As 2025 attracts to a detailed there may be one story that has captured the nation’s consideration. It is not the placing of boats off the coast of Venezuela allegedly transporting medication, or China’s announcement of army maneuvers round Taiwan. It’s the story of fraud in Minnesota, which federal prosecutors estimate might high $9 billion.
A viral social media video by YouTuber Nick Shirley, which was amplified by Elon Musk, Vice President J.D. Vance and Legal professional Normal Pam Bondi, has put the problem into the middle of the nationwide dialog, stoking a scandal that has been brewing in state politics for years.
Within the wake of the video, the Trump administration introduced it’s pausing federal funding to little one care in Minnesota, with President Trump calling Minnesota a “hub of fraudulent cash laundering exercise.” The U.S. Division of Well being and Human Companies additionally introduced sweeping modifications to how all states should submit claims for Medicaid-supported daycares, together with requiring “a justification and a receipt or picture proof earlier than we ship cash to a state.”
Even earlier than the video unfold far throughout the web, nonetheless, scandal plagued Minnesota. In 2021, federal regulation enforcement first probed a sequence of multimillion greenback fraud schemes. These fraud schemes have led to federal expenses towards 92 individuals with 62 convicted — and counting.
President Trump and different Republican lawmakers have centered consideration on the state’s massive Somali neighborhood, as a lot of the fraud defendants are of Somali descent, drawing stiff criticism from native officers, together with the state’s Democratic Governor Tim Walz, who denounced Mr. Trump’s criticism as “vile, racist lies and slander in the direction of our fellow Minnesotans.”
Walz, in the meantime, has confronted intense scrutiny from each inside and outdoors Minnesota over his administration’s dealing with of the disaster. The governor has acknowledged in latest weeks that the fraud drawback might stretch into the billions, however disputed the $9 billion determine cited by prosecutors.
Whereas Shirley’s video centered on allegations of fraud in daycares in Minneapolis, federal investigators informed CBS Information little one care is barely “vaguely” a precedence for prosecutors, and a spotlight and sources are as a substitute centered on greater than a dozen different social providers packages in Minnesota, together with vitamin, housing and behavioral well being.
Here is what you should know:
Feeding Our Future: The case that began all of it
- This COVID-era $250 million scheme — which now contains upwards of 75 defendants — revolved round a nonprofit group referred to as Feeding Our Future. The group claimed to work with eating places and caterers to distribute meals to varsities and extracurricular packages however as a substitute submitted faux meal depend sheets and invoices, raking in hundreds of thousands in administrative charges and getting kickbacks from individuals who ran their meal distribution websites, prosecutors mentioned.
- Feeding Our Future founder Aimee Bock was convicted earlier this yr, and a number of other others concerned within the scheme have pleaded responsible or been convicted.
- Early on, Minnesota officers questioned a number of the group’s filings and slowed approvals of reimbursements, prompting Feeding Our Future to file a lawsuit accusing the state of racial discrimination. The state auditor’s workplace discovered that “the specter of authorized penalties and detrimental media consideration” affected the state’s decision-making course of about regulatory motion towards Feeding Our Future.
- What federal prosecutors referred to as “the most important pandemic period fraud in america” is “simply the tip of a really massive iceberg,” in keeping with FBI Director Kash Patel.
Fraud in a housing program with “low limitations to entry”
- This summer season, state officers shut down a reasonably new program designed to assist seniors and folks with disabilities discover housing after discovering “large-scale fraud.”
- A month later, federal prosecutors charged eight individuals with defrauding this system, which was run by the state’s Medicaid service, by enrolling as suppliers and submitting hundreds of thousands in “faux and inflated payments.”
- One other 5 individuals have been charged with bilking the housing program in mid-December — together with two Pennsylvanians with no clear connections to Minnesota who allegedly traveled there in what prosecutors described as “fraud tourism.”
- Prosecutors mentioned the housing stabilization program was prone to fraud as a result of it deliberately had “low limitations to entry” and few record-keeping necessities. Additionally they famous that spending on this system had ballooned to greater than $100 million final yr, regardless of preliminary estimates that it could value round $2.6 million a yr.
