On this episode of the News World, we're going to discuss the details of the billion dollar fraud scheme in the state of Minnesota and how it all happened.

How could one state lose this much money through social service programs while going unchecked.

My guest today has written about Minnesota's fraud for the Manhattan Institute's City Journal in an article co authored with Christopher Ruffo quote the largest funder of Al Shabab is the Minnesota taxpayer, which is available now at citydash Journal dot org.

I'm really pleased to welcome my guest, Ryan Thorpe.

He is an investigative reporter at the Manhattan Institute.

Ryan, welcome, and thank you for joining me a news room.

It's great to be here.

And then let me say to everybody that I think the paper that Ryan and Chris Road is astonishing, and as you listen to this podcast, you'll understand what an extraordinary story they've helped put together and how truly this is a wake up call for the United States at a lot of different levels.

But let me give you a brief overview of the frauds game, because frankly, it's sufficiently complicated.

I had to go back and reread various things several times to begin to realize the real depth of it.

The fraud scheme began with a Minnesota based nonprofit organization called Feeding Our Future.

Their goal was to help feed children during the COVID pandemic shutdowns when food and secure children were not going to school.

The result was they set up several feeding sites by partnering with local businesses.

The only problem was kids weren't actually being fed by these sites, but the stay with being billed as if they were.

And what's worse, the owners of the businesses reimbursed for vinfoices for feeding children were actually spending the money on luxury cars, houses, and real estate projects over seats.

Then a second program emerged, the Housing Stabilization Services.

Hundreds of providers were reimbursed for assistance they claimed to provided to people at risk for homelessness, though federal authority said those services were just not provided.

And yet another Minnesota program meant to provide therapy for autistic children.

Prosecutors said providers recruited children in Minneapolis Somali community, falsely certifying them as qualifying for autism treatment, and then paying their parents cash payments as kickbacks for their cooperation.

The amount of money stolen is nearing one billion dollars.

Remember this is just for the city of Minneapolis.

You would think it a billion that should be nationwide, but it's not.

And Minnesota has now announced that they're putting a pause on fourteen other social services programs to evaluate them for fraud.

So now, Ryan, given that background, First of all, what was your reaction when you first encountered this.

It was astonishing.

We had been talking about doing some reporting on waste, fraud and abuse in government programs, kind of for at large.

We clued into Minnesota as perhaps being a good location for some on the ground reporting given some of the indictments that we were seeing coming down.

But when I really dove into this and started to piece together the scope of the fraud in the state of Minnesota, it was absolutely astonishing, and very quickly.

The other thing that became apparent to me was that when you're looking at these fraud rings, they have been heavily concentrated in the state's Somali community, But reviewing kind of mainstream media cup or even statements from progressive politicians, it just seemed like this was an inconvenient fact that no one was either able or willing to confront.

And so those two elements of this piece struck me right away and signaled to me that this was going to be fertile ground for some investigative reporter.

How did you and Chris first discover the story?

I began by just going through press releases from the US Attorney's Office.

I'd been developing some sources in the state.

People had indicated to me that this was something that'd be worthwhile to look into.

I was told that state level officials had really dragged their heels in confronting the program, so that wouldn't be the place to begin.

But I simply went back over the past five years and I wrote through every press release that had been issued by the US Attorney's Office announcing indictments, and pretty quickly I was able to establish a timeline in terms of charges that have come down and allegations that the US Attorney's Office has made against members of the Somoli community.

And then after that it really focused on developing additional sources.

So we started cold calling people associated with counter terrorism with law enforcement, and we were able to develop a number of people who were willing to speak to us, who had looked into this, had a certain area of expertise on this topic, and we're willing to feed us some information.

Will you be adignianto, because you did have a US attorney who has actually being pretty aggressive.

The gap between the public coverage and what he was uncovering, it seems to me might be as big as anything I've ever seen.

Do you think if he had not been so aggressive that they would never have found any of this?

It's certainly quite possible.

So one thing I would say is that there have been people, and I would say people are kind of more associated with the political right in the state of Minnesota, who have been trying to do good work on this and have been doing good work and trying to raise alarm bells, but it simply wasn't punching through into kind of a more mainstream conversation for a number of different reasons that given the fact that the progressive political establishment, I would say, the mainstream press corps was just simply from what I can tell, turning a blind eye to this massive issue.

If it wasn't for the work of the US Attorney's Office breaking up these fraud ranks, charging people and also coming out at some press conferences with some really strong statements.

I think it would have been much easier for the establishment to ignore this.

