Fraud

This article originally appeared in the Fall 2025 issue of Thinking Minnesota magazine.

Is Minnesota the nation’s most corrupt state?

There’s a new, disturbing epidemic sweeping through Minnesota. It has shown up on the government radar, infecting state agency social benefit programs and siphoning taxpayer money by the millions: fraud. But identifying the contagion is only part of the way back to the state’s good health. The questions that need answers for a full recovery are what can be done and who will do it?

Fraud ranked as one of the top issues of this past state legislative session and was the focus of a special-purpose House of Representatives committee. Despite the huge efforts undertaken by state Republicans (and a few Democrats) to shine a light on the scope of the problem across state government, in the session’s final hours in May, the heavy lifting was put off until next year by state Democratic leaders.

To tell the story of how it all went wrong this year, we must tell two stories simultaneously: one political and one judicial.

Outgoing U.S. Attorney Andrew Luger put it bluntly during an exit interview on KSTP-TV in December: “Minnesota has a fraud problem.”

Luger served two non-consecutive terms as the top federal prosecutor in Minnesota, first under Pres. Barack Obama from 2014 to 2017, and then from 2022 to January 2025 under Pres. Joe Biden.

In July, Luger’s temporary successor, the Trump-appointed Acting U.S. Attorney Joseph H. Thompson, went one step further. Again, in another KSTP-TV interview, Thompson put a price tag on the recent frauds against state government programs at more than $1 billion.

They should know. As the top federal prosecutors in Minnesota, these two gentlemen are the leading figures who have been fighting the fraud that Thompson described as being “vast,” “pervasive,” “staggering,” and “brazen,” and “a far-reaching fraud crisis that’s swamping Minnesota.”

In between those two television interviews, the entire 2025 legislative session played out in St. Paul. To get to the session’s inconclusive outcome, we must first retrace some of the bizarre history of the early months of this year in state politics.

The 2024 election saw state Republicans winning 67 seats in the House, ending a six-year run of DFL majority control of the chamber. Then, House Democrats boycotted the first month or so of the 2025 session until a power-sharing agreement could be reached with Republicans to govern what would eventually become a tied 67-67 body.

Down the hallway, the state Senate found itself, briefly, in a 33-33 tie, until a special election restored the DFL’s one-seat (34-33) majority. During that brief tie, and with the House nonfunctioning, Senate Republican committee co-chairs began the hard work of holding hearings and digging into the state’s fraud problem.

Some of the highlights from early in the session featured the work of the independent Legislative Auditor Judy Randall and her office. The resulting June 2024 report on the Feeding Our Future scandal and the coinciding mishandling by the state Department of Education (MDE) is an essential roadmap document to understanding what happened during the pivotal years of 2020 and 2021.

One positive outcome of the 2025 legislative session was an increase of more than $1 million to the Auditor’s budget, allowing for increased oversight of state programs this year and into 2026.

Eventually, the House officially convened in February with Republicans holding a (temporary) 67-66 majority and electing Republican Speaker Lisa Demuth (R-Cold Spring). The GOP/DFL power-sharing deal has a unique feature: It created a permanent House Fraud Prevention and State Agency Oversight Policy Committee, with a permanent Republican majority. The committee is chaired by state Rep. Kristin Robbins (R-Maple Grove). The fraud committee’s weekly Monday morning meetings throughout the winter and spring became the closest thing to “Must See TV” that politics has to offer.

Most notable was the March 10 committee hearing, where American Experiment presented its ScandalTrackerTM spreadsheet.

The Center’s ScandalTracker is an effort to track all the fraud across Minnesota state government organizations. It features estimates of not just the Feeding Our Future fraud but also fraud committed by autism clinics, personal care attendants, adult day care centers, childcare centers, housing consultants, addiction counselors, language translators, van drivers, and more.

At the time, the Tracker listed only $600 million or so in fraud dating back to 2019. And this number predates the Thompson $1 billion fraud interview by four months. Incredibly, the three committee Democrats tried to argue that American Experiment was grossly exaggerating the fraud problem and making up the numbers, despite the spreadsheet’s 27 carefully documented footnotes.

The resulting yelling match, live-streamed on the House website and YouTube, produced a minor media kerfuffle.

