ST. PAUL — Democratic Gov. Tim Walz pushed back Thursday against critics who say his administration should have done more to thwart what federal prosecutors have called a scheme to take advantage of the COVID-19 pandemic to defraud the U.S. government of at least $250 million.
Walz said the Minnesota Department of Education’s hands were tied by a court order for it to resume food program payments despite concerns the state had raised. And he said the FBI asked the state to continue the reimbursements while its investigation continued.
Federal authorities on Tuesday announced charges against 48 people in Minnesota on conspiracy and other counts in what they said was the largest pandemic-related fraud scheme yet. Many of the companies that claimed to be serving food to low-income children were sponsored by a nonprofit called Feeding Our Future.
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The defendants allegedly created companies that claimed to be offering meals to tens of thousands of children across Minnesota, then sought reimbursement through Feeding our Future from the U.S. Department of Agriculture’s child nutrition programs. But prosecutors said few meals were actually served, and the defendants spent the money on luxury cars, property and jewelry. The government has so far recovered $50 million.
“We caught this fraud. We caught it very early. We alerted the right people,” Walz said at a news conference in his first detailed public remarks on the case. “We were taken to court. We were sued. We were threatened with going to jail. We stuck with it.”
The governor said his administration spotted irregularities “very early” and alerted the USDA during President Donald Trump’s administration. Walz said he couldn’t recall precisely when he first learned of the suspicions.
Court filings indicate Feeding Our Future applied to become a program sponsor in Spring 2020, and that the state agency began trying to crack down in October 2020.
Walz said there “needs to be a review” of why the USDA didn’t take the state’s concerns seriously when it first sounded the alarm. The state agency contends its concerns weren’t taken seriously until it reached out to the FBI in April of 2021. The FBI ultimately executed a series of search warrants in January 2022 and released partial information about the investigation, effectively shutting down the alleged scheme.
Walz also noted that Ramsey County District Judge John Guthmann ordered the state in April 2021 to resume the payments and and held the state agency in contempt of court. Walz suggested the judge’s order was expensive.
“Most of the money left after we were forced to continue to pay, not before,” he said.
It was only under President Joe Biden that the FBI began to act, Walz said. But he said Education Commissioner Heather Mueller came under FBI orders not to say anything that could jeopardize the investigation.
“I and my team have not been able to say anything because the FBI was in an active investigation and we were told not to,” he said.
Walz also said he would like to see an investigation into the judge’s order to resume payments, though he didn’t say who should conduct that inquiry. The judiciary is independent under the constitutional separation of powers.
“I was speechless,” the governor said. “Unbelievable that this ruling would come down, did not really know what to say. Obviously we had to honor it. … I wouldn’t have believed in a million years that they were going to rule that way.”
Republicans were quick to denounce the Walz administration for not doing more — and earlier — to stop the scheme, and for not appealing the judge’s order to resume payments. They have also tried to spread blame to Attorney General Keith Ellison and State Auditor Julie Blaha, even though their authority to monitor Feeding Our Future appeared minimal at best.
“This is the largest case of COVID fraud in the nation because MDE didn’t do their jobs,” Minnesota Senate Education Committee Chairman Roger Chamberlain said in a statement Tuesday. “The fraud was started and persisted because MDE failed to complete due diligence on these bad actors. They may have assisted in the investigation, but it’s too little, too late.”
GOP gubernatorial candidate Scott Jensen called on Walz to ask for Mueller’s resignation.
Bur Walz said the GOP criticism is unwarranted and defended his commissioner.
“It’s amazing to me that we find folks in the political realm that are more angry that they can’t blame us for everything rather than recognizing we had criminals that we caught,” the governor said.
When he announced the indictments Tuesday, U.S. Attorney Andy Luger said it took his office and the FBI, “working at breakneck speed,” until January 2022 to be able to shut the scheme down. Asked if the Minnesota Department of Education did anything wrong in its handling of the matter, Luger replied, “That’s not for me to say.”
But Luger added: “We’re pleased with the cooperation — thorough cooperation — we got from MDE throughout this investigation. … I blame the defendants who perpetrated, covered up and executed the scheme.”
The state on Wednesday asked a different judge, who is overseeing the dissolution of Feeding our Future, to order the group to reimburse it for the over $580,000 it paid to defend itself against what it called a “sham lawsuit.”