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Dippel




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Hello from the State Capitol,

 

For those of you who are trying to keep up with the fraud problems in our state, please check out this month's Fraud Monitor, which is compiled monthly by several people in the Minnesota House.

 

Fraud Monitor: April & May in Review

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Welcome back to the MN Fraud Monitor

April and May closed a two-year legislative cycle in which Minnesota’s fraud crisis moved from isolated program failures to a statewide oversight issue and a major federal enforcement priority.

The Legislature adjourned sine die on May 18th. Before adjournment, lawmakers passed several fraud-related measures, the House Fraud Committee approved its final report, and federal investigators continued work across child nutrition, Medicaid, autism services, housing stabilization, home supports, and childcare.

Good intentions have not been enough to ensure that programs meant to help the most vulnerable are operated with integrity. That requires serious competence, engagement, and accountability across the state: from agencies tasked with administration, to providers and individuals giving and receiving services, to Minnesotans demanding that government at every level operate with transparency and integrity.

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Session Fraud Legislation: What Passed and What Moved

 

*Statewide Office of Inspector General*

Lawmakers established a new independent Office of Inspector General in the executive branch. The proposal cleared the Senate with broad support in 2025 but stalled in the House before returning this session. In 2026, the House passed the final bill 127-5, the Senate concurred 66-0, and Governor Walz signed it into law in May. The Inspector General will be appointed by the governor to a five-year term and confirmed by a three-fifths vote of the Senate. (1 [ [link removed] ]) (2 [ [link removed] ]) (3 [ [link removed] ]) (26 [ [link removed] ])

The office is scheduled to be fully operational by September 1, 2027. Its responsibilities include overseeing agency inspectors general, investigating credible allegations of fraud or misuse in state programs, establishing best practices, facilitating cross-agency information sharing, and issuing public reports after completed investigations. Beginning January 1, 2028, the office may establish the Inspector General Anti-Fraud and Waste Bureau. (1 [ [link removed] ]) (2 [ [link removed] ])

*Expanded Payment-Withholding Authority*

HF3629 [ [link removed] ] removes the prior 60-day limit on withholding payments, eliminates the 2027 expiration date, and lowers the standard to a credible allegation of fraud verified by the agency. It also allows agencies to share information about suspected participants receiving payments from multiple state agencies, provided doing so does not compromise an active investigation. (4 [ [link removed] ]) (5 [ [link removed] ])

The bill requires DHS and DCYF to submit annual program-integrity reports. DHS’s first report is due November 30, 2026. DCYF’s first report is due January 1, 2027. (4 [ [link removed] ]) (5 [ [link removed] ])

*Additional Human Services Provisions*

The House human services policy bill included prepayment review for Medical Assistance claims and claims in 14 high-risk DHS programs, enrollment moratoriums of up to two years for those high-risk programs, 90-day payment-withholding authority for Medical Assistance, formal termination of Housing Stabilization Services, and legislative access to the unredacted Optum report. (6 [ [link removed] ])

*Medicaid Fraud Bill*

The House passed HF2354 [ [link removed] ] by a vote of 118-16. As passed by the House, the bill would provide $1.23 million annually from fiscal years 2027 through 2029 for 18 new positions in the Attorney General’s Medicaid Fraud Unit: 11 investigators, three attorneys, and four support staff. (7 [ [link removed] ]) (8 [ [link removed] ])

The bill would also expand the definition of Medicaid fraud to include conduct such as lying during provider enrollment, falsifying service records, and destroying records requested by a state agency. It would create stronger penalties for Medicaid fraud over $100,000 and over $1 million. (7 [ [link removed] ]) (8 [ [link removed] ])

*Other Key Measures*

Human services IT modernization legislation created the Human Services IT Systems Modernization Fund, effective July 1, 2026. The law includes funding for fraud prevention and detection technology, DHS and DCYF modernization work, MNIT, and county health and human services systems. (9 [ [link removed] ])

The fund is a vehicle for modernization, not a complete fix. Minnesota still has significant work ahead to move beyond outdated technology, resolve data-sharing barriers, and use modern tools effectively across agencies and programs.

