Governor Tim Walz Takes Action Against Public Funds Fraud in Minnesota
On January 3, 2025, Governor Tim Walz responded to widespread fraud schemes that have misappropriated hundreds of millions of taxpayer dollars from Minnesota’s safety net programs. He signed an executive order and proposed accompanying legislation aimed at strengthening the state’s ability to detect, prevent, and prosecute this type of theft. The fraudulent activities targeted programs designed to assist children, low-income residents, and the elderly.
The executive order establishes a centralized fraud investigation unit within the Bureau of Criminal Apprehension (BCA). This unit will incorporate fraud investigators currently employed by the Department of Commerce. Furthermore, the Governor’s plan includes the addition of nine staff members to Attorney General Keith Ellison’s Medicaid fraud unit.
The proposed legislation includes several key measures. State agencies will receive increased authority to halt payments to individuals suspected of fraudulent activity. The use of artificial intelligence to identify patterns indicative of fraud and flag them for investigation is also proposed. This contrasts with less technologically advanced methods, which might have proven more effective in uncovering fraud in previous scandals, such as the Feeding Our Future case where claims of serving thousands of children daily from small residential locations were made.
Governor Walz emphasized the severity of the crimes during a Friday press conference: “These are not just financial crimes against the state and the taxpayers of Minnesota. These are crimes against children, and what we’ve seen in Minnesota is these crimes have basically targeted programs that either feed children or help children in need … It’s simply unacceptable.”
The proposed legislation also strengthens penalties for fraud convictions. A new “theft of public funds” statute would increase criminal penalties by 20% compared to existing theft laws. Additionally, the Governor proposes to criminalize kickbacks, aiming to deter collusion between state employees and fraudulent actors.
The timing of Walz’s proposals is significant, coming approximately one month after FBI agents executed search warrants at two autism providers suspected of massively overbilling for services not rendered. This investigation is linked to the Feeding Our Future scandal, a $250 million theft of federal funds intended for child nutrition during the pandemic. The FBI warrant indicated a connection between at least a dozen defendants in the Feeding Our Future case and these autism clinics.
Governor Walz acknowledged Minnesota’s culture of generosity and trust as a potential contributing factor to the increase in fraud. While he doesn’t view these traits as inherently negative, he recognizes the need for stronger preventative measures in the face of escalating fraudulent activity.
Passage of the proposed legislation requires bipartisan support, presenting a challenge given the current political landscape. The Senate is evenly divided between Republicans and Democrats following the recent passing of Senator Kari Dziedzic. The House Republicans currently hold a narrow majority. House Speaker-designate Rep. Lisa Demuth criticized the Governor’s proposal as “smoke and mirrors,” promising a comprehensive Republican alternative focused on independent oversight and accountability.
By Michelle Griffith, Minnesota Reformer, January 3, 2025
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