Audit Finds Minnesota Agency’s Lax Oversight Fueled Theft of $250 Million from Federal Food Aid Program

MINNEAPOLIS – A Minnesota agency’s inadequate oversight of a federal program designed to provide food for children and its failure to act on warning signs created the opportunities that led to the theft of $250 million in one of the largest in the country cases of pandemic aid fraud, the Legislature’s oversight arm said Thursday in a scathing report.

The Minnesota Department of Education “failed to act on warning signs known to the department prior to the onset of the COVID-19 pandemic and prior to the onset of the alleged fraud, failed to effectively exercise its authority to hold Feeding Our Future accountable for program requirements and was ill-prepared to respond to the problems it encountered with Feeding Our Future,” the nonpartisan Office of the Legislative Auditor concluded.

Seventy people have been charged in federal court for their alleged roles in a scheme that prosecutors say centered on a nonprofit called Feeding Our Future. Five of the first seven defendants to be tried were sentenced on Friday. The trial gained widespread attention after someone tried to bribe a juror with a bag of $120,000 in cash the night before the case went to the jury. Authorities are still trying to determine the origin of this money.

Eighteen other defendants have already pleaded guilty. Trials are still pending for the others.

Education Commissioner Willie L. Jett II challenged the auditor’s characterization of his agency’s oversight as inadequate. He said in a response written on 120 page report that his supervision “met applicable standards” and that department officials “made effective referrals to law enforcement.” He said department officials first detected problems in the summer of 2020 and raised their concerns with federal authorities.

“What happened to Feeding Our Future was a sham – a coordinated and brazen abuse of nutrition programs that exist to ensure access to healthy meals for low-income children,” the commissioner wrote. “The responsibility for this blatant fraud lies with the indicted and convicted fraudsters.”

But Republican legislative leaders said at a news conference that the report shows the failure to stop fraud lies with the administration of Democratic Gov. Tim Walz, who said the state hands were tied by a 2021 court order to resume payments despite their concerns – a charge the judge disputed – and that the FBI asked the state to continue making payments while the investigation continued.

“That’s impressive,” said Republican Senate Minority Leader Mark Johnson of East Grand Forks. “The Department of Education and Governor Walz have repeatedly tried to tell the public that they did everything they could…but this report clearly demonstrates that was a false narrative.”

Harsh criticism also came from some Democrats during a hearing on the report. Sen. Ann Rest of New Hope said it was a shame that Jett’s predecessors, who ran the agency during the period in question, weren’t there to answer questions.

“These commissioners had the authority, as noted in this report by the legislative auditor, and clearly did not exercise it to uncover and report fraud,” Rest said. “We have not heard of … similar programs that use federal money to feed students in other states who have suffered such fraud.”

Rest lamented that no one in the department took responsibility for what happened. In a variant of the expression “The buck stops here,” Rest said: “But what we really have is that the buck is still running down the street – running down the street and not stopping anywhere.

Republican Rep. Patti Anderson of Dellwood, who served as state auditor from 2003 to 2007, said the pandemic’s disruption was no excuse.

“They could have stopped this long before more than $250 million in fraudulent claims were sent to these people,” Anderson said.

Jett, who was appointed commissioner in January 2023 amid the fallout, said his agency has implemented changes to strengthen its oversight capabilities, including establishing an office of inspector general in 2023, adding an office of general counsel in 2022, providing training to all employees on its updated fraud reporting policies and hiring a company to conduct financial reviews of certain partners.

Federal Public Ministry claims that the conspiracy Exploited rules that were kept lax so that the economy would not collapse during the pandemic. The FBI began investigating the matter in spring 2021. The defendants allegedly submitted invoices for meals never served, ran shell companies, laundered money, indulged in passport fraud and accepted bribes. More than $250 million in federal funds was taken from the Minnesota scheme overall, and only about $50 million was recovered, authorities say.

The money came from the U.S. Department of Agriculture and was administered by the state agency, which funneled the funds through partners including Feeding Our Future. Defendants awaiting trial include Aimee Bock, the founder of the group. She maintained her innocence.

One Associated Press analysis published last June documented how thieves across the country looted billions in federal COVID-19 relief dollars. Fraudsters potentially stole more than $280 billion, while another $123 billion was wasted or misspent. The combined loss represented 10% of the $4.3 billion the government disbursed last fall. Nearly 3,200 people have been charged and about $1.4 billion in stolen aid has been seized, according to the Justice Department.