Governor Unveils Centralized Anti-Fraud Unit and Legislative Crackdown Amid Mounting Fraud Scandals

(KNSI) — Governor Tim Walz has signed an executive order establishing a centralized state fraud investigations unit within the Bureau of Criminal Apprehension to strengthen Minnesota’s efforts to combat fraud. He also unveiled a legislative package aimed at preventing, detecting, investigating, and penalizing fraudulent activity in state programs.

“As long as there have been programs aimed at helping people, there have been fraudulent actors looking to steal from those who need them most. Our job is to stay one step ahead of them. We’re coupling new tools, like AI, with old fashioned police work, to slam the door shut on theft,” said Governor Walz. “Minnesotans rightly have no tolerance for misuse of taxpayer dollars. This plan directs every single state agency to work together to better prevent, detect, investigate, and punish fraud.”

The order moves fraud investigators from the Minnesota Department of Commerce to the BCA, creating a Fraud and Financial Crimes Unit and creating an expanded Medicaid Fraud Team under the Attorney General’s Medicaid Fraud Unit.

State agencies will gain expanded powers to stop payments to individuals or entities involved in, suspected of, charged with, or convicted of financial crimes. The Minnesota IT Services MNIT will collaborate with industry experts to pilot AI systems for identifying and flagging anomalies in Medicaid provider payments through the Department of Human Services.

MNIT is the agency behind the disastrous 2017 rollout of the $100 million driver’s licensing and registration system known as MNLARS. Governor Walz pulled the plug on it in 2019.

MNIT will be tasked with following new licensing protocols and more frequent revalidation visits for Early Intensive Developmental and Behavioral Intervention providers. Part of the problem with the ongoing fraud was that scammers were claiming they were helping kids or running feeding sites and no one was checking to see if it was happening, allowing millions to be collected for services that weren’t provided.

Additional personnel will join Minnesota Management and Budget MMB to strengthen internal controls and fraud awareness, as well as expand the DHS’s fraud prevention and billing oversight capacity.

A proposed new Theft of Public Funds Statute would stiffen penalties for public fund theft and establish kickback violations as a state crime and expand the Attorney General’s investigative authority.

The proposal is estimated to cost $39 million in FY 2026-27 and $15 million in FY 2028-29.

An onslaught of fraud in Minnesota that has popped up on Governor Walz’s watch, totaling nearly $1 billion, including the $250 million Feeding Our Future scam uncovered in 2022, which investigators said is the largest pandemic era fraud case ever. The latest was a bombshell report outlining ongoing fraud within the state’s autism centers. Many of the people brought down in that case are also connected to the Feeding Our Future case.

House Speaker-Designate Lisa Demuth (R, Cold Spring) took issue with the plan saying the same administration that allowed the fraud to happen “is nothing but smoke and mirrors. We need real change to crack down on fraud, and that starts with a process that is truly independent of the leadership that allowed fraud to run rampant over the last five years. House Republicans will be unveiling a comprehensive fraud package that treats this as the serious problem it is and includes meaningful accountability for fraudsters and agencies who have failed to protect Minnesotans tax dollars.”

The next session of the Minnesota Legislature begins at noon January 14th.

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