Feeding frenzy

How a couple of nonprofits allegedly swindled the federal government of $48 million meant to feed children.

On January 21, some 200 law enforcement agents descended on a little-known nonprofit as the FBI executed three search warrants of their offices and related entities.

Thus began the saga of the Feeding Our Future scandal. The St. Anthony-based nonprofit Feeding Our Future was officially in the business of distributing free food to needy children. The FBI charged that at least $48 million in federal money was never used to feed children, but was instead diverted to luxury cars, lakefront homes, and foreign properties.

The day after the FBI raids, the U.S. Attorney for Minnesota filed a lawsuit to recover assets purchased with the alleged proceeds of the scandal. As of press time, no properties have been seized. Not one person has been arrested or charged in the alleged scandal as the FBI continues to make its case.

Feeding Our Future and a related nonprofit, Partners in Nutrition (d/b/a Partners in Quality Care), were both founded in Minnesota in 2016 to help local organizations gain access to two lucrative federal free-food programs, the Child and Adult Care Food Program (CACFP) and the Summer Food Service Program (SFSP). Both were created to supplement the better-known federal school lunch program by filling the gaps during those hours (and months) that school is out of session. In Minnesota, the programs are overseen by the state Department of Education (MDE). It was the department, suspecting fraud in the programs, that alerted the FBI who then started the year-long investigation.

The lead nonprofits, known as sponsors, were just middlemen. For a 10 percent fee, they stitched together networks of hundreds of sites, dozens of subsidiary nonprofits, and private food vendors to distribute meals to hungry children. Many of these sites are believed to be completely legitimate, while others have been placed under suspicion. It is the private food vendors who are believed by the FBI to be the culprits in the fraud, taking tens of millions of dollars from the program, without feeding children.

As outlined in three search warrants, the FBI described an elaborate scheme in which the state was billed for thousands of meals each day, then money was laundered through a complex network of shell companies and interlocking nonprofits, and proceeds spent on luxury cars and real estate in Minnesota and overseas — basically everything except food for low-income children.

Since 2017, the two lead nonprofits received $445 million from the two federal programs which are overseen locally by the Minnesota Department of Education (MDE), with the vast majority received over the last two years. At their summer peak, the networks run by Feeding Our Future and Partners in Nutrition were said to be feeding some 200,000 children per day at hundreds of sites around the state. In the wake of the FBI raids, MDE shut down both networks in late January.

The fallout of the scandal promises to have a widespread impact on how social services are delivered and overseen in Minnesota.

If the local nonprofit community was shocked by the FBI raids (and they were), the warning signs were there all along.

Political connections

Background checks conducted by local media revealed that many of the named alleged fraudsters had criminal backgrounds. Some had convictions for violent crimes (domestic assault and stabbing), some had convictions for financial crimes (theft by swindle and receiving stolen property) and some figures had both.

A couple of names stand out. The first, Guhaad Said, is named in the FBI search warrants and was convicted of a stabbing in Ohio.

Guhaad has close ties to Congresswoman Ilhan Omar (D-Minneapolis) as documented by AlphaNews in the 2016 article “A Community Forced Into Silence.” Omar held an election-night victory party at Safari Restaurant, one of many events she held at the venue and one of the suspect locations in the scandal. Since the scandal broke, Guhaad has also forwarded sizable political donations received from several figures in the scandal to other local food charities.

The second notable figure is Empress Malcolm Watson, Jr., the live-in boyfriend of Feeding Our Future CEO Aimee Bock. He has a criminal record that includes four felony convictions and is accused by the FBI, but not charged, with billing the nonprofit for construction work not performed.

The third person, Abdi Salah, resigned from the staff of Minneapolis Mayor Jacob Frey after his name appeared in a court filing linked to the case. Additionally, a local city councilman, a state senator, and the mayor himself, have received donations from figures named in the case.

That no background checks were conducted by either the nonprofit or the government before the millions of tax dollars were doled out is a minor scandal in itself. The nonprofit sponsor Feeding Our Future conducted no such checks because they were afraid of accusations of racism when selecting contractors.

Bock alluded to race and discrimination in an email quoted in the Star Tribune, “Many of the young black men in our state have records, but when given a chance they have shown that their past does not define their future or even their present.” Additionally, the state government also did not conduct background checks because federal rules governing the program were subject to a court order prohibiting restrictive hurdles to distribute aid in the midst of the Covid pandemic emergency. The Star Tribune also states, “Officials at MDE said background checks are not part of the sponsor or site application process outlined by the federal program.”

Explosive growth in free food

These federal free-food programs reimbursed food vendors between $2 and $4 per child per meal. How could these vendors clear enough profit in a single summer to buy lake homes and office buildings? Volume, sheer volume.