While this was happening in basement committee hearing room G-23 at the state Capitol, Feeding Our Future kingpin Aimee Bock was standing trial in a federal courtroom in downtown Minneapolis. The trial began on Feb. 10 and would conclude on March 19 with guilty verdicts on all counts for Bock and a co-conspirator, Salim Said.

It was U.S. Attorney Luger who led during the first few rounds of criminal indictments in what came to be known as the Feeding Our Future case. Since the first fraud charges were filed in September 2022 against 47 individuals, the number of defendants has ballooned to 75.

When Luger announced that first batch of indictments, he provided an initial estimate of the dollar amount involved at $250 million. As more defendants were added, the official number grew to $300 million, with indications that the final number may even reach $400 million or $500 million from this single fraud.

As Auditor Randall documents in her report, nearly all of this money was stolen during a brief 18-month period from April 2020 to November 2021.

Fast forward to December 2024, when Luger told Jay Kolls of KSTP,

I think there needs to be a lot more done, and people need to have serious conversations and getting to the root of this about stopping it before it happens. I just see it and no other state had a Feeding Our Future. We did. No other states have had the kinds of problems we’ve had with government fraud.

As of Sept. 4, 2025, federal prosecutors have secured 55 convictions in the Feeding Our Future case. Of those convictions, 48 came via guilty pleas, with another seven coming through two spectacular, multi-week courtroom trials that drew national and international media coverage. Those trials were conducted by the case’s lead prosecutor, Joseph H. Thompson, a Stanford-educated career prosecutor who would later be elevated to Acting U.S. Attorney for Minnesota.

The first courtroom trial in June 2024 featured a ham-handed attempt by defendants to bribe a juror with $120,000 in cash stuffed into a Hallmark gift bag.

That felony bribery criminal case resulted in five additional guilty pleas, including those from two defendants not charged in the larger fraud case.

The question now is, “How much money has been recovered?” Keep in mind that a significant portion of the money stolen was sent overseas, beyond the reach of U.S. authorities. Or it was spent on luxury vacations, credit card bills, jewelry, or clothing — essentially things that have little or no resale value. The many luxury cars that were purchased in 2020 and 2021 have now depreciated in value.

The short answer is that $75 million has been seized, with a recoverable value of approximately $60 million to $65 million.

At this point, it’s appropriate to ask where the state’s top prosecutor, Attorney General Keith Ellison, has been during all of this. While it’s true that a dedicated Medicaid fraud unit within his office produced many ScandalTracker prosecutions, there is a curious sidenote to the second Feeding Our Future trial. A defense exhibit in the case included an hour-long audio recording of Ellison meeting privately in December 2021 with leading figures of the scandal, some of whom would later be indicted in the case. Ellison can be heard agreeing with the fraudsters, some of whom would later donate to his re-election campaign. In April 2025, American Experiment would be the first news organization to publish the Ellison/ Feeding Our Future recording.

Even as federal prosecutors continue to pursue the Feeding Our Future case, adding new defendants and new charges to existing defendants, federal prosecutors have expanded investigations into other frauds, many of which have been ongoing for years, such as the childcare center fraud.

What stands out as the common element of these old and new frauds is the involvement of the state’s Department of Human Services (DHS).

DHS gives out more grant money than any other state agency. It had been led under Gov. Tim Walz since 2019 by Commissioner Jodi Harpstead, a former executive with Lutheran Social Service.

Feeding Our Future (under the Dept. of Education) represents the largest single-dollar-amount item in the ScandalTracker. But by the number of line items, DHS oversees the programs behind 20 of the 28 fraud scandals included in the Tracker. As state agencies go, DHS is ground zero for fraud.

Perhaps coincidentally, Harpstead resigned as DHS commissioner in January 2025, before the legislature convened for the year. Since then, the agency has been led by a “temporary” commissioner, Shireen Gandhi, a former Harpstead staffer.

In December 2024, the month before Harpstead resigned, Joe Thompson led a series of FBI raids on autism clinics that operate under a different DHS program called Early Intensive Developmental and Behavioral Intervention (EIDBI). Since the program began in 2017, the agency has paid out around $1 billion to service providers — who don’t have to be licensed. Some 85 autism clinics are reported to be currently under state investigation.