The higher education bill included $3 million in fiscal year 2027 for Minnesota State to purchase software to detect and prevent ghost-student fraud. It also strengthened the Office of Higher Education’s ability to deny grants to applicants who provide false or misleading information, refuse reasonable requests for information, or have been found to have committed fraud or major violations involving government funds. (10 [ [link removed] ])

Grant oversight provisions require the Office of Grants Management to implement a fraud risk rating system for state grantees, effective February 1, 2028. The language came from grant-management legislation and was later included in the state government package. (11 [ [link removed] ]) (12 [ [link removed] ])

*Dates and Implementation Items to Watch*


* *July 1, 2026:* Human Services IT Systems Modernization Fund effective. (9 [ [link removed] ])
* *November 30, 2026:* DHS first annual program-integrity report due. (4 [ [link removed] ]) (5 [ [link removed] ])
* *January 1, 2027:* DCYF first annual program-integrity report due. (4 [ [link removed] ]) (5 [ [link removed] ])
* *September 1, 2027:* Statewide Office of Inspector General fully operational. (1 [ [link removed] ]) (2 [ [link removed] ])
* *February 1, 2028:* Office of Inspector General’s first annual report due. (1 [ [link removed] ]) (2 [ [link removed] ])
* *February 1, 2028:* Grant fraud risk rating system effective. (12 [ [link removed] ])

 

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Executive Branch Program-Integrity Actions

The executive branch has also taken direct action through fraud-focused executive orders and DHS program-integrity efforts. Executive Order 25-10 directed state agencies to continue combatting fraud across Minnesota government programs, and Governor Walz later ordered a third-party audit and payment pause for 14 high-risk Medicaid services. (20 [ [link removed] ]) (21 [ [link removed] ])

DHS has implemented prepayment review for certain Medicaid benefits and services and has advanced provider revalidation through Minnesota Revalidate 2026. These steps reflect a stronger front-end posture that was long needed. (22 [ [link removed] ]) (23 [ [link removed] ])

Implementation has also raised serious concerns. Media reports highlighted suspended payments, delayed payroll for providers, and disruptions affecting care for older and disabled Minnesotans. As of late May, thousands of providers remained in limbo during revalidation. (27 [ [link removed] ]) (28 [ [link removed] ]) (29 [ [link removed] ]) (30 [ [link removed] ])

The state’s stronger fraud posture is necessary, but intention is not enough. Results will depend on whether agency leadership can stop fraud without creating new administrative failures that harm legitimate providers and vulnerable residents. That will be a central test for state leadership going forward.

 

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House Fraud Committee Final Report

The House Fraud Prevention and State Agency Oversight Policy Committee approved its final report in May. The committee was established in January 2025 and held 25 meetings. The final report followed testimony, whistleblower submissions, agency records, and prior Office of the Legislative Auditor findings. (13 [ [link removed] ])

The 84-page report passed on a party-line vote, with Republican members supporting the report and DFL members abstaining. Recommendations included technology modernization, stronger provider documentation, in-person site visits before billing begins, improved attendance records in high-risk programs, and automatic stop-payment triggers when a program’s budget increases by at least 50 percent over the prior year. (13 [ [link removed] ])

On May 5, the committee considered a motion to subpoena records from U.S. Rep. Ilhan Omar related to Feeding Our Future and the federal MEALS Act. The motion failed 5-3 because House rules required six votes. The requested records involved communications related to Feeding Our Future and individuals or entities referenced in federal trial exhibits. (14 [ [link removed] ])

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Feeding Our Future Case Developments

Aimee Bock, founder and executive director of Feeding Our Future, was sentenced to 500 months in prison in connection with a more than $250 million federal child-nutrition fraud scheme. According to DOJ, Feeding Our Future’s federal child-nutrition disbursements increased from about $3.4 million in 2019 to nearly $200 million in 2021. The scheme involved false meal counts, fake attendance rosters, and claims for meals not served. (15 [ [link removed] ])

*Additional April developments included:*


* Abdullahe Nur Jesow was sentenced to 43 months in prison and ordered to pay $866,458 in restitution. Academy for Youth Excellence and S&S Catering received about $4.286 million while serving only a fraction of claimed meals. (16 [ [link removed] ])
* Suleman Yusuf Mohamed and Gandi Yusuf Mohamed pleaded guilty, bringing total convictions to 65. Star Distribution received about $10.1 million for purportedly serving about 4.8 million meals while spending very little on actual food. Suleman Mohamed agreed to pay more than $8.66 million in restitution, and Gandi Mohamed admitted to laundering about $1.3 million through real estate transactions. (17 [ [link removed] ])
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April Search Warrants and May Federal Health Care Fraud Takedown

