Audit finds Minnesota agency’s lax oversight fostered theft of $250M from federal food aid program

MINNEAPOLIS (AP) — A Minnesota agency's inadequate oversight of a federal program that was meant to provide food to kids, and its failure to act on red flags, created the opportunities that led to the theft of $250 million in one of the country's largest pandemic aid fraud cases, the Legislature's watchdog 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 start of the alleged fraud, did not effectively exercise its authority to hold Feeding Our Future accountable to program requirements, and was ill-prepared to respond to the issues 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 prosecutors say centered on a nonprofit called Feeding Our Future. Five of the first seven defendants to stand trial were convicted 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 source of that money.

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

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

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

But Republican legislative leaders said the report shows that the failure to stop the fraud lies with the administration of Democratic Gov. Tim Walz, which has said that the state’s hands were tied by a 2021 court order to resume payments despite its concerns, and that the FBI asked the state to continue making payments while the investigation continued.

“This was something that they should have been picking up on. They had the authority to do so, but they didn’t do that. This is stunning," GOP Senate Minority Leader Mark Johnson, of East Grand Forks, said at a news conference. "The Department of Education and Gov. Walz have repeatedly tried to tell the public that they did all they could ... but this report clearly demonstrates that was a false narrative.”

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 a general counsel’s office in 2022, providing training to all staff on its updated fraud-reporting policies, and contracting with a firm to conduct financial reviews of certain partners.

Federal prosecutors say the conspiracy exploited rules that were kept lax so the economy wouldn’t crash during the pandemic. The FBI began digging into it in spring 2021. The defendants allegedly produced invoices for meals never served, ran shell companies, laundered money, indulged in passport fraud and accepted kickbacks. More than $250 million in federal funds was taken in the Minnesota scheme overall, and only about $50 million of it has been recovered, authorities say.

The food aid came from the U.S. Department of Agriculture and was administered by the state agency, which funneled the meal money through partners including Feeding Our Future. The defendants awaiting trial include Aimee Bock, the founder of Feeding our Future. She has maintained her innocence, saying she never stole and saw no evidence of fraud among her subcontractors.

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