Walz Pressed On Federal Probe Of State Fraud Allegations

A day after announcing his bid for a third term, Minnesota Gov. Tim Walz faced scrutiny over his administration’s handling of a state housing program that was shut down amid widespread fraud allegations.

Last month, Department of Human Services temporary commissioner Shireen Gandhi asked federal officials to help terminate the Housing Stabilization Services program, citing “credible allegations of fraud” and “exponential growth in spending.”

The Medicaid-funded program was intended to help older adults and people with disabilities secure housing, but costs soared from an estimated $2.6 million annually in 2017 to $107 million by 2024, the Minnesota Reformer noted.

The Republican-led House Fraud Prevention and State Agency Oversight Policy Committee was set to question DHS officials on Wednesday over why the fraud went unchecked. About 45 minutes before the hearing, Walz announced he had signed an executive order creating a statewide Inspector General Coordinating Council led by the Bureau of Criminal Apprehension, though the council’s exact role remains unclear.

Walz also pointed to steps his administration has taken to curb fraud, including expanded data-sharing among agencies and appointing an inspector general within DHS.

“If you’re going to commit these crimes in Minnesota, you are going to get caught,” Walz said last month in an interview with WCCO.

“You’re always gonna find people trying to cheat the system,” Walz told WCCO. “But I think this legislative session with a, you know, the new IG (Inspector General) that’s over there, the new tools that we have, and just the capacity for us. And I wish we would have got a little more. The one thing I wish we would have got it, there are some AI tools out there that would help us on this.”

“We have no tolerance for fraud in the state of Minnesota,” Walz said in a statement. “Abuse of taxpayer dollars takes resources away from the people who need them most. If you commit fraud in Minnesota, you will be prosecuted and held accountable to the fullest extent of the law.”

Recent scandals suggest otherwise, with fraudsters exploiting state and federally administered programs in Minnesota for hundreds of millions of dollars. Cases have included the Feeding Our Future scandal, abuses in the state’s autism program, various Medicaid schemes, and most recently, housing assistance.

Rep. Kristin Robbins (R-Maple Grove), chair of the fraud prevention committee, questioned Walz’s executive order creating an inspector general council, arguing it lacks sufficient independence from the executive branch, the outlet reported.

“Releasing this executive order just before today’s House Fraud Prevention and State Agency Oversight hearing appears more like a distraction than a solution,” Robbins said in a statement. “Our committee will continue pressing for accountability and real reforms to protect taxpayers and ensure state programs serve those truly in need.”

Robbins, a Republican candidate for governor, is expected to use her role over the next year to challenge Walz’s record on fraud prevention, the Reformer reported.

Ahead of Wednesday’s hearing, Robbins said DHS Commissioner Shireen Gandhi informed her that the assistant commissioner who oversaw Housing Stabilization Services was no longer with the department. Robbins described the move as a firing, while Gandhi characterized it as the assistant commissioner’s “appointment” having ended, said the outlet.

DHS Inspector General James Clark told lawmakers Wednesday the agency has suspended payments to 115 providers in the Housing Stabilization Services program, which billed the state about $100 million over six years.

Robbins pressed Clark and Gandhi on why the agency failed to act sooner, noting it only responded after KARE 11 reported on the fraud. In July, the FBI raided five Minnesota businesses accused of collecting millions in Medicaid payments for services never provided.

Clark said DHS is now taking a more “aggressive” approach by halting payments when fraud is suspected and notifying law enforcement, a shift from past practice of continuing payments to avoid alerting suspects.

Gandhi added that the program, pending federal approval, is scheduled to end Oct. 20, said the Reformer.