Yesterday, Federal authorities charged 47 people in Minnesota with conspiracy and other counts in what prosecutors said is, to date, the largest fraud scheme of the COVID-19 pandemic, a scheme that stole at least $250 million from a federal program that provides meals to low-income children.
According to the Justice Department, “The 47 defendants are charged across six separate indictments and three criminal informations with charges of conspiracy, wire fraud, money laundering, and bribery.”
Government prosecutors allege the defendants created companies that claimed to be offering food to tens of thousands of children across Minnesota — nearly all of whom did not exist, — then sought reimbursement for those meals through the U.S. Department of Agriculture’s food nutrition programs. Because the need was so great, some standards were waived and oversight was often minimal. The USDA allowed for-profit restaurants to participate, and allowed food to be distributed outside educational programs. The charging documents say the defendants exploited such changes “to enrich themselves.”
A non-profit called Feeding Our Future was central to the scheme.
The Federal Child Nutrition Program is used to feed low income children in daycare and afterschool organizations. It spends $4 billion a year to feed needy children across the country. Feeding Our Future received hundreds of millions of dollars from the program from 2019 through 2021.
Here’s how it worked.
The government alleges Feeding Our Future, a sponsor in the Federal Child Nutrition Program, established sponsorship contracts with nearly 200 federal child nutrition program sites throughout the state, knowing that the sites intended to submit fraudulent claims. The sites would submit the claims to Feeding Our Future, which would then submit them to the Minnesota Department of Education, which has historically administered the programs, primarily through school programs. With schools closed for the pandemic the rules of the nutrition programs were changed to allow for all of the new entrant providers and the relaxed rules.
Feeding Our Future became a sort of Third Party Administrator for the sham sites and collected 15% of the charges as its fee. It went from receiving and disbursing approximately $3.4 million in federal funds in 2019 to nearly $200 million in 2021.
According to the indictments, “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.”
The massive fraud was allegedly headed up by Aimee Bock, Feeding Our Future’s founder and executive director. The indictments also allege she and some of her employees received additional kickbacks, which were often disguised as “consulting fees” paid to shell companies Bock created.
Andy Luger, the U.S. Attorney for Minnesota, said the fraudsters billed the government for more than 125 million fake meals. 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 a meal.
Luger said, “These children were simply invented.”
Earlier this year, the U.S. Department of Justice made prosecuting pandemic-related fraud a priority. The department has already taken enforcement actions related to more than $8 billion in suspected pandemic fraud, including bringing charges in more than 1,000 criminal cases involving losses in excess of $1.1 billion.
In this case, one of the indictments offered a beyond-brazen example of the fraud. It 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 $40,000 a month to use his restaurant, then billed the government for some 1.6 million meals through 11 months of 2021. 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. And where did the defendants get the names of the children they said the program fed? From a website that randomly provides the names of mythical children. That’s where.
As usual in these kinds of fraud schemes the defendants used the stolen money to buy homes, exotic cars, vacation junkets and expensive clothes and jewelry.
And what did Minnesota’s low income children get? They got hunger.