Federal prosecutors in the United States have revealed that a sprawling fraud scandal in Minnesota could have cost taxpayers billions of dollars, with up to half of $18 billion in federal funds potentially stolen from state-run programmes.
The Staggering Scale of the Alleged Fraud
First Assistant U.S. Attorney Joe Thompson stated on Thursday that losses from 14 high-risk programmes could reach into the billions. Half or more of the roughly $18 billion in federal funds supporting these initiatives since 2018 may have been siphoned off through fraudulent activity. The programmes targeted included those for child nutrition, housing services, and autism support.
"I’m sure everyone is wondering how much of this $18 billion was fraud," Thompson told reporters. "That’s the $18 billion question." The investigation, which began with the Feeding Our Future scam first announced in 2022, has snowballed. Initially, 47 defendants were charged with stealing $250 million meant to feed children during the pandemic. Prosecutors now say they are uncovering new depths to the fraud patterns, with many suspects creating entities that billed multiple programmes simultaneously.
Political and Community Tensions
The case has become politically charged, particularly as 82 of the 92 defendants charged so far are Somali Americans, according to the U.S. Attorney’s Office for Minnesota. Former President Donald Trump has used this fact to criticise both the Somali diaspora and the state's Democratic leadership. Minnesota is home to the largest Somali population in the U.S.
Local community leaders have urged officials and the public to avoid stigmatising the wider Somali American community. Yusuf Abdulle, a Minneapolis-based imam, emphasised that "Fraud is an issue of individual wrongdoing, not community identity." He warned against conflating alleged crimes by a small number of defendants with the over 80,000 people of Somali descent in the Twin Cities area.
A National Problem of Programme Integrity
Experts warn that the Minnesota cases reflect a broader national vulnerability in government programmes, especially following the rapid expansion of aid during the COVID-19 pandemic. Linda Miller of the Program Integrity Alliance noted that fraudsters saw how easy it was "to just submit these fake invoices and get paid millions of dollars." She warned that similar attempts are likely happening across the country.
Rebecca Shea from the U.S. Government Accountability Office (GAO) explained that fraud is a "hidden crime," making estimates imprecise. The GAO has previously estimated that the U.S. government loses between $233 billion and $521 billion annually to fraud, roughly 3% to 7% of the federal budget. Other pandemic-era fraud includes scammed unemployment aid, costing at least $100 billion, and over $200 billion in potentially fraudulent pandemic relief loans from the Small Business Administration.
Response and Recovery Efforts
In response to the investigations, Minnesota Governor Tim Walz ordered a third-party audit in October and paused payments to the 14 high-risk programmes for 90 days. One programme has since been shut down entirely. The state has also appointed a statewide director of programme integrity to oversee fraud detection efforts.
Recovering the stolen funds, however, is a slow and often incomplete process. In the Feeding Our Future case, authorities have seized between $60 million and $70 million, with only about $30 million in liquid cash. The rest is tied up in assets like real estate and luxury vehicles, including a Porsche and a Mercedes, which must be sold at auction. Prosecutors noted that millions were spent on property in Minnesota, Ohio, and Kentucky, as well as on lavish travel, including a honeymoon to a private villa in the Maldives. A significant portion of the money is considered permanently lost.
The scandal underscores a critical weakness in public sector spending. As Linda Miller, a former GAO official, put it, "We still have programmes 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. It’s a ‘trust-and-don’t-verify’ system."
