Feds Slam Minnesota as 'Welfare Scam State'—Billions Vanish, Walz Under Fire

Paul Riverbank, 12/21/2025Minnesota’s welfare system faces a crisis as billions vanish to fraud, exploiting weak oversight. The fallout undermines aid for families in need and erodes public trust, prompting urgent federal demands for systemic reform.

The numbers are so jaw-dropping that investigators haven’t been shy with their language. “Fraud tourism,” they call it — a brand-new phrase for a new breed of hustler. People aren't just running scams on their home turf. They’re traveling to Minnesota from other corners of the country and even hopping continents because word spread that the state’s social programs were there for the taking, no complicated plans required.

Joe Thompson, the First Assistant U.S. Attorney in Minneapolis, put it bluntly during a press conference. He didn’t point to a handful of clever criminals; this is “industrial-scale fraud,” he said, enough to raise existential doubts about Minnesota’s image as a model of clean government. There’s no sugarcoating the scale.

If you want an example of how deep the rot went, look no further than the state’s effort to support children with autism. Intended spending was a reasonable $3 million a year. But instead, $400 million vanished into thin air. The stories behind those numbers orbit around a mix of hurried, questionable training programs and faked diagnoses — parents paid to invent problems, and providers barely qualified for the title. The state, caught on its heels, shelled out hundreds of millions that, in retrospect, now looks like monopoly money.

The head of the Centers for Medicare & Medicaid Services, Dr. Mehmet Oz, usually calm and wonky in manner, didn’t bother with euphemisms in a recent radio interview. “One big scam,” he called it, slicing right through government jargon. Real families — those meant to benefit — got shortchanged, while opportunists made off with the cash. Oz said it’s what happens when programs designed with good intentions are left open to anyone brazen enough to claim a piece of the pie.

And the aftermath is more criminal than comical. Federal investigators followed the money and found it ricocheting around the globe: homes snapped up in Kenya and Somalia, tales about luxury cars in suburban driveways, mysterious cryptocurrency purchases. And, perhaps most chilling, suggestions that some stolen funds might have found their way to terrorist groups.

Remember “Feeding Our Future,” the nonprofit that popped up during the COVID-19 pandemic? They claimed to be feeding Minnesota’s children — 91 million meals, supposedly. Prosecutors say most of those meals existed only on paper. That single episode alone adds up to $300 million in fraudulent claims, and the case has become the poster child for everything that went wrong. Since then, dozens of people have been charged, and new names are added to the list with clockwork regularity.

But it didn’t stop at fake meals. Shell companies began billing for housing aid. So-called autism therapy agencies sent invoices without providing services. A steady influx of out-of-state scammers camped in Minnesota, filing fraudulent paperwork, because — as one seasoned prosecutor dryly noted — “it was just that easy.”

The people in charge aren’t taking these accusations lying down. Governor Tim Walz has been on the defensive, arguing that his team is actively fixing the mess. “Do you think the governor himself checks every Medicare claim?” he snapped in a recent interview, his frustration barely concealed. He insists previous administrations left behind a nest of “poorly written” rules, wide open for exploitation by the unscrupulous.

Response or no, the federal government isn’t in a patient mood. CMS’s Dr. Oz offered a blunt ultimatum to the state: “Either patch the holes in 60 days, or don’t expect us to pay your bills.” His colleagues are equally unsparing, warning that the culture of easy money and absent oversight in Minnesota could easily metastasize beyond its borders. “People come from all over the world to steal millions from U.S. government Medicaid, housing, and other programs,” said Assistant U.S. Attorney Thompson.

Wild spending during COVID, a rush to get money out the door with red tape suddenly relaxed, and years of weak oversight — it proved to be combustible. As is so often the case, the real losers are the people supposed to be helped: struggling families, children with special needs, vulnerable Minnesotans who now may see support dry up just as a punitive spotlight swings their way.

What comes next feels uncertain. There’s a flood of new officials, promises to overhaul oversight, talk of digital fraud detection, and a flurry of new titles like “Director of Program Integrity.” But for now, trust in government and its ability to keep close watch on taxpayer funds has taken a body blow.

Maybe the truest lesson, as repeated by prosecutors and top officials alike, is this: the price of looking the other way is never just financial. Every dollar lifted by a scammer is a meal missed, a patient untreated, a community left in the lurch. And absent real reform, this story may well be just the prelude to another, even costlier chapter.

