Minnesota housing program under federal fraud investigation

Federal agents are probing what they describe as a massive scheme to defraud Minnesota’s Housing Stabilization Services program, according to a search warrant.

Numerous outlets reported that a federal investigation is targeting a Medicaid-funded benefit created in 2020 to assist people with disabilities, mental illnesses, substance use disorders and seniors in securing and maintaining housing.

Originally expected to cost $2.5 million per year, program costs surged to $21 million in 2021 and ballooned to $104 million last year, according to a report from CBS News.

A search warrant filed in the U.S. District Court for Minnesota states that the FBI believes the program has become “extremely vulnerable to fraud.”

Investigators reportedly identified eight business locations that were allegedly tied to fraudulent activities, spanning the Twin Cities metro area in places like St. Paul, Roseville, Blaine, Little Canada and Woodbury.

“Since Minnesota became the first state to offer Medicaid coverage for Housing Stabilization Services, dozens of new companies have been created and enrolled in the program,” the warrant reads.

“These companies, and the individuals that run them have taken advantage of the housing crisis and the drug addiction crisis in Minnesota to prey on individuals who need help getting on their feet as they recover from drug addiction.”

According to investigators, the scheme involved contacting Medicaid-eligible individuals in drug treatment centers and halfway houses with promises of stable housing. After signing them up, the companies allegedly billed for extensive services that were never provided.

The program is administered by the Minnesota Department of Human Services (DHS).

Following the execution of federal search warrants on Wednesday, Shireen Gandhi, the temporary commissioner of DHS, issued a statement to credit the joint effort among multiple agencies.

“The search warrants executed today at several Housing Stabilization Services providers are the result of the critical partnerships between the Minnesota Department of Human Services, the Minnesota Department of Public Safety Bureau of Criminal Apprehension, the Office of Attorney General and federal offices and is an important example of our shared commitment to work together to ensure Medicaid program integrity,” Gandhi said.

“The DHS Office of Inspector General regularly provides investigative data and information about Medicaid provider targets to our law enforcement partners so they can build actionable cases to hold bad actors accountable.”

No charges have been filed in connection with the case.