Feeding Our Future fraud led to new grant controls, little progress recovering stolen money

Nearly three years after a series of dramatic FBI raids put a stop to a wide-ranging meal program fraud, federal prosecutors in Minnesota have secured 28 criminal convictions but have recovered only a small fraction of the stolen money.

When the first 48 defendants were indicted in November 2022, the U.S. Attorney’s Office said it already had recovered around $50 million in money and property of the roughly $250 million stolen. Asked this month for an update, prosecutors gave the same figure: about $50 million recovered.

The fraud, which took place at a time during the coronavirus pandemic when government funds flowed freely with minimal oversight, now has produced a total of 70 indictments and brought about new government controls around grant dollars. Yet, the scheme continues to be a political liability for Minnesota Democrats who were in power during the pandemic, including Gov. Tim Walz, whose bid for vice president has generated renewed scrutiny over what went wrong and why the fraud wasn’t stopped sooner.

The criminal cases involved the Child and Adult Care Food Program and Summer Food Service Program, two federal meal programs administered by the Minnesota Department of Education, which reimbursed a long list of obscure nonprofits and businesses for handing out meals to children and their families while schools were closed during the pandemic. Prosecutors allege that numerous nonprofits were paid back for millions of meals they never actually served after filing reimbursement claims with help from an online name generator.

So far, prosecutors have obtained guilty pleas from 23 defendants and convicted five more at trial, where two defendants were acquitted. The alleged ringleader, Aimee Bock, whose sponsoring agency Feeding Our Future raked in fees from the nonprofits it supported, has yet to go to trial.

Between 2020 and 2022, indictments allege, defendants spent proceeds from the fraud on real estate, jewelry, luxury cars and foreign investments, among other things. Court filings in advance of the first sentencing hearing, which took place last week, highlight the challenges prosecutors face in recovering that stolen money.

Mohamed Jama Ismail, convicted at trial in May on charges of wire fraud conspiracy and money laundering counts, took home about $2 million over 12 months, according to federal prosecutors, but at least $850,000 may never be recovered because it’s out of the reach of U.S. authorities, in Chinese investments and real estate in Kenya and Somalia.

Ismail was sentenced Tuesday to 12 years in prison and was ordered by the judge to pay restitution.

However, prosecutors wrote in a sentencing memo, “He has never agreed to return the federal child nutrition program funds he sent abroad back to the United States. Because of his crime, he will leave prison a wealthy man.”

Ismail isn’t the only defendant whose fraudulent proceeds will be difficult to recover. Other indictments mention additional real estate purchases in places like Kenya and Turkey, as well as foreign investments.

Said Ereg and his wife, Najmo Ahmed, operators of Evergreen Grocery and Deli in South Minneapolis, were indicted in February, having obtained more than $4.2 million in meal reimbursements. Although the exact nature of their transactions is not yet clear, they allegedly transferred more than $2.5 million to accounts controlled by foreign companies.

Walz under scrutiny

Questions remain about whether Minnesota’s government agencies should have done more to stop the fraud.

In an audit report released in June, the Office of the Legislative Auditor flagged concerns about the way the state awarded grants to nonprofits, highlighting “inadequate oversight” at the Minnesota Department of Education, in particular.

Department officials early in the pandemic received numerous tips about Feeding Our Future and another sponsor, Partners in Nutrition, vastly exaggerating the number of meals they provided. The department passed the information on to its partners in the federal government, but state officials have said they couldn’t act to stop the fraud because of an ongoing FBI investigation and an unfavorable ruling and judge’s warnings in a lawsuit brought by Feeding Our Future.

Walz’s selection as the Democratic vice presidential nominee gave new oxygen to the Feeding Our Future controversy, with congressional Republicans in September subpoenaing Walz for records related to the case.

Walz and fellow Democrats say fraudsters are being held criminally accountable and that the agencies have improved their oversight protocols following unprecedented challenges they faced during the pandemic, when employees were working from home and unprecedented amounts of federal aid was available.

But Minnesota Republicans say that doesn’t excuse the staggering level of fraud. As they did in the 2022 campaign, Minnesota Republicans continue to question how much Walz, his appointees and agency employees knew about the fraud, and why they didn’t move sooner to intervene and call for more investigations and discipline.

Sen. Mark Koran, R-North Branch, the vice chair of the Legislative Audit Commission, noted the OLA report’s finding that the state education department had recognized issues with Feeding Our Future well before the pandemic.

“From my perspective, it’s almost unbelievable, because of all of the early warning signs,” he said. “And then to just omit or to refuse to perform the basic standards of accountability towards public dollars is completely unacceptable.”

Koran says MDE employees didn’t follow state law when they didn’t report their suspicions to the Legislative Auditor, and that more should be done to hold them accountable. He also noted that Minnesota has had several other cases of fraud and government mismanagement of money come to light recently.

The state overpaid unemployment insurance by $430 million during the pandemic according to a recent U.S. Department of Labor review, and reporting by the Minnesota Reformer and others has revealed ties between possible fraud at autism centers and defendants in the Feeding Our Future case.

Seeking accountability

While federal authorities continue prosecuting the alleged fraudsters, some critics say that government officials should be held accountable for allowing the fraud to happen in the first place.

