As 2025 drew to a detailed there may be one story that captured the nation’s consideration. It isn’t the hanging of boats off the coast of Venezuela allegedly transporting medicine, or China’s announcement of navy maneuvers round Taiwan. It’s the story of fraud in Minnesota, which federal prosecutors estimate may prime $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 Common 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 baby 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 adjustments 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, nevertheless, scandal plagued Minnesota. In 2021, federal regulation enforcement first probed a sequence of multimillion greenback fraud schemes. These fraud schemes have led to federal prices in opposition to 92 folks 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 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 current weeks that the fraud downside may 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 instructed CBS Information baby care is just “vaguely” a precedence for prosecutors, and a spotlight and assets are as an alternative centered on greater than a dozen different social companies packages in Minnesota, together with vitamin, housing and behavioral well being.
Here is what it’s essential 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 known as Feeding Our Future. The group claimed to work with eating places and caterers to distribute meals to colleges and extracurricular packages however as an alternative submitted pretend meal rely sheets and invoices, raking in thousands and thousands in administrative charges and getting kickbacks from individuals who ran their meal distribution websites, prosecutors stated.
- Feeding Our Future founder Aimee Bock was convicted earlier this yr, and several other others concerned within the scheme have pleaded responsible or been convicted.
- Early on, Minnesota officers questioned among 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 unfavourable media consideration” affected the state’s decision-making course of about regulatory motion in opposition to Feeding Our Future.
- What federal prosecutors known as “the most important pandemic period fraud in the US” is “simply the tip of a really massive iceberg,” in response to FBI Director Kash Patel.
Fraud in a housing program with “low obstacles to entry”
- This summer season, state officers shut down a reasonably new program designed to assist seniors and other people with disabilities discover housing after discovering “large-scale fraud.”
- A month later, federal prosecutors charged eight folks with defrauding this system, which was run by way of the state’s Medicaid service, by enrolling as suppliers and submitting thousands and thousands in “pretend and inflated payments.”
- One other 5 folks 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 stated the housing stabilization program was vulnerable to fraud as a result of it deliberately had “low obstacles 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 will price round $2.6 million a yr.
Autism program fraud
- In current months, two folks have been charged with defrauding a 3rd state program — on this case, one that gives companies 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 instances sending them as a lot as $1,500, prosecutors stated.
- One of many autism companies 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 stated the autism companies case “shouldn’t be an remoted scheme.” In complete, 14 Medicaid companies are below audit and deemed “excessive danger” for fraud.
Fraud claims in opposition to day care facilities
- YouTuber Nick Shirley drew tens of thousands and thousands of views in late December when he posted a video that confirmed him visiting federally supported baby care facilities round Minneapolis and discovering no youngsters current. He alleged practically a dozen day care facilities weren’t really offering any service and steered 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 response to state information, and all lively places have been visited by state regulators inside the final six months. One was subjected to an unannounced inspection as not too long ago as Dec. 4, and our assessment 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 baby care funding for the state of Minnesota, which receives roughly $185 million in federal assist for baby 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 non permanent deportation protections for Somali immigrants who dwell in Minnesota, claiming with out proof that “Somali gangs are terrorizing the folks 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 overseas terrorist group primarily based in Somalia.
- A number of federal investigators instructed CBS Information Minnesota there may be no proof taxpayer {dollars} have been instantly funneled to al Shabaab. “The overwhelming majority of the cash that these of us made went to spending on luxurious gadgets for themselves,” stated 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 folks we indicted.”
- A CBS Information assessment of the recordsdata exhibits that defendants spent taxpayer money on vehicles, property and luxurious journey. Additionally they wired thousands and thousands in stolen funds abroad, together with to banks and firms in China, the place discovering the recipients of that money can develop into an investigative black gap. The defendants additionally transferred practically $3 million to accounts in Kenya.
