The DFL coverup of the great Feeding Our Future (FOF) caper has now begun. We need to begin with the mess Gov. Tim Walz, Attorney General Keith Ellison, and the Minnesota Department of Education (MDE) created. Make no mistake, their malfeasance cost taxpayers $250 million.
Chapter one: The fraud is discovered
In May of 2020, Feeding Our Future’s Big Fraud began. The MDE says that through its “diligent monitoring” it quickly “identified” and “caught” this fraud within a month of its inception by flagging FOF’s dramatic increases in meals served and reviewing FOF’s financial statements. “We knew something was wrong from the beginning. Our processes and monitoring worked.”
So far so good. It isn’t clear whether MDE delayed processing FOF’s site applications in the spring of 2020 because of the fraud they detected or just because they were swamped. FOF was, however, Johnny on the spot and sent MDE a draft lawsuit complaint and a “litigation hold” notice (save your documents because we are going to sue). It seems highly likely these legal documents were sent to the AG. In any case, after receiving the draft complaint, MDE folds and processes the applications, and FOF relents from its proposed suit.
What should MDE have done? They had detected fraud, and they could have nipped it in the bud in any number of ways. They could and should have started doing onsite visits to verify the many thousands of meals that were supposedly being served or delivered to and from the sites. They could and should have told FOF “sue away” and then deposed Aimee Bock and FOF and demanded production of documents that would have confirmed the fraud. They could and should have sent out a car or two to observe activity at the sites for a day or put up some security cameras to record site activity. They could and should have asked the AG’s investigators to do that. They could and should have asked the AG to send FOF one of his investigative demands (this fraud certainly violated state law in addition to federal). Or call the FBI. They didn’t do any of that. Instead, they resumed business as usual with a group they say they caught in a fraud.
The meal money starts flowing out, in tens of millions of dollars. Meanwhile, MDE still doesn’t do any site visits. They say that was due to Covid, they are not fraud investigators, and they didn’t have the expertise, and besides FOF sites may have been delivering food offsite. MDE also doesn’t escalate what they found to their risk mitigation and internal controls group. They do alert the USDA in October, which apparently does nothing. They continued to do “desk audits” that continued to reveal the fraud. All they had to do was take reasonable steps to follow up on the fraud they say they caught and detected.
Chapter two: FOF sues and MDE agrees to a consent order
In November 2020, MDE gets behind in processing FOF’s site applications. This time FOF actually sues MDE. AG Ellison says this is where he got involved. Again, MDE packs up its tent and goes home, and (incredibly) enters into a formal agreement with the suspected fraudsters to timely process FOF applications and even to assist FOF, and consents to the entry of a court order in December 2020. Remember that at this point there isn’t any FBI involvement and no FBI investigation that would constrain MDE’s efforts to follow up on the fraud in any way.
What should MDE and the AG have done? They should have answered the complaint, taken depositions of FOF, requested production of documents, and proved up the fraud they had “detected and caught.” Or gone to the FBI. Instead, they cave yet again to the audacious FOF. By year-end 2020 they have given FOF over $43 million.
Chapter three: MDE surrenders to FOF
MDE sends out two notices of deficiency, one in January 2021 and another in March 2021. The biggest item is FOF’s failure to have an audit from a CPA. MDE now confers with USDA. The dollar amount already paid to FOF — now some $77 million — alarms USDA. MDE and USDA agree that payments to FOF should be suspended, no more applications processed, and that MDE should require FOF to comply with a claim validation process as part of a proposed correction plan. Predictably, the ballsy FOF files a motion for contempt of the December 2020 consent order and to require MDE to resume payments.
Which brings us to the all-important court hearing of April 21, 2021. Ramsey County Judge John Guthmann is sympathetic to FOF’s complaint that MDE has not been processing site applications in a timely way consistent with the December 2020 agreed order. On the suspension of payments, the judge tells FOF they will need to file an amended complaint since their original complaint only dealt with site applications. He also presses the AG on MDE’s authority to stop payments during the pendency of the notice of deficiency. FOF argues that under the regulation, MDE can’t stop payments during the pendency of a notice of deficiency. They cite the language of the USDA regulation and 2002 guidance from USDA to that effect. The AG says MDE can only pay valid claims during the pendency of a notice of deficiency, and so they need to see the claim documentation before they can pay. The judge tells the AG that he thinks they have a problem with that position but “you’ll have an opportunity to develop (your argument) because I’m not going to be issuing any rulings today on this issue.”
