematic, with Minnesota's generous programs becoming a target for exploitation.
"Fraud is the business model," James Clark, the state's inspector general, told lawmakers.
President Donald Trump attacked liberal national and state-managed immigration policies in posts on Thanksgiving.
He attacked Walz and Rep. Ilhan Omar, D-Minn.
The president pointed to Minnesota as an example of a state where federal policies of former President Joe Biden, compared to lax state controls, created chaos.
He said the "once great state of Minnesota" has been "completely" taken over by "hundreds of thousands of refugees from Somalia."
"Somalian gangs are roving the streets looking for 'prey' as our wonderful people stay locked in their apartments and houses hoping against hope that they will be left alone," Trump said in a post on Truth Social.
Trump described Walz as "seriously retarded," and said he is either too afraid or incompetent to do anything about the problem. The president said Omar, whom he called "the worst 'congressman/woman' in our country," reportedly does nothing to better the situation either.
Jim Mishler ✉
Jim Mishler, a seasoned reporter, anchor and news director, has decades of experience covering crime, politics and environmental issues.
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