Minnesota lawmakers vow new crackdown after $1B fraud meltdown they say Walz let spiral

As investigations continue into widespread fraud across multiple government programs, Minnesota lawmakers and a former prosecutor on the case spoke to Fox News Digital about how to fix the roots of the crisis that lie in years of unchecked incompetence, political resistance to oversight, and a culture inside state government that discouraged whistleblowers from speaking out.

"Republicans have proposed a number of common sense guardrails," Republican state Sen. Julia Coleman told Fox News Digital. "I have a bill that mandates state employees to report fraud if they know of it to law enforcement, but Democrats have blocked us every step of the way."

Republican state Sen. Michael Kreun told Fox News Digital that Republicans will put forward measures to crack down on fraud during the next legislative session early next year.

"There's going to be a number of bills coming up here in the next legislative session to address fraud," Kreun said. "The one that I've been working on this past year was a bill to establish a statewide office of inspector general, which would be an independent office not that wouldn't direct directly answer to the governor, whose sole mission would be to root out fraud, investigate fraud, with all providers and recipients across all state agencies and to be overlooking the agencies themselves."

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Kreun blamed Walz for his legislation stalling in the Democrat-controlled House earlier this year, a sentiment echoed by state Rep. Patti Anderson, who wrote on X, "Speaker Demuth tried to get the OIG bill passed in the House but the House Dems killed it due to pressure from Governor Walz. We all know that’s true. Let’s hope House Dems finally see the light and we get it done next year."

Walz's office directed Fox News Digital to a clip of Demuth saying in a press conference last week that Walz previously stated "he would sign it" if the bill got to his desk. 

"So that's one measure that we can take next year," Kreun said. "There's gonna be a whole host of other measures to put up those guardrails to make sure that it becomes a lot harder to commit fraud here in Minnesota."

Minneapolis has been at the center of controversy in recent weeks over a massive fraud scheme dating back to at least 2020 that permeated several departments and several nonprofits, ranging from childcare services, to COVID-19 relief, to autism care. It is believed by many to eventually eclipse $1 billion in wasted state and federal taxpayer funds. 

The most prominent scandal, related to the nonprofit Feeding Our Future and representing the nation's largest COVID-19 fraud case, involves a scheme that prosecutors say exploited a federally funded children’s nutrition program administered by the Minnesota Department of Education (MDE) during the COVID-19 pandemic, siphoning money meant to provide meals to low-income kids. 

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"For this amount of fraud to take place in the state of Minnesota, a billion or more dollars of fraud to happen has to be apathy and incompetence," GOP state Sen. Julia Coleman told Fox News Digital. 

"Years ago, before this ever hit the national media stage, I sat on an education committee trying to get to the bottom of how the Feeding Our Future fraud scandal happened. Now, this was years ago. There have been no additional guardrails in place, and in fact, fraud has been allowed to be more rampant than ever. It's a mix of apathy and incompetence. Republicans have proposed a number of common sense guardrails. I have a bill that mandates state employees to report fraud if they know of it to law enforcement, but Democrats have blocked us every step of the way."

GOP state Sen. Mark Koran told Fox News Digital that while legislation will help, ultimately, the oversight in Minnesota is done by the executive branch.

"It's not gonna change with this governor," Koran said. 

Fox News Digital also spoke to former federal prosector Joe Teirab, who worked on the Feeding Our Future case, and asked him what changes need to be made to ensure this large-scale fraud doesn't happen again. 

"I think you need to look at all these big government programs where tons of money is going out, and especially the ones in which nonprofits or other organizations are just entrusted to be watchdogs themselves," Teirab explained. "That's just not a system that's set up well. Those things need we need to have way more checks and balances, way more structure to make sure that that money's going out to the right people and it's actually being used in the way that it should be used and then we need to give more teeth and more ability for auditors and inspector generals to actually say, hey, look, if someone is potentially committing fraud, that person, the money should be cut off from them in other aspects of other agencies."

Minnesota’s Legislature is narrowly divided, with Democrats holding a one-seat majority in the Senate (34–33) and a larger but still closely watched majority in the House (70–64). The razor-thin margin in the Senate means a single defection can derail major legislation, while the House majority gives Democrats control of the agenda but not much room for controversial or partisan bills to lose support.

"Ultimately, we need to figure out the depth of this problem, get it taken care of once and for all, get the right people in place," Kreun told Fox News Digital. "A change in the administration would go a long way towards helping that, and then rebuilding that trust with proper safeguards and people that are looking out for the taxpayer and make sure that they're not getting ripped off."