Giving away free food to Minnesota children may be the fastest growing industry in the state, judging by the numbers involved.

The vast majority of the participants in the programs were — and still are — schools (public, private, and charter) who also operate the primary school lunch program. Childcare facilities and community churches are also frequent participants. Total federal spending on the two programs in Minnesota in fiscal year 2018 amounted to $75.8 million. In 2019, the number rose slightly to $80.5 million. Then came the pandemic.

Concerned that schools would be closed and unable to feed kids, the feds relaxed the rules enabling almost any location or entity to serve as a food distribution site. Fast-forward to fiscal year 2020 and the amount spent in Minnesota almost doubled, to $153.8 million, with all of the growth occurring in the summer food program. What followed should provide a cautionary tale about throwing money at government programs, even during times of emergency.

Nothing could have prepared MDE for fiscal year 2021 when Feeding Our Future received more than $140 million, nearly as much as the entire program the previous year.

Before 2018, almost all participants in the program were schools and childcare facilities. But purpose-built nonprofits such as Feeding Our Future or Partners in Nutrition were unattached to these traditional means of food distribution, but were also not a typical food-shelf. These organizations do not solicit private donations, instead relying solely on taxpayer money — through the government — to run their program exclusively to distribute food. And because of the massive volumes involved, MDE struggled with how to review nonprofits’ applications and oversee their work.

But beyond the challenge of overseeing dozens of new sponsors and hundreds of new sites, the sheer size of some of these new locations seemed to pose a challenge for MDE’s program oversight.

The largest free-food distribution sites run by nonprofits in Minnesota boasted capacities of unbelievable size. Individual locations claimed the capacity to serve 5,000, 6,000, even 7,000 children per day. As documented in an FBI search warrant, one location being run out of Safari Restaurant actually claimed to be feeding 5,000 children per day two meals per day, every day for a month through its single Minneapolis dining room. These sites rival the capacities available at the state’s largest public schools, even entire public-school districts.

The locations operated more modest efforts during the school year. Still, MDE was tasked in the summers of 2020 and 2021 with oversight of massive new operations, while the agency’s staff was still working remotely due to Covid.

Still, the nonprofits behind the Feeding Our Future alleged scandal argued that Minnesota children were going hungry for lack of free food distribution sites. A look at one Bloomington address suggests otherwise.

Too big to fail

While the rest of the state waits for indictments to drop in the scandal, Gov. Tim Walz has put forward a proposal to put another $400 million per biennium to fund more free meals for kids.

While credit is due to the Minnesota Department of Education for its efforts to stop this fraud and ultimately hand it over to the FBI, MDE is still part of the broader environment that allowed the fraud to occur in the first place. The shutdown of the state government that hindered MDE’s oversight efforts was ordered by the same elected officials running MDE. Regular onsite visits to grant recipients of the free meal program certainly would have limited the amount of money lost to fraud.

For others at the state Capitol, the timing of the alleged scandal could not be worse. The state legislature reconvened for the year just 11 days after the FBI raid. The top item on the agenda this session is what to do with the projected $9.3 billion budget surplus.

Since the start of the legislative session, regular press conferences have been held to unveil another ambitious, multi-billion-dollar spending proposal. Not only do Walz’s spending plans include the new $200 million free-food initiative, but it was also his number one item when unveiling his 2022 supplemental budget proposal.

Many of these new spending initiatives rely on nonprofits to deliver services or they require the creation of new state oversight bureaucracies. But the apparent failures associated with Feeding Our Future raise questions on this approach of delivering government largesse.

The Feeding Our Future scandal is the perfect illustration of a well-intentioned government run amok. The federal programs involved were an outgrowth of the once modest and widely supported “free and reduced price” school lunch program, which dates to the 1940s.

Federal data show that pre-pandemic (2019), most U.S. public school children were eligible for the free and reduced lunch program, originally designed to serve only those children from the lowest income households. Some 36.4 percent of Minnesota’s schoolchildren were eligible in 2019, well below the national average of 52.4 percent. Only four states (Delaware, New Hampshire, North Dakota, and Utah) had lower shares. The national average of 52.4 percent in 2019 was up considerably from the 2001 average of 38.3, because eligibility standards relaxed.

During the pandemic, for practical purposes, all children in America were eligible for free lunches. Now that the end of the pandemic is in sight, there are efforts to resist reinstating eligibility requirements. When well-intentioned government programs grow out of control, especially during “emergencies,” the usual due-diligence and oversight go out the window. Minnesota should tread cautiously before throwing good money after bad.