An official says as much as half of the $18 billion in federal funds for Minnesota-run programs may have been lost to fraud, according to federal authorities who described the scope of the alleged schemes as unprecedented and deeply troubling.
A federal prosecutor revealed Thursday that more than half of the approximately $18 billion allocated to 14 Minnesota-administered programs since 2018 may have been siphoned off through widespread and sophisticated fraud networks. Speaking at a news conference in Minneapolis, First Assistant U.S. Attorney Joe Thompson called the situation “industrial-scale fraud,” emphasizing that the damage goes far beyond financial loss.
Vulnerable Communities Put at Risk
Thompson stressed that the alleged fraud has directly threatened essential services for people who rely on them the most. Adults transitioning out of addiction treatment programs, children with autism in need of personalized therapy, and individuals seeking stable housing were among those potentially deprived of support due to the misuse of funds.
Unlike typical fraud cases involving inflated billing, investigators say some companies were allegedly created solely to extract money from Medicaid without delivering any services at all. According to Thompson, federal funds were instead spent on international travel, luxury cars, and lavish lifestyles.
“The magnitude cannot be overstated,” Thompson said. “This is not a small group exploiting the system. What we’re seeing is staggering, large-scale fraud.”
Political Fallout and Scrutiny of State Leadership
The latest findings have intensified political debate, with former President Donald Trump citing the cases as evidence that Minnesota has become a center for fraudulent financial activity under Governor Tim Walz. Trump has repeatedly pointed to the investigations to criticize state leadership.
However, his rhetoric has also drawn controversy for targeting Minnesota’s Somali community. According to federal records, 82 of the 92 defendants charged so far in child nutrition, housing services, and autism-related fraud cases are Somali Americans.
State Response: Audits, Paused Payments, and New Oversight
In response to growing concerns, Gov. Walz ordered a third-party audit in October and temporarily suspended payments to the 14 high-risk Medicaid programs for 90 days.
“We will not tolerate fraud,” Walz said in a statement, adding that the state is working closely with federal authorities to identify and stop wrongdoing. He also recently appointed a director of program integrity, tasked with strengthening fraud detection and prevention across Minnesota.
Despite these actions, Republican lawmakers continue to criticize the administration, arguing that safeguards should have been in place earlier to protect taxpayer dollars.
Autism Program Investigation Traced to Feeding Our Future Case
The current wave of investigations stems from the massive $300 million Feeding Our Future case, widely described as the largest COVID-19-related fraud scheme in the country. Fifty-seven defendants have already been convicted in that case.
Thompson explained that investigators uncovered irregularities in Minnesota’s autism support program—known as the Early Intensive Developmental and Behavioral Intervention benefit—while examining financial records linked to Feeding Our Future.
“About two dozen Feeding Our Future defendants were also receiving payments from autism clinics,” he said. “That connection raised immediate red flags.”
Prosecutors announced new charges Thursday, including allegations that one clinic operator recruited children from the Somali community and paid parents kickbacks to inflate enrollment. Court filings claim the clinic submitted $6 million in Medicaid claims. Another defendant previously charged pleaded guilty the same day, with prosecutors alleging she collected $14 million in reimbursements.
New Charges in Housing Services Fraud
Authorities also unveiled charges against five additional defendants tied to a housing services fraud scheme. Instead of helping Medicaid recipients find stable housing, the defendants allegedly pocketed the funds. One individual reportedly fled the country after receiving a federal grand jury subpoena.
Two of the newly charged defendants are from Philadelphia and were described by Thompson as engaging in “fraud tourism,” allegedly viewing Minnesota’s Housing Stability Services Program as an easy target. Prosecutors say they submitted $3.5 million in false claims. The program has since been shut down entirely.
Another Program Under the Microscope
Investigators are now examining a third program, Integrated Community Supports, designed to help adults with disabilities live independently. Payments to providers are expected to reach $180 million this year—an explosive increase from its launch in 2021.
“Every day, we uncover another multimillion-dollar scheme,” Thompson said, underscoring how rapidly the investigations are expanding.
Funds Sent Abroad, but No Proven Terror Links
Claims that stolen funds were deliberately used to support terrorism have added another layer of tension. A conservative outlet recently alleged that money from fraudulent programs flowed to al-Shabab, a Somali militant group linked to al-Qaida.
Thompson acknowledged that some money was sent overseas but firmly stated there is no evidence that defendants intentionally funded terrorist organizations. Much of the money, he said, appears to have been used for real estate investments and luxury purchases in places like Nairobi, Kenya, and Alanya, Turkey.
“There’s no indication the defendants were radicalized or attempting to finance terrorism,” Thompson said. One defendant reportedly spent hundreds of thousands of dollars on an aircraft in Nairobi, while another wired millions to China and Kenya.
A Growing Investigation With Far-Reaching Impact
As the probe continues, federal officials warn that additional charges are likely. The alleged fraud not only represents a massive financial loss but also undermines public trust and threatens vital services for Minnesota residents who depend on them.