KARE-11’s A.J. Lagoe has also uncovered massive fraud in the addiction recovery and housing support state programs under DHS. Lagoe’s 2024 reports on the addiction recovery business led to federal criminal charges in one case and an $18 million settlement in another.

But it was Lagoe’s 2025 reports on a relatively new state program called Housing Stabilization Services (HSS) that led to more meaningful results.

Lagoe’s work led to a Joe Thompson-led FBI raid in July 2025 of vendors to the HSS program. The program only began in 2020 and quickly ballooned into a $100 million-per-year industry.

In that same July 22 KSTP interview mentioned above, Thompson told Jay Kolls that the “vast majority” of the HSS program was consumed by fraud. And by the “vast majority,” Thompson meant virtually all. On July 28, Walz announced that payments to HSS providers had been stopped. On Aug. 1, DHS announced that the entire HSS program was being shut down.

No doubt Walz and DHS felt emboldened to act quickly by some of the reforms that were passed by the state legislature in 2025. Among the reforms that reached the governor’s desk in May were measures to allow agencies to cut off payments earlier to vendors suspected of fraud and allowing agencies to share information among themselves on vendors scamming more than one agency.

But the biggest reform under consideration in 2025 never made it to the finish line. Early on, there seemed to be widespread and bipartisan support for the idea of creating a statewide, independent Office of Inspector General (OIG). Many state agencies — including DHS — have their own OIG, but this office would operate at the enterprise level, cutting across bureaucratic silos. It was well established that many (if not most) of the Feeding Our Future fraudsters were running multiple scams, not just against MDE, but against DHS, the Departments of Health, Employment, and even the Minnesota State Arts Board, not to mention county and city agencies.

First-term Sen. Heather Gustafson (DFL-Vadnais Heights) carried the bill (SF856) to create an Office of Inspector General. Sen. Gustafson serves as vice chair of the Senate State and Local Government Committee. Her bill had two Republican co-authors and two Democratic co-authors.

The bill had to be reviewed by seven separate committees. Three of those seven reviewed the bill a second time. Along the way, the original six-page bill grew to some 35 pages.

On May 8, the bill passed the full Senate on an overwhelming 60-7 vote, a lopsided result unheard of in these divided times.

Efforts by House Republicans to get SF856 through the tied 67-67 chamber failed to attract any House Democrat votes. House Democratic leadership, suddenly transformed for a few minutes into small government fiscal conservatives, refused to support the effort due to the proposal’s cost and alleged lack of vetting.

Sometimes you have to make government just a tiny bit bigger, temporarily, in order to shrink it substantially.

The OIG measure may be revived next year.

Even though the legislature has adjourned for the year, the House Fraud Prevention and State Agency Oversight Committee continues to meet. As recently as July 8, the committee met and looked into the state-run Medicaid program. More committee meetings are expected this autumn.

Meanwhile, Acting U.S. Attorney Thompson continues to push the anti-fraud agenda, in both the courtroom and the media.

Recently, Thompson has been emphasizing the systemic nature of the fraud in Minnesota and how it must be opposed on a large scale, rather than on a case-by-case basis. In an Aug. 12 U.S. Attorney’s Office statement, he says,

These crimes are not isolated events. They are part of a web of schemes targeting programs that are intended to lift up Minnesotans and bleeding them dry. From where I sit, the scale of the fraud in Minnesota is staggering, and every rock we turn over reveals more. We must be honest and clear-eyed about the scope of this problem, because ending it will take an unyielding, all-hands-on-deck effort from all of us.

And “all of us,” must include more than just employees of the U.S. Department of Justice.

That sentiment builds on something that Thompson told The Minnesota Star Tribune a few weeks earlier, when asked about fraud:

I’ll say this: It’s clear our state needs to take fraud more seriously, and we can’t just assume that people who participate in these programs — even if they’re ostensibly a nonprofit — are doing so honestly. And that’s especially true when people are getting millions or even tens of millions of dollars a year, and when newly created companies are doing so, that’s obvious.

Thompson will be busy this fall, with more courtroom trials scheduled for the remaining Feeding Our Future defendants.