And as I said, even as the facts began to come out about how much corruptions in bought, you have people like Congresswoman Elen Omar, who was a s ollyborn congressman, aggressively attacking the people who are trying to get to the truth.

It's one hundred percent right, I would say.

It's a pattern that we've seen for a number of years now.

So off the top, you had mentioned defeeding our future scandal.

Well, when alarm bells were going off about that particular fraud ring, the leaders responded by filing litigation against the state government and alleging racial discrimination.

And so that this is something that we've seen here as a shield on multiple occasions, and even now with the publication of our Peace and City Journal, we've gotten attacks by people saying, wow, this is racism.

It's like well, first of all, the first question is whether or not it's true, and if it's true, then we need to confront the facts as they are and begin to figure out what to do about it.

We continue to see that defense here.

In this first phase feeding our future.

If I understand it, Seventy eight people have been charged with fraud.

Fifty of them have already been convicted.

Yes, many have pled guilty because the evidence is overwhelming.

And they had apparently set up over two hundred and fifteen off friction in sights within several dozen shell companies.

This was a real project.

It was.

This was a sophisticated, coordinated network in Minneapolis, in the state of Minnesota.

It was heavily concentrated in the Somali community.

And look, they figured out, we can get our hands on millions of tax dollars if we simply eat doctor some paper work here, and if anyone starts asking questions, we're going to accuse them of being bigots.

And we're also going to flex our political connections to various Democratic officials in the state.

Frankly, the one I found the most fascinating was the autism program, where they were actually paying parents a monthly fee for the parents to claim that their child was autistic when they're not.

That's a pretty amazing deliberate effort to rip off the government.

It is the other thing that I find quite noteworthy about that particular case is we've seen some people say, after this has been exposed, well it's a few bad apples.

Well, this autism fraud case, one indictment's come down.

The US Attorney's office says, we're scratching the surface that more charges are coming, and it shows that this was a network that extended out into the wider Somali community.

They needed parents on board with this scheme, and parents who you know, may not have been ring leaders themselves were receiving kickbacks, and prosecutors allege that the parents, if the kicks weren't high enough, they said, well, there's so many fraudulent autism providers in the smaller community.

If you don't pay me more, I'm gonna pull my kid from your fake program, take them over to another fraudulent fake program, and they'll give me more money.

So they were using their leverage in order to get a greater share of the stolen tax dollars.

So you had a competitive fraud market.

Yes, yes, that's exactly right.

You know, it's one of thom you think about a couple of people who happen to be doing fraud, But this is a real machine.

Yes, there was a period where during COVID where there's I think two billion dollars stolen by identity theft by California criminals in prison using the State of California's computer programs to go out and file false claims and then have friends on the outside picking up the checks, and I think it came to two billion dollars.

Se people really underestimate how much fraud is going on in the United States in general.

I think that's true.

The situation in Minnesota seems quite bad.

Where it stacks up nationally, well, that's very difficult to say.

The reality is, we don't even know the true dollar figure in the state of Minnesota.

From what I'm hearing, it's very safe to say billions of dollars.

But final price take i'm sure of at this point.

But what these schemes do reveal is that if someone is motivated and has a little bit of know how, it doesn't appear to be that difficult to walk away with hundreds of millions of stolen tax dollars because it keeps cropping up in that state.

Well, if you look at it, the Fear Our Future program jumped from point four million in federal money in twenty nineteen two two hundred million two years later, in twenty twenty one.

Now, you had thought somebody would have looked and said, with that scale of growth, something's happening that we need to really dig into.

But apparently it is ignored it.

I think that's spot on.

I think they did look the other way, and I think that's a consistent pattern we see here in regards to all of these fraud scams.

You see expenditures skyrocket over a very short number of years, which should be setting off, you know, major alarm bells for the people who are responsible for keeping an eye on the public purse and overseeing and administering these welfare programs.

But they did not crack down on this.

It was allowed to fester.

I also think you mentioned the COVID nineteen.

I think that's a very important moment here.

I think that these issues predate COVID in the state of Minnesota.

But we're allowed to fester, and then you get COVID, you have more money going up the door than ever.

You have progressive politicians saying, well, this is an emergency.

We can't worry about checks and balances right now.

We simply need to get money into the hands of people who need it.

And so because this problem had been allowed to fester before then it just accelerates during the pandemic.

Ryan, Isn't it true that there've been a very large number of potential whistle blowers who have complained publicly that the Minnesota government in fact knew about this and did nothing about it, but that in fact it clearly was there and it clearly was being ignored or covered up by Tim Watson's administration.

