Insufficient oversight of a federal program meant to provide food for children and failure to act on red flags created an opportunity for $250 million to be stolen in one of the nation’s largest pandemic aid frauds, a Minnesota legislative watchdog said in a scathing report released Thursday.
The Minnesota Department of Education “failed to act on warning signs the department was aware of before the COVID-19 pandemic and before the alleged fraudulent activities began, did not effectively exercise its authority to hold Feeding Our Future accountable for program requirements, and was inadequately prepared to respond to problems that arose at Feeding Our Future,” the nonpartisan Legislative Auditor’s Office concluded.
Seventy people have been indicted in federal court for their alleged involvement in a scheme that prosecutors say centered around the nonprofit group Feeding Our Future. Five of the first seven defendants to go to trial were convicted Friday. The trial drew attention for the alleged attempt to bribe a juror with a bag containing $120,000 in cash on the eve of jury selection. Authorities are still trying to determine where the money came from.
Eighteen other defendants have already pleaded guilty; trials for the remaining defendants are still pending.
Secretary of Education Willie L. Jett II disputed the auditor’s assessment that the agency’s oversight was inadequate. In a written response to the 120-page report, he said its oversight “met applicable standards” and that Department of Education officials “made effective reports to law enforcement.” Department of Education officials first became aware of the problems in the summer of 2020 and raised concerns with federal authorities, he said.
“What happened at Feeding Our Future was a travesty: a systematic and brazen abuse of a nutrition program meant to provide healthy meals to low-income children,” the commissioners wrote. “The fraudsters, who have been indicted and convicted, are responsible for this blatant fraud.”
But Republican legislative leaders said at a news conference that the report points to Democratic Gov. Tim Walz’s administration’s failure to stop the fraud. The administration has said the state was held back by a court order to resume payments in 2021 despite the state’s concerns (a claim the judge disputed), and that the FBI has urged the state to continue making payments while the investigation continues.
“This is astonishing,” said Senate Minority Leader Mark Johnson, a Republican from 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 shows that was a false narrative.”
The hearing on the report also drew sharp criticism from Democrats, including Sen. Ann Rest, R-New Hope, who said it was disappointing that Jett’s predecessor, who ran the agency during the period in question, was not present at the hearing and therefore unavailable to answer questions.
“As noted in the Legislative Auditor’s report, the commissioners had the authority but clearly did not use that authority to detect and report fraud,” Rest said. “I am not aware of any similar programs in other states that use federal funds to educate students who have experienced similar misconduct.”
Resto lamented that no one in the police department has taken responsibility for what happened. “The blame stops here,” Resto said, using a slight variation on the phrase. “But what we’re really facing is that the blame is still running down the street. It keeps running down the street and it’s not stopping anywhere. This is unacceptable.”
Republican Rep. Patty Anderson of Dellwood, who served as state auditor from 2003 to 2007, said the disruptions caused by the pandemic are no excuse.
“They could have stopped this long before over $250 million in fraudulent claims were sent to these people,” Anderson said. “All of this could have been avoided.”
Jett, who was appointed commissioner in January 2023 amid the turmoil, said he has implemented reforms to strengthen oversight, including establishing an inspector general’s office in 2023, adding a general counsel’s office in 2022, training all staff on updated fraud reporting policies and contracting with firms to conduct financial investigations of certain partners.
Federal prosecutors say the conspiracy took advantage of rules that had been relaxed to keep the economy from collapsing during the pandemic. The FBI began its investigation in the spring of 2021. The defendants allegedly created invoices for meals that weren’t served, ran shell companies, laundered money, committed passport fraud and accepted kickbacks. Overall, the Minnesota scheme stolen more than $250 million in federal funds, but only about $50 million of that has been recovered, authorities said.
The money came from the U.S. Department of Agriculture, was administered by state agencies and funneled through partners such as Feeding Our Future, whose founder, Amy Bock, is among the defendants awaiting trial. She has pleaded not guilty.
An Associated Press analysis published last June documented how thieves across the country plundered billions of dollars in federal COVID-19 relief funds. The fraudsters may have stolen more than $280 billion, and another $123 billion was wasted or misused. The total loss represented 10% of the $4.3 trillion the government had disbursed through last fall. About 3,200 people have been indicted, and about $1.4 billion in stolen aid has been seized, according to the Department of Justice.