After the April 21, 2021 hearing, the AG and MDE quickly put their tails between their legs, and the MDE’s executive committee immediately rescinded the “stop pay” on claim payments to FOF. MDE forthwith paid out an additional $23,814,000 to the crooks. MDE ultimately processed all FOF site applications, lifted the notices of deficiency, and declared FOF a sponsor “in good standing.”
I am confident from reading everything in the record and all public statements and testimony that it was only at this point that the frustrated AG went to the FBI. The AG says they went to the FBI “in the spring of 2021” and elsewhere we hear from MDE and the AG that it was April 2021. As part of this coverup they purposely don’t disclose the actual date in April, leaving us to think that it was their plan all along to go to the FBI. But the FBI didn’t even open its investigation until May 2021.
What should the AG and MDE have done? Well, first get the law right. If the regulation didn’t allow MDE to stop making payments during the pendency of a notice of deficiency, or the regulation wasn’t clear, they shouldn’t have gone down that path to begin with. If the judge was wrong in his reading of the regulation and MDE and the AG were right, they should have stuck to their guns and brought their fortified arguments back to the court, as Judge Guthmann had invited them to do on April 21.
Most importantly, the AG should have done his homework on the fraud MDE had detected on multiple occasions before the hearing, and gotten MDE or AG investigators to do site visits or stakeouts (if Covid was an issue, well stay in the car then). At the hearing, the AG did tell the court MDE had received calls from three site operators. One of these operators had told MDE that they had not served any meals. All the AG had to do was provide more meat to this itty-bitty bone that they put before the court, and for sure Judge Guthmann would have lowered the boom on FOF. But MDE had not done their homework, and never did, for we have Assistant Commissioner Daron Korte amazingly testifying in a deposition of July 29, 2021 (note FOF takes depositions, apparently the AG doesn’t know how to do them) that MDE had no reason to suspect FOF had committed “intentional acts of fraud.”
And the AG should have deposed Bock and served FOF with a demand for production of claim validation documents. But don’t just roll over! Do something other than let the fraud continue.
Chapter four: The coverup
Which brings us to the coverup. The U.S. attorney unveiled his indictment in September 2022. The evidence laid out is crystal clear — evidence that MDE and the AG could easily have obtained and produced to the court on April 21, 2021, if they had done just a teensy bit of their homework.
- The defendants used a website (randomnames.com!) that could produce phony names.
- Defendants used an excel formula to insert a random age between seven and 17 into the age column so that the recipients would be considered minors.
- A Wilmar site reported 2,000 kids served a week, just under half the entire school district population. Only 33 of the students listed were actually enrolled in the district.
- The number of meals served daily in July 2020 at Safari Restaurant was 5,000, and Safari submitted meal counts to MDE claiming that it was feeding 6,000 children a day, seven days a week, for a total of 185,903 in one month.
Coverup argument one: After the indictments, the governor and the AG tried unsuccessfully to pin this on the court, falsely alleging that Judge Guthmann had ordered MDE to resume payments. When the judge called them on that and emphasized that he had issued no such order (in fact, he made it clear the AG could reassert his arguments at the next hearing since he was issuing no order), they decided to shift the blame to the FBI.
Coverup argument two: The governor and the MDE say they went to the FBI “early on.” The MDE statement on the indictments says that “when MDE identified the unexplained growth of Feeding Our Future, MDE immediately reported those activities” to the USDA and its inspector general, “and the FBI.” Attorney General Ellison said in a radio interview: “We saw fraud. We went to the FBI.” There was a seamless state-federal effort to catch FOF, “a case of federal-state cooperation.” The truth: It is clear from the transcripts of the hearings that there was absolutely no plan to involve the FBI until after MDE and the AG were humiliated in the April 21, 2021 hearing, and that the FBI was certainly not involved “early on” in this fraud.
Coverup argument three: The FBI told us we couldn’t divulge the fraud to Judge Guthmann at the April 21, 2021 hearing.