Sean Moulton, a senior policy analyst with the Project on Government Oversight, a nonpartisan Washington, D.C.-based watchdog group, said that while unprecedented amounts of federal pandemic aid called for more oversight, the sheer amount of money state agencies were suddenly handling presented a unique challenge.

“This money didn’t even get the normal level of oversight and accountability, because the people who were normally doing the oversight were stretched incredibly thin,” he said. “In many of these agencies, federal and state level, it was a small team, often that was suddenly giving out a decade’s worth of money in less than a year, and all of a sudden, the pressure was on to get things done right away.”

Education department leaders and the governor’s office won’t say if anyone was fired or disciplined for what happened. A Walz spokesperson said personnel data was private.

Former Education Commissioner Mary Cathryn Ricker resigned in March 2021, shortly after the FBI told the agency they were investigating Feeding Our Future. Her successor, Heather Mueller, left the agency and was replaced by current Commissioner Willie Jett at the beginning of Walz’s second term as governor in 2023.

Jett has avoided placing blame for what happened. He and others instead point to the measures the state has taken to boost oversight.

Following the indictments, Democratic-Farmer-Labor lawmakers passed measures creating an Office of Inspector General at MDE and giving agency commissioners the power to terminate grants they don’t see in the best interest of the state. The agency also added a general counsel’s office, began training staff on an updated fraud-reporting policy and contracted with a firm to conduct financial reviews of certain partners.

At a June hearing on a report finding oversight issues at MDE, Sen. Ann Rest, a New Hope DFLer who chairs the Senate Tax Committee, noted no other state had seen such significant fraud with student pandemic meal programs, and called the lack of accountability “unacceptable.”

In a recent statement to the Pioneer Press, however, she said Republicans were using the report to paint a negative picture of DFL-controlled state government for political gain.

“Minnesotans, including me, have the utmost respect for the role of the Office of the Legislative Auditor (OLA), and we strongly object when its reports are misrepresented, exaggerated, or politicized,” she said. “When some attempt to score points and establish a theme from scattered acts of criminality, the DFL majorities and the governor instead take substantial action.”

Whether a chief executive like a governor or his appointees should be held responsible for fraud is hard to say, Moulton said.

“Especially for individual cases, it becomes pretty tenuous,” he said, adding, however, that the head of any government can be measured on how seriously they approached accountability in the first place.

Timeline of Feeding Our Future case

2016-2020: Feeding Our Future is established and is rejected for state grants early on as numerous allegations of theft, forgery and kickback schemes are reported to the state.

February 2020: The IRS revokes Feeding Our Future’s nonprofit status for failing to file proper documents.

March 2020: Schools close in Minnesota due to the pandemic. Soon after, federal aid begins to flow into meal programs to feed kids during school closures.

April 2020: Minnesota Department of Education staff identify issues with Feeding Our Future, which made claims of serving tens of thousands without proof, according to a nonpartisan state audit. MDE approves grant applications after threats of legal action.

October-November 2020: MDE brings fraud concerns to the U.S. Department of Agriculture.

November 2020: Feeding Our Future sues education department for failing to act on its grant applications within 30 days.

December 2020: Ramsey County District Judge John Guthmann requires the state to respond to applications in a “reasonably prompt manner”; MDE denies pending grant applications over concerns about Feeding Our Future’s ability to provide more meals.

January 2021: MDE declares Feeding Our Future “severely deficient” for meal aid grants, due in part to IRS revocation of nonprofit status.

February 2021: The FBI notifies state officials of allegations it received about meal program fraud in Minnesota.

March 2021: MDE starts trying to terminate partnership with Feeding Our Future over “serious deficiencies” identified in January. Agency says it’ll stop making payments until problems are fixed.

April 2021: MDE gives information on fraud allegations to FBI. Feeding Our Future files court motion to force state to process applications. Judge stops short of ordering payments, but said it could be a “real problem” for MDE to stop paying claims. MDE later says it continued giving Feeding Our Future money because of judge’s statement.

May 2021: FBI begins investigation.

June 2021: Guthmann holds MDE in contempt of court for violating the December order requiring timely approval of applications, orders MDE to pay Feeding Our Future $47,500.

January 2022: FBI raids Feeding Our Future office and other locations tied to nonprofit. Feeding Our Future dissolves soon after.

September 2022: Feds announce charges against Feeding Our Future founder Aimee Bock and 46 others. Republicans pounce at election-year political opportunity. Gov. Tim Walz claims Guthmann forced the state to pay, which the judge denies.

February 2023: Office of the Legislative Auditor finds “pervasive noncompliance” in how state awards grant money.

March 2023: Feds announce the number of indicted individuals is up to 60.

February 2024: Feds announce 10 more indictments, bringing the total to 70.

May-June 2024: Five of seven defendants are found guilty in the first trial. Two others are indicted for attempting to bribe a juror with $120,000.

June 2024: Legislative Auditor finds “inadequate oversight” at the education department contributed to the fraud.

September 2024: Walz is subpoenaed by U.S. House Republicans for records related to the fraud.

October 2024: The first defendant to be sentenced gets 12 years in prison.