Minneapolis (US): The United States authorities charged 48 people in Minnesota with conspiracy and other counts in what they said was the largest pandemic-related fraud scheme yet, stealing USD 250 million from a federal programme that provides meals to low-income children.
Federal prosecutors on Tuesday said the defendants created companies that claimed to be offering food to tens of thousands of children across Minnesota, then sought reimbursement for those meals through the US Department of Agriculture’s food nutrition programmes.
Prosecutors say few meals were actually served, and the defendants used the money to buy luxury cars, property and jewellery.
“This USD 250 million is the floor,” Andy Luger, the US attorney for Minnesota, said at a news conference. “Our investigation continues.”
Many of the companies that claimed to be serving food were sponsored by a nonprofit called Feeding Our Future, which submitted the companies’ claims for reimbursement.
Feeding Our Future’s founder and executive director, Aimee Bock, was among those indicted, and authorities say she and others in her organisation submitted the fraudulent claims for reimbursement and received kickbacks.
Bock’s attorney, Kenneth Udoibok, said the indictment “doesn’t indicate guilt or innocence”. He said he wouldn’t comment further until seeing the indictment.
In interviews after law enforcement searched multiple sites in January, including Bock’s home and offices, Bock denied stealing money and said she never saw evidence of fraud.
Earlier this year, the US Department of Justice made prosecuting pandemic-related fraud a priority. The department has already taken enforcement actions related to more than USD 8 billion in suspected pandemic fraud, including bringing charges in more than 1,000 criminal cases involving losses in excess of USD 1.1 billion.
Federal officials repeatedly described the alleged fraud as “brazen”, and decried that it involved a programme intended to feed children who needed help during the pandemic.
Michael Paul, special agent in charge of the Minneapolis FBI office, called it “an astonishing display of deceit”.
Luger said the government was billed for more than 125 million fake meals, with some defendants making up names for children by using an online random name generator.
He displayed one form for reimbursement that claimed a site served exactly 2,500 meals each day Monday through Friday with no children ever getting sick or otherwise missing from the programme.
“These children were simply invented,” Luger said.
He said the government has so far recovered USD 50 million in money and property and expects to recover more.
The defendants in Minnesota face multiple counts, including conspiracy, wire fraud, money laundering and bribery. Luger said some of them were arrested on Tuesday morning.
Authorities announced 47 indictments at the news conference. A 48th person, who according to a criminal complaint was scheduled to board a one-way flight to Ethiopia on Tuesday evening, was arrested sometime after the prosecutors’ press conference.
According to court documents, the alleged scheme targeted the USDA’s federal child nutrition programmes, which provide food to low-income children and adults. In Minnesota, the funds are administered by the state Department of Education, and meals have historically been provided to kids through educational programmes, such as schools or daycare centres.
The sites that serve the food are sponsored by public or nonprofit groups, such as Feeding Our Future. The sponsoring agency keeps 10 per cent to 15 per cent of the reimbursement funds as an administrative fee in exchange for submitting claims, sponsoring the sites and disbursing the funds.
But during the pandemic, some of the standard requirements for sites to participate in the federal food nutrition programmes were waived.
The USDA allowed for-profit restaurants to participate and allowed food to be distributed outside educational programmes. The charging documents say the defendants exploited such changes “to enrich themselves?”
The documents say Bock oversaw the scheme and that she and Feeding Our Future sponsored the opening of nearly 200 federal child nutrition program sites throughout the state, knowing that the sites intended to submit fraudulent claims.
“The sites fraudulently claimed to be serving meals to thousands of children a day within just days or weeks of being formed and despite having few, if any staff and little to no experience serving this volume of meals,” according to the indictments.
One example described a small storefront restaurant in Willmar, in west-central Minnesota, that typically served only a few dozen people a day. Two defendants offered the owner USD 40,000 a month to use his restaurant, then billed the government for some 1.6 million meals through 11 months of 2021, according to one indictment.
They listed the names of around 2,000 children “nearly half of the local school district’s total enrollment” and only 33 names matched actual students, the indictment said.
Feeding Our Future received nearly USD 18 million in federal child nutrition programme funds as administrative fees in 2021 alone, and Bock and other employees received additional kickbacks, which were often disguised as “consulting fees” paid to shell companies, the charging documents said.
According to an FBI affidavit unsealed earlier this year, Feeding Our Future received USD 307,000 in reimbursements from the USDA in 2018, USD 3.45 million in 2019 and USD 42.7 million in 2020. The number of reimbursements jumped to USD 97.9 million in 2021.
Court documents say the Minnesota Department of Education was growing concerned about the rapid increase in the number of sites sponsored by Feeding Our Future, as well as the increase in reimbursements.
The department began scrutinising Feeding Our Future’s site applications more carefully and denied dozens of them. In response, Bock sued the department in November 2020, alleging discrimination, saying the majority of her sites were based in immigrant communities.