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| Photo Credit: AP. |
MINNEAPOLIS (AP) — Federal authorities charged 47 people in Minnesota with conspiracy and other counts in what they said Tuesday was the largest fraud scheme yet to take advantage of the COVID-19 pandemic by stealing $250 million from a federal program that provides meals to low-income children.
Prosecutors
say 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 U.S. Department of Agriculture’s food nutrition programs.
Prosecutors say few meals were actually served, and the defendants used the
money to buy luxury cars, property and jewelry.
“This $250
million is the floor,” Andy Luger, the U.S. 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 organization
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 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.
Federal
officials repeatedly described the alleged fraud as “brazen,” and decried that
it involved a program 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 program.
He said the
government has so far recovered $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 Tuesday
morning.
According to
court documents, the alleged scheme targeted the USDA’s federal child nutrition
programs, 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 programs, such as
schools or day care centers.
The sites
that serve the food are sponsored by public or nonprofit groups, such as
Feeding Our Future. The sponsoring agency keeps 10% to 15% 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 programs were waived. 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.”
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 $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 $18 million in federal child nutrition program 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
$307,000 in reimbursements from the USDA in 2018, $3.45 million in 2019 and
$42.7 million in 2020. The amount of reimbursements jumped to $197.9 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 scrutinizing 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. That case has since been dismissed.