Magnitude 'cannot be overstated': Feds say Minnesota fraud may be more than $9B

"Minnesotans and taxpayers deserve to know the truth of the fraud," First Assistant U.S. Attorney Joe Thompson told reporters at a press conference.  "The fraud is not small. It isn't isolated. The magnitude cannot be overstated. What we see in Minnesota is not a handful of bad actors committing crimes. It's staggering industrial-scale fraud. It's swamping Minnesota and calling into question everything we know about our state."

Thompson explained that 14 programs have been identified as containing fraud and those programs have cost taxpayers $18 billion overall since 2018.

When asked specifically by a reporter how much of that $18 billion is suspected to be fraudulent, which reports have previously suggested could be around $1 billion, Thompson suggested that number will be higher when the investigations are concluded. 

"I think a significant portion," Thompson responded.

Thompson later said, "When I say significant, I'm talking in the order of half or more. But we'll see."

Six new defendants have been charged in connection with a Minnesota housing services fraud, Thompson revealed on Thursday.

Two defendants pocketed $750,000 instead of helping Medicaid recipients find stable housing, Thompson said. Prosecutors allege they used the proceeds to travel to international destinations, including London, Istanbul and Dubai.

One defendant submitted $1.4 million in fraudulent claims, using some to purchase cryptocurrency, Thompson said. Federal officials say he fled the country after receiving a subpoena.

The six new defendants join eight others charged in September for their alleged roles in the scheme to defraud the Minnesota Housing Stability Services Program.

Two dependents mentioned by Thompson sent significant sums of money overseas to Kenya, in one case over $200,000.

"There's been a significant amount of money sent abroad, mostly to East Africa, much of it to Kenya and to Nairobi, that the money that we've traced most, most of which has been used to purchase real estate in Nairobi," Thompson said, mentioning the "large Somali diaspora" in those areas.

Prosecutors also named a new defendant accused of defrauding another state-run, federally funded program that provides services for children with autism, alleging he submitted millions of dollars worth of claims for Medicaid reimbursement. One woman previously charged with exploiting that program pleaded guilty Thursday morning, officials said.

Thompson said that two of the dependents aren't from Minnesota but came from Philadelphia because "they heard that Minnesota and its housing stabilization services program was easy money."

"What we're seeing is programs that are just entirely fraudulent," Thompson said. "These aren't companies that are providing some services, but overbilling Medicare, Medicaid. These are companies that are providing essentially no services. They're essentially shell companies created to defraud the program created to submit on a wholesale level, fraudulent claims for services that aren't necessary and are provided."

Minnesota's fraud crisis has been in the spotlight in recent weeks as the Trump administration and local Republicans have blasted Minnesota's elected officials over the scandal, which dates back to at least 2020 and involves fraudulent billing for a wide range of government services, mostly involving, but not limited to, the state's Somali community. 

"I mean, these fraudsters were just saying that they were spending all this money on feeding kids, and they were just making up these PDFs, putting false names into Excel sheets. I could do that in five minutes on a computer if I had absolutely no conscience."

"It's been allowed to go on for far too long, and we need to do whatever we can to stop it in its tracks," Thompson said in the press conference. 

Associated Press contributed to this report.