On April 28, federal and state authorities executed 22 search warrants targeting social-welfare fraud, primarily at businesses. The operation involved the FBI, Homeland Security Investigations, the Minnesota Attorney General’s Medicaid Fraud Control Unit, and the Bureau of Criminal Apprehension. Authorities stated that the operation was not related to immigration enforcement. (18 [ [link removed] ])

On May 21, DOJ announced charges against 15 defendants in schemes totaling more than $90 million in alleged fraud. The announcement described the cases as including the two largest Medicaid fraud cases ever charged in the District of Minnesota and first-of-their-kind charges involving additional Minnesota Medicaid programs. (19 [ [link removed] ])

The announcement also included additional federal enforcement resources, including funding for 15 new federal prosecutors and support staff, expansion of the Health Care Fraud Section’s Medicaid fraud work, and expansion of the Midwest Strike Force to include Minnesota. The Health Care Fraud Section’s Data Fusion Center used analytics to support the cases. (19 [ [link removed] ])

Notable cases in the takedown included:

* *EIDBI / Autism Services:* Two defendants were charged in connection with an alleged $46.6 million scheme involving kickbacks, improper diagnoses, and billing for services not provided. EIDBI claims in Minnesota increased from more than $600,000 in 2018 to more than $400 million by 2025. (19 [ [link removed] ])
* *Integrated Community Supports:* The first criminal prosecution involving Minnesota’s Integrated Community Supports program included an alleged $1.4 million scheme. ICS paid out about $4.2 million when the program began in 2021, increased to more than $183 million in 2025, and has paid more than $460 million since 2021. One charging allegation involved a vulnerable recipient requiring 24-hour care who was found deceased after the defendant allegedly billed for services the recipient did not receive. (19 [ [link removed] ])
* *Individualized Home Supports*: Two defendants were charged in connection with an alleged scheme of more than $22 million involving concealed property ownership and false billing. IHS grew from more than $100 million in 2018 to more than $700 million in 2025. (19 [ [link removed] ])
* *Housing Stabilization Services:* Eight defendants were charged with defrauding Housing Stabilization Services of approximately $15.7 million. DHS predicted HSS would cost about $2.6 million annually before implementation. HSS claims exceeded $26 million in 2021 and $104 million in 2024. Minnesota shuttered the program on October 31, 2025, due to fraud. (19 [ [link removed] ])
* *Child Care:* Charges included an alleged $425,000 fraud involving the state-funded Great Start Compensation Support Payment Program and an alleged $4.6 million fraud involving the federally funded Child Care Assistance Program. (19 [ [link removed] ])

 

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Closing

The state has taken real action: legislation, expanded federal enforcement, and executive-branch efforts through prepayment review, revalidation, and oversight. These steps are necessary and should be judged by results: whether fraud is detected earlier, improper payments are stopped sooner, information is shared across agencies, and underlying administrative weaknesses are corrected.

Minnesota’s recent fraud record is a warning, not a sentence. The failures that brought us here do not have to define what comes next, but they require a clear-eyed assessment of where government fell short and sustained vigilance about whether new tools are actually working.

Minnesotans should be able to take pride in state government the same way we take pride in the state itself: serious, competent, fair, and worthy of public trust. That demands protecting both taxpayers and the vulnerable residents these programs serve.

 

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Sources

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Report Fraud!

Minnesota has lost an estimated $9 billion to fraud, money meant to help vulnerable Minnesotans and fund your top priorities. We can’t afford to let it continue. If you’ve seen or experienced fraud in state programs, make a confidential report at MNFraud.com [ [link removed] ] and help us protect taxpayer dollars.

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Please Contact Me

Please continue to reach out with thoughts, ideas, and priorities by emailing me directly at [email protected] or calling me at my office at (651) 296-3135.











Centennial Office Bldg.
658 Cedar Street
St. Paul, MN 55155
651-296-3135
[email protected]







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