Key questions about Minnesota’s fraud schemes and the billions in losses

The full scale of the federal fraud schemes targeting Minnesota-run programs remains unknown, but prosecutors now say losses could reach into the billions.

Half or more of the roughly $18 billion in federal funds that supported 14 Minnesota-run programs since 2018 may have been stolen, according to First Assistant U.S. Attorney Joe Thompson. Speaking to reporters Thursday, Thompson revealed that fraud was discovered in various state-administered programs, including child nutrition, housing services, and autism support.

“I’m sure everyone is wondering how much of this $18 billion was fraud,” Thompson said. “That’s the $18 billion question.”

The case has taken on political and cultural dimensions as Somali Americans make up 82 of the 92 defendants charged so far, according to the U.S. Attorney’s Office for Minnesota. President Donald Trump has seized on this fact to target Minnesota’s Somali community—the largest in the United States—as well as the state’s Democratic leadership.

Community leaders have urged officials and the public not to stigmatize the entire Somali American population, which numbers more than 80,000 in the Twin Cities. “Fraud is an issue of individual wrongdoing, not community identity,” emphasized Yusuf Abdulle, the Minneapolis-based imam who directs the Islamic Association of North America.

The investigation began with the Feeding Our Future scandal, first announced in 2022 under the Biden administration, when 47 defendants were charged with allegedly misappropriating $250 million in federal funds intended to feed children during the pandemic. Since then, the case has expanded significantly, with Thompson indicating more charges are expected.

While prosecutors had previously estimated losses in the hundreds of millions, the new billion-dollar figure represents a dramatic escalation. The Minnesota Department of Human Services has identified 14 state-run programs as high risk due to program vulnerabilities, evidence of fraudulent activity, or suspicious billing patterns. Investigators report seeing more red flags than legitimate claims, with many suspects creating entities that billed multiple programs simultaneously.

Rebecca Shea of the U.S. Government Accountability Office (GAO) noted that because fraud is inherently a “hidden crime,” investigators must rely on imprecise estimates. She added that many fraudulent activities likely go undetected altogether.

The uptick in government program fraud may be part of a national trend, according to Linda Miller, president and co-founder of the Program Integrity Alliance. “Fraudsters saw how easy it was during the pandemic to just submit these fake invoices and get paid millions of dollars,” Miller explained. “There’s very likely people attempting to defraud these programs all over the country.”

Miller, a former assistant director with the GAO, pointed out that fraud risk increases when programs expand quickly without sufficient staffing, modern technology, or robust verification systems. “We still have programs that assume trust, and we don’t have anything like the infrastructure to deal with all these people who are exploiting that most basic vulnerability,” she said. “It’s a ‘trust-and-don’t-verify’ system.”

In response to the investigations, Minnesota Governor Tim Walz ordered a third-party audit in October and paused payments to the 14 affected programs for 90 days. One program has since been shut down entirely. Walz maintains that the state has aggressively increased resources for fraud detection and prevention and recently appointed a statewide director of program integrity.

Despite these measures, Trump and other Republicans have criticized Walz’s administration, with the former president characterizing Minnesota under Democratic leadership as a “hub of fraudulent money laundering activity.”

The Minnesota cases reflect broader federal concerns about government program fraud, particularly since the COVID-19 pandemic. Based on data from 2018 through 2022, the GAO estimated annual losses between $233 billion and $521 billion to fraudulent activity—approximately 3% to 7% of the federal budget.

The White House Office of Management and Budget disputed these figures in March 2023, calling them “implausibly high.” Shea countered that the GAO analysis deliberately included both pandemic and non-pandemic years, with the wide range reflecting those variable conditions.

Other notable pandemic-era fraud includes unemployment aid scams, which the GAO estimated cost at least $100 billion. The Small Business Administration’s Inspector General reported that over $200 billion in pandemic relief loans may have gone to fraudulent actors.

Earlier this year, federal prosecutors announced what they described as the Justice Department’s largest healthcare fraud case by dollar amount. Nineteen people were charged for allegedly submitting nearly $11 billion in false Medicare claims for urinary catheters, activity attributed to a transnational criminal organization.

Recovering stolen taxpayer money presents significant challenges. Thompson reported that authorities have seized between $60 million and $70 million connected to the Feeding Our Future case, with about $30 million in liquid cash or funds recovered from bank accounts. The remaining assets include real estate and vehicles that must be sold, often through auctions that can take months or years.

Court records show Feeding Our Future defendants spent millions on homes in the Minneapolis area, lakefront property elsewhere in Minnesota, and real estate in other states. Luxury purchases included a $88,000 GMC truck, a $93,250 Porsche, and a Mercedes worth over $100,000.

Some funds, however, are permanently lost. Prosecutors noted that defendants spent money on travel, entertainment, and services that cannot be recovered, including a lavish honeymoon at a private villa in the Maldives and a suite at a Minnesota Timberwolves game.

Authorities also face obstacles retrieving money transferred to overseas accounts or invested in foreign property. In one plea agreement, a defendant forfeited an apartment in Nairobi and an oceanfront resort in Kenya.