WALZ ADMINISTRATION SHUT DOWN CHILD CARE FRAUD INVESTIGATIONS
The final two hearings of the Fraud Prevention Committee had astounding revelations from whistleblowers Jay Swanson and Faye Bernstein.
From 2015 to 2018, before Tim Walz became governor, the Department of Human Services had a unit that specialized in child care criminal investigations. They worked with BCA agents embedded in their unit and issued search warrants, conducted surveillance operations and had a forensic lab to conduct analysis of cell phones, computers, and other evidence that was seized in raids.
At the beginning of Walz’s tenure in 2019, the nonpartisan Office of the Legislative Auditor (OLA) issued two reports highlighting the depth of fraud taking place within childcare programs in Minnesota. Instead of taking the report seriously and taking action on behalf of the taxpayers, the Walz administration disbanded the criminal investigation unit in DHS, instead shifting to only looking for “overpayments” and setting up an “Overpayments Committee” to recommend whether any overpayments should be repaid or any administrative, not criminal, sanctions issued.
Once the threat of criminal penalties was removed, the childcare fraud floodgates opened and swindlers took full advantage.
Our witness testified that when a child care agency received an administrative sanction, it would just reopen at the same location under a friend or a relative, so the fraud could continue. A DHS whistleblower explained how this repeatedly happened, which you see by clicking here.
Last year alone, 107 childcare centers received administrative sanctions. Only 3 were referred to law enforcement, and there were zero convictions. Statistics from previous years are shockingly similar. The day of our hearing, the FBI was conducting raids at 22 childcare and autism centers. The fraud hasn’t stopped – state action did. If not for our federal law enforcement partners, we would STILL not be going after these criminals.
But the attempt to suppress the fraud predates the Walz Administration. Prior to the criminal investigative unit being shut down, the whistleblower also noted that the Dayton Administration also tried to keep it under wraps. He was told NOT to give a report to the OLA, which is a violation of state law. Instead, they hired a consulting firm that initially found $105 million in fraud, slightly exceeding the whistleblower’s estimate of $100 million. After DHS reviewed the consulting firm’s findings, however, they reduced the fraud estimate by $33 million – from 10% to 7% fraud, to make it look like the amount of fraud wasn’t so severe.
The administration actually worked closely with a group, the Minnesota Minority Child Care Association, which was actively trying to stop people from imposing new guardrails on the child care programs. Two of the leaders of the Minnesota Minority Child Care Association have been indicted, charged, and convicted in the Feeding Our Future scandal.
The point to remember here is all of Minnesota’s fraud problems began in childcare programs. Governors Dayton and Walz both downplayed the problems, and when Walz eliminated the DHS criminal investigation unit he basically removed any deterrent. From here, fraud morphed into Feeding Our Future, and that led to other vectors of fraud in autism centers, integrated community supports, and housing stabilization, to name a few.
There are so many interconnected layers and webs of relationships among these criminals, and we must root all of that out. Numerous times, the Walz administration could have stopped the fraud on the front by continuing criminal investigations, requiring prepayment reviews, stopping payments when there were credible allegations of fraud, etc. But they chose not to use the tools they had.
Think about how many billions of dollars could have been saved had the Dayton and Walz administrations not chosen to downplay the problems, suppress evidence, remove fraud safeguards, and close an investigative unit that could have stopped fraudsters in their tracks. Nearly 10 years later, not one person in state government has been held accountable for this misconduct.
Although the Fraud Prevention Committee will no longer be holding public hearings, we will continue to investigate whistleblower reports and turn any credible findings over to our federal law enforcement partners, who are doing a terrific job.
To learn more, click here.
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