Hasn't that been an allegation by people who actually are in the bureaucracy.

Yes, so there is a significant minority.

I would say, we're talking hundreds of employees within DHS in the state of Minnesota who have been trying to raise concerns for a number of years now.

They've taken to various social media platforms to publish allegations against the government.

And what they allege is that we've been trying to clean up the fraud and to expose the fraud internally within the state government for a very long time, but that political officials have been turning a blind eye and also retaliating against them.

And then one other thing that's somewhat related that comes to mind is that during the Feeding our Future scam, there were concerns raised among bureaucrats by just how rapidly this nonprofit was expanding, both in terms of the sites that it was administering and the total amount of taxpayer dollars it was therefore getting access to.

And the ring leaders of this fraud ring, you know, they made public allegations of racism, They coordinated protests.

They also filed a lawsuit ledging racial discrimination against the state government.

And subsequently we've had an oversight report that was actually published not too long ago that looked into that and was able to get access to, you know, internal correspondence, and it proved that the response from the state government, given the kind of social context they were in at that time, their response was impacted by worries about being seen as racist if they were to crack down on this fraud given the identities and nationalities of the perpetrators.

How much of this, sooner or later it comes to Governor Tim Watson's administration, How much responsibility ultimately this his administration there for allowing a billion dollars in fraud.

Well, I mean, he's the governor.

Most people who were in that position would probably admit in their honest moments, like the buck stocks with me.

They are the people who overseeing these programs.

This has all happened on their watch.

And I've spoken to a number of counter terrorism law enforcement folks who say, look, there is a law enforcement solution here.

We need to keep doing investigations, we need to keep bringing charges.

But at the end of the day, there was so much fraud that like, there needs to be a change on the policy side of things.

We have to stem the tide of this and not just expect law enforcement to clean it all up after the fact.

And so if there's going to be a significant change on the policy side, I think that comes from political change, which means Minnesotans are going to have to decide at the ballot box whether or not they're okay with what's been going on, because they should be absolutely outraged at the extent to which they've been taken advantage of.

There's an example of a systemic problem.

You described the Housing Stabilization Services program as quote almost designed to facilitate fraud.

What were the things in the program structure that made it so vulnerable to abuse?

They specifically designed it to have very loose criteria in terms of people that it would apply to and they wanted against specifically low barriers for reimbursements.

So when you write the rules in such a way as you're trying to make this program accessible to as why of a number of people as possible, and you also are putting in very minimal requirements in terms of how they get money released to them, and then you launch this program in the context of which you already know you have a significant fraud problem in the state, it is unsurprising that pretty quickly costs skyrocket the program spiers outder control.

US attorney comes out and says, I think there's more fraud going on here than there is legitimate services, and then the government has to come in and shut the whole thing down.

To what a scent.

Are the same people involved in all three So.

The individual charged in the autism fraud, she was also indicted in the Feeding our Future scam.

These are overlapping networks, is how I've heard it describe.

So there are people who have gotten in on multiple of these grifts.

Now, the other thing I think that's important to note is that these are the three major fraud rings exposed to day.

From what I'm hearing, this is the up at the Iceberg.

They have had a lack of resources, even though the US Attorney's Office has been doing really great work.

I don't think that they've had the resources they need in order to get to the bottom of this.

So I think we'll see additional connections grow as more prosecutions come down.

When you start talking at a billion dollars, it's set like a gigantic ball and we're only now on the surface of the ball.

We don't fully understand the scale and just the handling of a billion dollars.

There have to be so many different people who have been violenting the law and methodically seeking to cheat the tax players and frankly to cheat the poor.

I mean, this is money that was supposed to go directly to the poor.

That's absolutely right.

Say whether or not you support in terms of welfare program should be you know, we can have a policy debate about that, but regardless, these programs were in some sense designed to try and help people who had some serious needs.

And when you steal money for auto and services, that means actual autistic children are not getting support.

Essentially, have three things of money being taken away from the taxpayers, children and other people who should be getting money not getting it, and the growth of a sort of gray economy of people who are really good at stealing.

I think that's absolutely right.

It has a little of the flavor of the mafia in Sicily, where you begin to have a culture of criminality.

Certainly.

Yeah.

I think one of the sub stories here is the number of people from Somalia who now live in Minneapolis and the role they play in politics.

Could you describe their impact on the politics of the state of Minnesota.

Absolutely so.