Autism program fraud
- In latest months, two individuals have been charged with defrauding a 3rd state program — on this case, one that gives providers to youngsters with autism. Each defendants have been accused of hiring unqualified “behavioral technicians” and submitting false claims to the state that indicated the employees had labored with youngsters enrolled in this system. Additionally they allegedly paid kickbacks to folks who agreed to enroll their youngsters in this system, in some circumstances sending them as a lot as $1,500, prosecutors mentioned.
- One of many autism providers defendants, Asha Farhan Hassan, was additionally charged with working a fraudulent meals distribution website as a part of the Feeding Our Future scheme. She pleaded responsible to wire fraud in December.
- First Assistant U.S. Legal professional for the District of Minnesota Joseph H. Thompson mentioned the autism providers case “shouldn’t be an remoted scheme.” In whole, 14 Medicaid providers are below audit and deemed “excessive danger” for fraud.
Fraud claims towards day care facilities
- YouTuber Nick Shirley drew tens of hundreds of thousands of views in late December when he posted a video that confirmed him visiting federally supported little one care facilities round Minneapolis and discovering no youngsters current. He alleged almost a dozen day care facilities weren’t really offering any service and advised house owners have been pocketing the taxpayer funds.
- CBS Information carried out its personal evaluation and visited a number of of the day care facilities talked about by Shirley: all however two have lively licenses, in keeping with state information, and all lively places have been visited by state regulators throughout the final six months. One was subjected to an unannounced inspection as not too long ago as Dec. 4, and our overview discovered dozens of citations associated to security, cleanliness, tools and employees coaching, however there was no recorded proof of fraud. One other day care shared safety footage of individuals dropping off younger youngsters the identical day that Shirley arrived and claimed the day care was empty.
Fallout and response
- Shirley’s viral video prompted the U.S. Division of Well being and Human Companies to freeze federal little one care funding for the state of Minnesota, which receives roughly $185 million in federal help for little one care.
- President Trump has largely blamed the Somali neighborhood, calling Somali immigrants “rubbish” who “contribute nothing,” which has incensed Minnesota lawmakers, who’ve accused him of demonizing the neighborhood at massive. Mr. Trump ended short-term deportation protections for Somali immigrants who dwell in Minnesota, claiming with out proof that “Somali gangs are terrorizing the individuals of that nice State.”
- Minnesota Gov. Tim Walz, who’s up for reelection, has drawn widespread scrutiny for his dealing with of fraud within the state. However Walz has defended his administration’s response, saying “we have spent years cracking down on fraudsters” and accusing Mr. Trump of “politicizing the problem to defund packages that assist Minnesotans.”
- Republican Rep. James Comer of Kentucky, the chair of the Home Oversight Committee, opened an investigation into fraud in Minnesota’s public help packages and introduced plans for hearings with testimony from Walz and different officers.
- Because the scandal took on new life in December, Walz unveiled a brand new statewide fraud prevention program, naming Tim O’Malley as the brand new director of program integrity.
Greed or nationwide safety danger?
- The Treasury Division is investigating whether or not tax {dollars} from Minnesota’s public help packages made their technique to al Qaeda affiliate al Shabaab, a U.S.-designated international terrorist group primarily based in Somalia.
- A number of federal investigators informed CBS Information Minnesota there may be no proof taxpayer {dollars} have been straight funneled to al Shabaab. “The overwhelming majority of the cash that these people made went to spending on luxurious objects for themselves,” mentioned Andy Luger, the previous U.S. Legal professional who led the workplace which prosecuted the Feeding Our Future case from 2022 till January. “There was by no means any proof that this cash went to fund terrorism nor was there any proof that was the intent of the 70 individuals we indicted.”
- A CBS Information overview of the information reveals that defendants spent taxpayer money on automobiles, property and luxurious journey. Additionally they wired hundreds of thousands in stolen funds abroad, together with to banks and corporations in China, the place discovering the recipients of that money can change into an investigative black gap. The defendants additionally transferred almost $3 million to accounts in Kenya.
