US Justice Department charges 48 in $338m pandemic aid fraud in Minnesota

IRS Special Agent Justin Campbell speaks regarding the charges filed in the Feeding our Future fraud case on Sept 20, 2022. PHOTO: NYTIMES

MINNEAPOLIS - The Justice Department said Tuesday it has charged 48 people with running a brazen fraud against anti-hunger programmes during the coronavirus pandemic, stealing US$240 million (S$338 million) by billing the government for meals they did not serve to children who did not exist.

The case, in Minnesota, is the largest fraud uncovered in any pandemic-relief programme, prosecutors said, standing out even in a period when heavy federal spending and lax oversight allowed a spree of scams with few recent parallels.

The Minnesota operation, prosecutors said, involved faked receipts for 125 million meals. At times, it was especially bold: One accused conspirator told the government he fed 5,000 children a day in a second-story apartment.

Other defendants in the case seemed to put minimal effort into disguising what they were doing, using the website listofrandomnames.com to create a fake list of children they could charge for feeding.

Others used a number-generating programme to produce ages for the children they were supposedly feeding, which led the ages to fluctuate wildly each time the group updated its list of those nonexistent children, court papers said.

But their scheme - details of which were reported in The New York Times in March - still pulled in millions of dollars per week, prosecutors said in court papers, because government officials relaxed oversight of the feeding programme during the pandemic and because the other defendants had help from a trusted insider.

Inside job

That insider was Aimee Bock, the founder of a nonprofit group, Feeding Our Future, that the state of Minnesota relied on as a watchdog to stop fraud at feeding sites.

But Bock did the opposite, the indictments said: When pandemic-relief programmes were flooded with money, she exploited her position to bring in nearly 200 new feeding operations she knew were submitting fake or inflated invoices.

Even when the government of Governor Tim Walz, a Democrat, raised questions, Bock rebuffed them by filing a lawsuit and accusing state officials of discriminating against her group's largely East African clientele.

"In effect, Feeding Our Future operated a pay-to-play scheme in which individuals seeking to operate fraudulent sites under the sponsorship of Feeding Our Future had to kick back a portion of their fraudulent proceeds," one indictment said, according to a copy obtained by the Times.

"The subjects in this case weren't interested in feeding our future," Mr Michael Paul, a special agent for the FBI, said at a news conference Tuesday, when the charges were announced. "They were interested in feeding their own gluttony."

The defendants were indicted on charges that included wire fraud, bribery involving federal programmes and money laundering. Prosecutors said the conspirators laundered money by routing the funds they stole through a web of shell companies.

Cleaning up

The case is the largest brought by the Justice Department as it scrambles to address waves of fraud involving pandemic-era programmes that sent billions of dollars of aid into the economy, often with few strings attached and little oversight.

The Labour Department's inspector-general's office has opened 39,000 investigations.

At the Small Business Administration, about 50 agents have been sorting through 2 million potentially fraudulent loan applications. And while the sheer volume of cases all but ensures that some cases will go unaddressed, the prosecutions in Minnesota signal that the Justice Department is moving aggressively on others.

The indictments said the defendants spent their money on real estate in the United States, Kenya and Turkey, as well as on cars and luxury goods.

The Justice Department is seeking to seize many of those purchases, including more than 20 cars, more than 40 properties, guns, cryptocurrency and a Louis Vuitton duffle bag.

Prosecutors said Tuesday that many defendants have been arrested or have turned themselves in. They said some have left the country, but declined to say how many.

Bock pleaded not guilty Tuesday afternoon and was released to await trial. Mr Kenneth Udoibok, her lawyer, said afterward that "we still maintain that she was unaware of any fraudulent activities".

The state blocked Feeding Our Future from receiving more aid money after the FBI served search warrants in the case in January. The nonprofit group sought to dissolve at the time, but Attorney-General Keith Ellison of Minnesota, a Democrat, blocked the move.

Mr Ellison asked a judge to supervise the group while he investigated whether it broke state charity laws. That investigation appears to be continuing.

How it all went down

As described by prosecutors, the participants targeted two federal food aid programmes, which were administered through state governments. They were intended to feed children in after-school programmes and summer camps.

But when the pandemic hit, Congress rejiggered the programmes to reach millions of children stuck at home, pouring in billions of dollars more and changing the rules to let families pick up meals to go.

As funding went up, however, oversight went down. State officials, for instance, no longer had to check on feeding sites in person. That left one last line of defence: the so-called watchdog sponsors, like Feeding Our Future.

Those nonprofit groups served as conduits for money, from the states to individual feeding sites, and they were supposed to be on guard against fraud. But the system also gave those watchdogs a reason not to bark. They could keep 10 per cent to 15 per cent of the money that flowed through them.

In this case, the indictments said, Bock's group kept the money flowing to increase its own cut.

"The defendants exploited the Covid-19 pandemic - and the resulting programme changes - to enrich themselves," the indictments say. NYTIMES

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