Minnesota is home to the largest concentration of Somali's outside of Somalia itself.

They began arriving in the state in large numbers in the nineteen nineties.

At this point, you know, I've seen estimates kind of on the low end eighty thousand, some people indicating perhaps upward of one hundred thousand.

But this is a very sizeable voting block in the state.

And the other thing I would say is that they've really established some strong political connections in the state.

So even looking at the Feeding our Future scam in particular, several individuals who were involved and indicted had donated to elin Omar or appeared with her publicly.

Omar's deputy district director had advocated on behalf of the frauding Omar Fata, who's a former state senator or recently ran for mayor of Minneapolis and finished second.

He had gotten involved with lobbying on behalf of the program, and one of the indicted was a senior aid to Minneapolis Mayor Jacob Fry.

And so what that demonstrates is they really have established significant political connections.

And the sources that I've spoken to in the state have indicated that, especially if you're a Democrat, alienating the Smally community, you run that risk at your own peril because they are a significant voting block in Minneapolis, and in order to carry the state, you have to do well in the capital city.

I noticed that four Republican Congressmen from the state had written a pretty strong letter tom Ember, of course, as the Republican whip, which is the third highest position in the House on the Republican side, and they say in their letter to the US Attorney quote, as you know, officials estimate a billion dollars have instolen under the waltsh administration since twenty twenty.

We have written the walts administration on numerous occasions inquiring about the feeding our future fraud scheme, as well as fraud in the housing Stabilization Services Program, childcare Assistance program, and Minnesota's early intensive developmental and behavioral intervention program with no avail.

Recently, it has come to our attention, quote, millions of dollars in stolen funds have been sent back to Somalia, where they ultimately landed in the hands of the terror group how Shabab.

We are deeply disturbed by these reports.

What is your sense and what are your sources tell you about the degree to which terrorist groups in Somalia were actually able to attract and to use American taxpayer money.

Yes, so I want to be clear here on the claim that we were making in the piece, because some people have misinterpreted it.

Our argument is that after we realized the scope of the fraud in the state of Minnesota pretty quickly, one of the first questions you'll have is said, like, okay, well, where's the money going?

And it can be tracked to various sources.

Sometimes people are enriching themselves, as mentioned, using it to purchase luxury vehicles, real estate, things of that nature.

Significant funds are also being sent back to Somalia to support family members.

Minnesota is the largest concentration of Somali's outside of Somalia itself, and that is a diaspora that sends significant funds back home.

We develop numerous law enforcement and chunter terrorism sources, one individual in particular, it's served on the JTTTF in Minneapolis for many years, and what these sources confirmed to us was that as this money is getting sent back to Somalia, it is primarily going through whole wala networks, which are informal money transfer networks that are prominent in Islamic countries and countries that don't have traditional banking sectors like we would see here in the West, and that because al Shabab, the al Qaeda affiliate, controls significant chunks of Somalia, when money is ending up in its territory, when it's going through money transfer networks in its territory, it is absolutely getting a cut of that money.

So our claim is not that these fraud rings were specifically ripping off American taxpayers in order to fundraise for Al Schibal, but that inadvertently tons of this money has ended up in their coffers, which is obviously a serious problem and it has national security implications as well.

Don't these historically traditional but very very private banking networks essentially make it impossible to apply the normal patterns we use with traditional banking to try to trace money.

That's absolutely correct, And the investigators that we've spoken to have indicated to us that one, this is something that we know is going on, but two, in terms of bringing a criminal indictment in regards to this behavior, it is extremely difficult.

And so these are in some sense, you know, dark money networks.

It becomes very difficult trace exactly where these funds are going.

Well in that sense, do we need a new law that applies the same money tracking capabilities to these networks that we apply to American banks.

I think that this is yet another problem that this story exposes where we do need to kind of go back to the drawing board from a policy standpoint and try to come up with a solution of that nature, because yet again, this is a situation where, at least from the criminal investigators that I'm speaking to, their saying, you know, our hands are somewhat tied on this issue.

And I think that's because we currently don't have any law which requires these groups to conform to any kind of reporting they're historically by definition secret.

It becomes a real cultural fight to suggest that we have an overriding interest.

I was fascinated by the story in part because I'm working on a general problem position that bureaucratic, big government socialism simply has a massive propensity towards corruption, whether it's in Chicago, Minneapolis, New York, the entire emergence for a while of the green industries, where the US governments passing out money to people who would then magically go bankrupt having got the money.

