Fear of lawsuits, racial backlash spurred massive Minnesota fraud, House report says

Minnesota officials knew early in the pandemic that a major food assistance program had fraud issues but kept money flowing because they feared the political fallout of a racially tinged lawsuit, according to a House report released Wednesday.

That reluctance to police the program ended up with one of the most extensive frauds in U.S. history. Dozens of people, largely from the Minneapolis-area Somali community, were charged in a federal criminal case with stealing $300 million in funds meant to go to hungry children.

The House Oversight and Government Reform Committee said the cost might be even higher in Minnesota’s Medicaid and child care programs, with up to $9 billion in fraud.

State officials had the ability to cut off payments but were reluctant to do so. At one point in March 2021, the state found a “serious deficiency” and suspended funding for Feeding Our Future, the children’s meals program. It restored the money a month later.

“They feared lawsuits, bad press and political backlash,” Chairman James Comer, Kentucky Republican, said at a hearing as he released the report.

He blamed Minnesota Gov. Tim Walz and state Attorney General Keith Ellison, both Democrats, for failing to recognize the signs of fraud and for caving to political pressure.

Mr. Walz, testifying to the committee, said he had taken “decisive action” on fraud.

He asserted that the focus on his state was unfair, and he tied that focus to the federal government’s immigration enforcement surge in his state, which made headlines as officers scoured Minnesota for illegal immigrants, protesters pushed back, clashes grew violent, and two American citizens were fatally shot.

“The people of Minnesota have been singled out and targeted for unprecedented retribution,” Mr. Walz said.

Feeding Our Future was a nonprofit that provided meals during the pandemic emergency.

Congressional investigators said Minnesota officials were first told of problems in the program in April 2020, just weeks into the pandemic.

Money continued to flow, largely uninterrupted, through early 2022.

Daron Korte, who was assistant commissioner at the Minnesota Department of Education, the agency that oversaw the food program, told the committee that state officials had the power to block new food distribution sites but were afraid of being sued.

“We could unilaterally make that decision, but we just knew, with Feeding Our Future, it was going to end up in court and had the potential to be overturned,” he said, according to the committee’s transcript of his interview with investigators.

He said the state had asked the U.S. Department of Agriculture, which oversees the food programs at the national level, for backup: a written statement confirming that the state had authority under federal regulations to suspend payments when fraud was suspected.

The feds, at that point under the first Trump administration, were “supportive generally” but wouldn’t put anything in writing.

“We felt like without having that backup from USDA that we just didn’t have firm enough ground to stand on to continue to deny those sites in the face of the threatened lawsuit,” he told investigators.

Mr. Walz has said a court ordered the payments to continue.

The judge, however, said he never ordered resumption of payments.

Rep. Jim Jordan, Ohio Republican, read the judge’s rebuttal to Mr. Walz.

“Either you’re lying, or the court’s lying,” the congressman said.

“That was not the interpretation of the attorneys,” Mr. Walz countered.

He told lawmakers he couldn’t remember when he first learned about the Feeding Our Future fraud, though he thought he heard tidbits about “irregularities” by late 2020.

His office, however, was briefed months before that, in April 2020.

“They were working to work through the process,” he said.

That didn’t sit well with Republicans.

“It’s either you were in on it, or you weren’t smart enough to see it,” said Rep. Pat Fallon, Texas Republican.

The Trump administration announced last month that it was suspending some Medicaid reimbursement payments to Minnesota to pressure Mr. Walz to do more to combat fraud.

The governor said the approach would hurt children who depend on the assistance.

He said he is committed to weeding out every dollar of fraud.

“The question is, is it a sledgehammer or a scalpel?” he said.