Minnesota’s social services system has suffered massive industrial-scale fraud, with federal prosecutors estimating over $9 billion stolen since 2018—more than half the $18 billion spent on 14 high-risk Medicaid programs. Schemes centered on fake billing for childcare, autism therapy, housing assistance, and child nutrition, primarily involving defendants from the Somali community. The biggest case, Feeding Our Future, diverted over $250 million from pandemic meal programs via shell companies, inflated claims, and kickbacks, with funds used for luxury vehicles, real estate, and overseas laundering. Autism and housing program costs surged with phony diagnoses and unprovided services. Lax oversight under Gov. Tim Walz, eased by COVID-19 rules, allowed the widespread theft. Ongoing FBI probes have resulted in dozens of convictions and calls for stronger audits, verification, and fraud prevention to safeguard taxpayer money and restore program integrity.
Long Version
Unraveling Minnesota’s Massive Social Services Fraud Crisis
Minnesota’s social services system, intended to aid vulnerable populations through Medicaid and related programs, has been undermined by widespread corruption and theft. Federal prosecutors have characterized the issue as an industrial-scale fraud, potentially diverting more than $9 billion in taxpayer dollars since 2018. This represents over half of the $18 billion allocated to 14 high-risk waivered programs. The schemes involve fake billing for services such as childcare, autism therapy, housing assistance, and child nutrition, leading to numerous indictments and charges, predominantly against individuals from the Somali diaspora. Lax oversight during the administration of Gov. Tim Walz, intensified by the COVID-19 pandemic, facilitated these activities by relaxing reimbursement claims and site applications to speed up aid.
Key Fraud Schemes and Cases
The scandal gained prominence with the Feeding Our Future case, recognized as the largest COVID-related fraud in the nation, where over $250 million was stolen from federal child nutrition programs meant for meals during the pandemic. Defendants allegedly established shell entities to submit inflated claims for nonexistent meals, supported by falsified attendance records and fabricated invoices. Diverted funds were used for personal gains, including luxury vehicles, real estate purchases domestically and abroad in places like Turkey and Kenya, and money laundering operations. Some schemes reportedly linked to supporting foreign terrorist organizations such as Al-Shabab, with examples including expenditures on aircraft in Nairobi, Kenya, and large overseas wire transfers. To date, 57 individuals have been convicted in this scheme, centered on kickback schemes and wire fraud.
Beyond nutrition programs, fraud has permeated autism services, particularly Early Intensive Developmental and Behavioral Intervention (EIDBI) programs for children with disabilities, mental illnesses, or substance-use disorders. Billing surged from $3 million in 2018 to $399 million in 2023, with nearly $220 million suspected as fraudulent through phony diagnoses and recruitment of children for non-provided autism therapy at clinics. Similarly, the Housing Stabilization Services (HSS) program, designed for housing assistance to prevent homelessness, experienced costs escalating from $21 million in 2021 to $104 million in 2024, with most deemed fraudulent. Eight defendants were charged for over $104 million in false claims, often for services never delivered in assisted living programs.
Exploitation in Childcare and Other Programs
Childcare fraud represents another major area, exemplified by cases like a Somali-run daycare that received $4 million in state funds despite lacking visible children, featuring misspelled signage and vacant facilities. Investigators identified “ghost” daycares licensed for numerous kids but offering no services, exploiting the Child Care Assistance Program (CCAP). In related instances, a home health business had its license revoked amid Medicaid fraud suspicions, with raids uncovering phantom patients and exaggerated reimbursement claims amounting to hundreds of thousands. These high-risk programs, managed by the Department of Human Services (DHS) and Department of Education, were vulnerable due to limited verification of behavioral intervention or substance-use disorders claims. Overall, fraud across these programs has been confirmed at over $822 million, though estimates indicate billions more lost, eroding resources for essential needs in healthcare and beyond.
Impact on the Somali Community
The Somali community, the largest Somali diaspora in Minnesota, has been heavily implicated, with over 90% of charged defendants in major cases being Somali-Americans. Factors within immigrant communities, including cultural and economic networks, are cited as facilitating the schemes, though not all members are involved. Allegations of racial discrimination have arisen, with some defendants claiming bias from state officials as scrutiny grew. Prosecutors maintain that investigations target criminal activities, not ethnicity, noting that concerns over such accusations may have delayed audits and fraud prevention measures.
Government Oversight and Criticism
Gov. Tim Walz and his administration have faced significant criticism for inadequate oversight that enabled the corruption. Initial fraud indicators in programs like Feeding Our Future were identified, but interventions were paused due to judicial orders and requests from federal investigators to preserve ongoing probes. Critics have described Minnesota as a hub of fraudulent money laundering activity, highlighting reluctance to act amid pandemic demands. A congressional oversight committee probe, initiated in December 2025, is examining whistleblower retaliation and potential kickbacks, including donations from fraud-linked individuals to political figures, some of which were later returned. The U.S. Attorney has noted that the scale of fraud in Minnesota is unparalleled, with new multimillion-dollar schemes uncovered regularly, overwhelming the system.
Recent Developments and Investigations
As of late December 2025, federal investigations have expanded, including raids on entities like home health services and probes into international connections. More than 878 arrests have been linked to various schemes, underscoring the extent of pervasive public corruption. A top prosecutor recently suggested the total fraud could exceed $9 billion across the 14 Medicaid services. Recent cases include additional charges in program fraud and new instances related to integrated community services. A viral video highlighting an allegedly fraudulent daycare center has prompted renewed demands for accountability from state leadership. The DHS has intensified efforts to crack down, including enhanced verification for fraudulent providers, amid ongoing FBI investigations.
Pathways to Reform and Prevention
To address the crisis, state officials advocate for third-party audits, strengthened program integrity measures, and rigorous fraud prevention protocols in high-risk programs. Gov. Walz has defended the administration’s approach, pointing to early detection efforts, but the scandal highlights the critical need for balanced oversight in social services. This ensures aid reaches those in need while safeguarding taxpayer dollars from theft and corruption. Minnesota’s experience offers valuable lessons for national systems, emphasizing accountability to avert similar industrial-scale exploitation in the future.