One of the books I've been really touting is by Chris Papst called The Failure Factories, which is a study of the Baltimore City schools in which at least forty percent of the students cannot read or write when they graduate.

It's the third most expensive school system in the country.

When I read it, it hit me that, in a very real sense, if you have a large school system certifying that, for example, a student has been in class, when in fact they'd never been in class.

They had some students who they interviewed who had never ever gone to class, but we're counted on the rolls for the purpose of getting money.

That's fraud.

It's really parallel to the Minneapolis situation.

It turns out we have a really really bright young assistant named Derek, and Derek has taken on Chris's assignment and has done an initial, very surface level look at New York, Chicago, Los Angeles, Indianapolis, Minneapolis, and Saint Paul, and again and again you'll have very expensive bureaucracies that are simply not delivering.

And their conclusion, this was part of what perhaps finally decided after eight years of work, that the systems have concluded they can't actually teach, but they can lie about it, and so if they methodically lie about it, they'll get paid as though they were teaching.

Absolutely, and you're right to point out the parallels in Minnesota.

I mean, hungry children aren't actually getting fed, but look on paper, you know, it's thousands that are getting fed, and we're spending all this money, so of course we're accomplishing something.

Same with autism, Same with the Housing Stabilization Services program, which was aiming to get the elderly, the mentally ill, people with addictions into housing.

Well, none of this was happening, but on paper, it seemed like everything was running smoothly.

And that's similar to kind of what you're pointing out in regards to Baltimore.

There, well, on paper, all these children are getting educated.

I think that the Office of Management Budget should be directing all of the federal agencies that are involved in giving out money to do this kind of forensic analysis to decide whether or not, in fact, we're paying for an amazing amount of dishonesty and theft and corruption.

I'm curious where do you go from here?

You mean, you've sort of scratched the surface of what may be the biggest corruption and fraud story in American history.

And I know this is part of your general interest nationally in the topic where do you guys go from here?

I think that there are still some unanswered questions on the ground in Minnesota.

You know, I had done some on the ground reporting in the state for this story.

Perhaps I will be back at some point in the near future.

I mean, in particular, I think the main kind of unanswered question in Minnesota at this point is how was this allowed to go on for so long?

We have some.

Idea, we have some insight into that, but I do think that there are some serious unanswered questions there, and there needs to be a real accounting of when were the alarm bells first raised, when did various government officials become aware that they had a problem, what steps were taken to address it.

So I think that there's more to push on there.

I also think that Minnesota is it's highly unlikely that's the only state in the Union that is dealing with a problem like this, and so I be interested in doing some digging into whether or not there are similar patterns emerging in other jurisdictions, and we perhaps might be able to take what we've learned in Minnesota and apply it in some other areas and compare what's going on in different places.

Well, I think in that sense, you can be an enormous asset and setting up for the federal government kind of a framework for what you look for and what questions you ask.

And I have a hunch that we will be astounded at the amount of total corruption and fraud that we discover, certainly in Medicare and medicaid, but again in housing programs and the various green programs, being a number of people who got money and the worthy cause of the environment, who then just went out and went bankrupt.

But kept the money.

It's absurdity.

So I would get very excited because I realized that the City Journal in the Manhattan Institute are centers of really intelligent, hard working analysis, and I think that by you doing it, you really move the seriousness of this issue very dramatically.

I mean, that's certainly our hope, and at least in regards to the Minnesota story, it's been very gratifying to see the way that this has caught the public's attention, because now it is impossible for folks to ignore.

Whether or not they want to quibble with us on some details of our reporting, that's all fine, but the reality is everyone is now acknowledging that this is a billion dollar problem in the state, and that's progress.

I want to thank you for joining me, and I remind people that your article, co authored with christopherfo the largest fundro al Shabab is the Minnesota Taxpayers available now at citydash Journal dot org, and our listeners can follow the work you're doing at the Manhattan Institute.

But this has been really, really helpful.

I appreciate you doing it.

There's a pleasure to join you today.

Thank you to my guest, Ryan Thorpe, New World is produced by Gangwi three sixty and iHeartMedia.

Our executive producer is Guarnesi Sloman.

Our researcher is Rachel Peterson.

The artwork for the show was created by Steve Finlay.

Special thanks to the team at Gingwich three sixty.

If you've been enjoying Newtsworld, I hope you'll go to Apple Podcast and both rate us with five stars and give us a review so others can learn what it's all about.

Join me on substack at gingwishtree sixty dot net.

I'm Newt Gingrich.

This is Newsworld