Attorney General Ellison said in that same radio interview:
“[I]f we would have gone to the court and said ‘here’s all our evidence’ … the people who were doing the stealing would simply try to run out of town and hide the assets … In order for us to tell the court why we were not paying these people we would have had to reveal the FBI investigation and we couldn’t do that so what we did is cooperated with the FBI investigation … Back when we were first in court with FOF in Ramsey County … as soon as we say we have all this fraud, and by the way we have gone to the FBI, what do the fraudsters do? They start hiding assets. They start shutting down … so what we did was we investigated and cooperated with the FBI.”
Say what? The FBI didn’t even begin their investigation until May 2021. There couldn’t have been instructions from the FBI to not disclose the fraud to the court at the April 21 hearing because the FBI wasn’t even involved at that point. It is abundantly clear from the record that MDE and the AG were pursuing cutting off payments via a notice of deficiency and claims validation process, not pursuing an FBI route, until after the court hearing of April 21.
The truth is that MDE and the AG didn’t disclose evidence of the fraud to the court on April 21 because they had not done their homework. They hadn’t done site visits, hadn’t involved their own MDE risk mitigation and internal controls people, and had not prepared the arguments from the written documentation they had from their desk audits, and so they were unprepared to prove up the fraud they knew was there. (I should also note here that the AG does not say the FBI told him — whenever he spoke to them — not to disclose the fraud to the court, only that he should not disclose the FBI investigation.)
It is crazy for the attorney general to say his attorneys kept their mouths shut at the April 21 hearing so that the crooks would not go hide the money they had stolen. By doing nothing the AG let the crooks steal another $170 million!
Coverup argument four: If we had spilled the beans on what we knew about the fraud to the court on April 21, we would have jeopardized the case against the crooks.
B as in b and S as in s, as they say in the garage. First off, you didn’t present the evidence of the fraud because you hadn’t properly gathered the evidence and hadn’t done site visits. Second, as of April 21, 2021, $77 million was already out the door and over 30 million fake meals already paid for. By year-end 2020 FOF had already received $43 million. The evidence in the indictments goes all the way back to May 2020. The crooks’ cake was already baked. You didn’t spill the beans because you had no beans. And if you had the beans, spilling them to the court would have cut the taxpayers’ losses by $175 million.
It is beyond absurd that Gov. Walz, MDE, and the AG are painting this as a success story and that DFL senators are “in awe” of the MDE’s discovery of the fraud. I am in awe at the absolute incompetence at virtually every turn. No amount of obfuscation can change these facts:
- The MDE knew there was fraud from the beginning, in spring 2020.
- Early intervention in the form of onsite observation would have confirmed the fraud. This was as simple as a security camera.
- Nothing at any point in the over year-and-a-half period this fraud went on prevented MDE from conducting onsite visits to observe the many thousands of meals supposedly being served each and every day.
- The MDE and AG rolled over not once, not twice, but three times in response to the aggressive litigation tactics of FOF.
- The MDE and the AG did not involve the FBI “early on” as they and the governor claim.
- The AG and MDE were not adequately prepared for the all-important court hearing on April 21, 2021. They failed to gather evidence of the fraud before the hearing. They failed to take Bock’s deposition. They failed to serve a request for production of documents. They used a flawed legal analysis to justify the stop pay they had placed on FOF’s claims.
- If the AG’s legal analysis was not flawed, they failed to follow the court’s advice at the April 21 hearing to represent their arguments at the next hearing.
- Neither MDE nor the AG went to the FBI before the court hearing on April 21, 2021.
- The FBI never told the AG not to disclose FOF’s fraud at the April 21, 2021 court hearing.
- The FBI never told MDE to resume making payments to FOF.
- If MDE and the AG had disclosed FOF’s fraud at the April 21 hearing, they would not have destroyed the case against the defendants. $77 million had already been stolen. The evidence revealed in the indictment was already there in plain sight.
- Not collecting the necessary evidence before the April 21 hearing and disclosing it to the court resulted in another $175 million delivered to the fraudsters.
- This is and forever will be the largest theft in Minnesota history and it didn’t have to happen.
Tell the truth or someone will tell it for you.
This is the second article in a series from retired attorney Greg Pulles on the Feeding Our Future scandal. Read the first article here.
The views and opinions expressed in this commentary are those of the author and do not represent an official position of Alpha News.