Minnesota officials are facing mounting political pressure as federal investigators unravel a series of sprawling welfare fraud schemes that flourished under Gov. Tim Walz’s (D) administration.
The investigations now span several programs and involve complex overseas money-transfer networks that federal sources say funneled portions of the stolen funds to the Islamic terrorist group Al-Shabaab.
The allegations have drawn intense scrutiny to a system critics argue lacked basic oversight.
Many operations relied on “hawalas,” informal financial networks that move money across borders with minimal documentation.
According to City Journal, “untold millions” traveled through these channels, and one confidential source warned that “the largest funder of Al-Shabaab is the Minnesota taxpayer.”
One of the most concerning cases involved the state’s Medicaid Housing Stabilization Services program, created in 2020 to help vulnerable Minnesotans secure housing.
Spending that was initially projected at $2.6 million ballooned to over $21 million within a year.
State officials abruptly shut the program down on Oct. 31 after receiving “credible allegations of fraud,” prompting immediate federal attention.
Federal prosecutors later charged eight individuals accused of exploiting the program for personal gain.
Then-acting U.S. Attorney Joseph Thompson described the operation as a network of sham businesses designed to siphon public funds.
“These are often just purely fictitious companies solely created to defraud the system,” he said, calling the scale of the scheme “unique.”
Authorities say several operators billed Medicaid for services that never occurred, often targeting recently discharged rehab patients and individuals with mental health challenges.
Some defendants allegedly ran overlapping schemes across multiple Medicaid programs to maximize payouts.
The fallout came as Minnesota was still grappling with the massive Feeding Our Future scandal—a $250 million COVID-era scam that ranks among the largest in U.S. history.
Prosecutors say organizers submitted fabricated meal counts and attendance records to secure federal nutrition funds, which were later spent on luxury cars, international real estate and personal expenses.
A recent guilty plea highlighted the network’s reach.
Abdullahe Nur Jesow became the 56th defendant to admit guilt, while investigators noted that political pressure and accusations of racism had previously hindered scrutiny of the nonprofit’s operations.
Federal authorities also charged Asha Farhan Hassan—already tied to Feeding Our Future—with orchestrating a separate $14 million scheme involving the state’s Early Intensive Developmental and Behavioral Intervention program.
Prosecutors say parents were offered monthly kickbacks of up to $1,500 to enroll children in autism therapy services, sometimes without a legitimate diagnosis.
State data shows Medicaid spending on autism services surged from $3 million in 2018 to $399 million in 2023, with the number of providers expanding dramatically during that period.
Investigators say the rapid growth created conditions that allowed coordinated schemes to go undetected.
The overseas money-transfer networks uncovered in the probes add another layer of concern.
Retired terrorism investigator Glenn Kerns said he tracked substantial sums moving from U.S. cities, including Minneapolis, through hawalas to Somalia.
“All these Somalis sending out money are on DHS benefits,” he said, describing the activity as “welfare misuse.”
A former Joint Terrorism Task Force official told City Journal that Al-Shabaab profits from nearly all funds entering Somalia.
“Every cent that is sent back to Somalia benefits Al-Shabaab in some way,” the official said.
With more arrests expected, Republicans argue the scandals expose systemic failures demanding accountability.
Kristin Robbins, running for governor, has pledged aggressive oversight reforms, while former state Sen. David Gaither said the investigations are only beginning.
“We aren’t even close to being halfway there,” he warned.
The unfolding scandals are expected to shape the 2026 gubernatorial race and could become a central campaign issue.
