Minn. agencies suppressed fraud reports, punished whistleblowers

By Morgan Sweeney
The Center Square

Officials within the administration of Minnesota Gov. Tim Walz enabled some of the state’s now estimated $9 billion in taxpayer-funded social services fraud by suppressing some fraud reports, retaliating against whistleblowers and changing protocols to mask criminal behavior., Republican Minnesota state lawmakers testified at a congressional hearing Wednesday.

State Reps. Walter Hudson, Marion Rarick, and Kristin Robbins are members of their legislature’s committee on fraud prevention, which has been investigating some of the same instances of fraud that have captured the national spotlight in the last several months. All three of them were invited to testify at the House Committee on Oversight and Government Reform’s first of at least two scheduled hearings on the rampant social services fraud that led Walz to withdraw his bid for reelection in 2026. 

Rarick in particular spoke about the pressure and opposition whistleblowers have said they have faced. According to Rarick, what was once a group of about 480 disenchanted current and former state Department of Health Services employees has grown to over 1,000 people across multiple state agencies. Those DHS employees started an account on X called Minnesota Staff Fraud Reporting Commentary, and many have been more than willing to talk with the fraud prevention committee about what they have found and experienced. 

“They have explained that they live in a constant state of fear of retaliation,” Rarick told the House committee, citing the example of Faye Bernstein reported by Newsweek. 

Bernstein was a compliance specialist who had reported some “sloppy contracting practices” to Minnesota DHS officials and was later “escorted out of the building” and transferred involuntarily to another agency. She now discourages others from reporting fraud without concealing their identity, calling it “career suicide” and more. Others that Rarick and fellow fraud prevention committee members have met with have backed up Bernstein’s story with anecdotes of their own, according to Rarick.

“In our face to face meetings with a group of whistleblowers, they revealed that retaliation now includes threats of being fired with cause, which means you do not get unemployment insurance in the state of Minnesota, being blacklisted from all state agencies… and then there was a veiled threat of the use of military intelligence against them,” Rarick said.

Some whistleblowers told committee members that pictures of their homes or cars were found in some of their personnel files and supervisors asked them questions like where their kids went to school and “where their bus stops are.”

Minnesota Lt. Gov. Peggy Flanagan has publicly disparaged the whistleblowers who formed the X account, and she was on the legislative committee that held hearings on child care fraud before becoming the state’s lieutenant governor, according to Robbins.

Robbins also said that after an important whistleblower report came out in 2019 exposing fraud in Minnesota’s state-sponsored child care services, the Office of Inspector General within the state’s DHS was shut down and “told they could no longer do criminal investigations.” The department also went from calling suspicious activity “fraud” to calling it “overbilling,” and created a committee that reviewed cases to decide whether the state would even attempt to recoup the money.

Committee Chairman U.S. Rep. James Comer, R-Ky., also cited a newly released report by the Minnesota’s Office of the Legislative Auditor that found evidence of various documents being created or backdated after investigative audits had been performed. 

House Committee Democrats, while acknowledging that abuse of government assistance programs should be punished, expressed frustration at the administration’s aggressive response to fraud in blue states and what they see as a much softer response to red states.

The Wall Street Journal reported Monday on a $77 million welfare scheme that U.S. Rep. Robert Garcia,D-Calif., claimed hasn’t received as much attention from the administration because it’s a red state.

“Republicans like to talk about fraud in states with Democratic governors exclusively,” Garcia said. “Republicans aren’t calling in [Mississippi] Governor Tate [Reeces].”

In response to the staggering fraud that has taken place in Minnesota with fake child care, autism, adult day care, housing and non-emergency medical transportation services programs, the Trump administration has frozen federal social services funding to Minnesota, California, Colorado, Illinois, and New York – all states with Democratic governors. Garcia said justice should be distributed evenly and those in power should be careful not to punish innocent people for others’ crimes.

“What we should not do is use fraud as an excuse to rip away aid from innocent people who follow the rules and need help in our society,” Garcia said.

Collectively, the administration withholding social services funding from a number of states could impact hundreds of thousands of children.

“These kids didn't commit fraud, so I want to know why they should be punished,” Garcia said.

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