Every now and then, a story comes along that punches a hole through the usual humdrum of bureaucratic oversight. In Minnesota, that hole is looking more like a canyon. Something’s gone wrong with the plumbing of public funds: since 2018, federal authorities say nearly half of the $18 billion funneled into Medicaid and welfare programs may have leaked out through scams — not drips, but gushing torrents of fraud.The numbers are so jaw-dropping that investigators haven’t been shy with their language. “Fraud tourism,” they call it — a brand-new phrase for a new breed of hustler. People aren't just running scams on their home turf. They’re traveling to Minnesota from other corners of the country and even hopping continents because word spread that the state’s social programs were there for the taking, no complicated plans required.Joe Thompson, the First Assistant U.S. Attorney in Minneapolis, put it bluntly during a press conference. He didn’t point to a handful of clever criminals; this is “industrial-scale fraud,” he said, enough to raise existential doubts about Minnesota’s image as a model of clean government. There’s no sugarcoating the scale.If you want an example of how deep the rot went, look no further than the state’s effort to support children with autism. Intended spending was a reasonable $3 million a year. But instead, $400 million vanished into thin air. The stories behind those numbers orbit around a mix of hurried, questionable training programs and faked diagnoses — parents paid to invent problems, and providers barely qualified for the title. The state, caught on its heels, shelled out hundreds of millions that, in retrospect, now looks like monopoly money.The head of the Centers for Medicare & Medicaid Services, Dr. Mehmet Oz, usually calm and wonky in manner, didn’t bother with euphemisms in a recent radio interview. “One big scam,” he called it, slicing right through government jargon. Real families — those meant to benefit — got shortchanged, while opportunists made off with the cash. Oz said it’s what happens when programs designed with good intentions are left open to anyone brazen enough to claim a piece of the pie.And the aftermath is more criminal than comical. Federal investigators followed the money and found it ricocheting around the globe: homes snapped up in Kenya and Somalia, tales about luxury cars in suburban driveways, mysterious cryptocurrency purchases. And, perhaps most chilling, suggestions that some stolen funds might have found their way to terrorist groups.Remember “Feeding Our Future,” the nonprofit that popped up during the COVID-19 pandemic? They claimed to be feeding Minnesota’s children — 91 million meals, supposedly. Prosecutors say most of those meals existed only on paper. That single episode alone adds up to $300 million in fraudulent claims, and the case has become the poster child for everything that went wrong. Since then, dozens of people have been charged, and new names are added to the list with clockwork regularity.But it didn’t stop at fake meals. Shell companies began billing for housing aid. So-called autism therapy agencies sent invoices without providing services. A steady influx of out-of-state scammers camped in Minnesota, filing fraudulent paperwork, because — as one seasoned prosecutor dryly noted — “it was just that easy.”The people in charge aren’t taking these accusations lying down. Governor Tim Walz has been on the defensive, arguing that his team is actively fixing the mess. “Do you think the governor himself checks every Medicare claim?” he snapped in a recent interview, his frustration barely concealed. He insists previous administrations left behind a nest of “poorly written” rules, wide open for exploitation by the unscrupulous.Response or no, the federal government isn’t in a patient mood. CMS’s Dr. Oz offered a blunt ultimatum to the state: “Either patch the holes in 60 days, or don’t expect us to pay your bills.” His colleagues are equally unsparing, warning that the culture of easy money and absent oversight in Minnesota could easily metastasize beyond its borders. “People come from all over the world to steal millions from U.S. government Medicaid, housing, and other programs,” said Assistant U.S. Attorney Thompson.Wild spending during COVID, a rush to get money out the door with red tape suddenly relaxed, and years of weak oversight — it proved to be combustible. As is so often the case, the real losers are the people supposed to be helped: struggling families, children with special needs, vulnerable Minnesotans who now may see support dry up just as a punitive spotlight swings their way.What comes next feels uncertain. There’s a flood of new officials, promises to overhaul oversight, talk of digital fraud detection, and a flurry of new titles like “Director of Program Integrity.” But for now, trust in government and its ability to keep close watch on taxpayer funds has taken a body blow.Maybe the truest lesson, as repeated by prosecutors and top officials alike, is this: the price of looking the other way is never just financial. Every dollar lifted by a scammer is a meal missed, a patient untreated, a community left in the lurch. And absent real reform, this story may well be just the prelude to another, even costlier chapter.