Minnesota rocked by $450 million COVID-19 fraud: Governor Walz deflects, “We can do better.”
The recent nomination of Minnesota Governor Tim Walz as the Democratic vice-presidential candidate, despite his previous lack of national attention, underscores the need to examine his executive track record thoroughly. This article highlights financial mismanagement leading to a $450 million COVID-19 fraud and Walz’s lack of accountability. At a state capitol press conference, Walz evades responsibility by responding, “We can do better.”
Frontline Worker Pandemic Payments
The Minnesota State Auditor conducted a performance audit of the Frontline Worker Pay Program for COVID-19 in June. The Department of Labor and Industry (DLI) distributed program bonuses to over one million residents. Eligible individuals worked in “frontline sectors” and were designated to receive compensation of up to $1,500. Due to the number of applicants being double state estimates, the maximum benefit paid to an individual was capped at $487.45.
The audit revealed that the Department of Labor and Industries (DLI) did not effectively enforce the eligibility requirements, and there were “significant cases of noncompliance with regards to payments to ineligible individuals.” The findings included identity theft, failure to verify adjusted gross income, individuals submitting multiple applications, and using residential addresses as employer addresses. The auditor estimated that only 58.9 percent of all paid applicants were eligible, which means an estimated overpayment of $200 million. The substantial financial implications of this must be addressed.
Feed Our Future Grant Fraud
USDA-funded, state agency-administered Federal Child Nutrition Programs provide meals to eligible children. In late 2020, the State of Minnesota awarded a no-bid grant to the Feed Our Future nonprofit (FOF) to administer the Federal Child Nutrition Program due to the COVID-19 pandemic. Minnesota provides contract administrative duties and oversight of meal sites. However, the nonprofit was insolvent, had a negative net worth, and lacked the resources and expertise to administer the $250 million federal grant.
Criminal charges assert that Somalian Americans gained control of FOF and conspired to fraudulently claim $250 million in federal meal funds that were spent instead on luxury vehicles, real estate, jewelry, and other unlawful purchases rather than their intended purpose. There have been 70 indictments, with five convictions for bribery, wire fraud, conspiracy, and money laundering. This is an example of Somali traditions enduring in America.
During the defendants’ trial, an attempt was made to influence the jury. An associate of one of the defendants delivered $120,000 in cash to a juror’s house in a gift bag, promising another $80,000 upon acquittal. The juror reported the bribery attempt and handed the money to the police. The defendant was convicted of bribery for jury tampering.
When the first indictments were announced in 2022, I thoroughly analyzed the audited financial statements and 990 publicly available tax returns. After studying material for irregularities, I filed a complaint with the Minnesota Accountancy Board against Charles Amevo for multiple violations of the AICPA professional and audit standards. The complaint also mentioned that Amevo had failed to conduct a required Single Audit of the federal grants.
A Single Audit would have provided a level of assurance that grantees receiving federal grant funds use the funds in compliance with the government’s requirements, that there are adequate accounting controls, and that there are no material irregularities.
When the convictions were announced last June, the Minnesota Accountancy Board gave me their ruling on my complaint against Amevo. Amevo (unindicted co-conspirator)had his CPA license revoked, was fined $20,000, and was required to notify the management of his six other audit clients’ audit opinions were withdrawn.
Upon reviewing the six clients, it was found that Somali Americans own and operate money transfer agencies catering to domestic and international money transfers. These agencies can also offer money orders, debit card issuance, check cashing, and currency exchange. Money transmitters can be a breeding ground for fraud and money laundering.
The Model Money Transmission Modernization Act (ACT) regulates money transmissions and uses a nationwide multistate licensing system and registry known as the Nationwide Multistate Licensing System and Registry (NMLS). The regulation aims to protect customer funds and prevent money transmitters from being used for money laundering.
The six companies are registered with the NMLS. However, Section 7.02 requires that money transmitters have current audited financial statements. With the audit opinions being pulled, the six entities are non-compliant and violate the requirements of their surety bonds.
Below is a summary of the six money transfers, their hyperlinked NMLS registration, and their website.
Money Transmitter Prior Legal Name NMLS ID Website 1 RASMI PAY LLC TAAG Services US LLC 1273252 rasmipay.com 2 Ramad Pay Inc. KAAG Express 1139908 ramadpay.com 3 HODAN Global Services 947779 www.hodanglobalus.com 4 Remit Choice Inc HAMI Express Inc. 1626269 www.remitchoice.com 5 Banana Pay, LLC 1136319 www.bananapays.com 6 Beeso Corp. SafariPay Corp. 1838296 www.paysii.com/en/
Given the situation, Minnesota’s Commerce Department must promptly issue a cease-and-desist order to the six money transmitters until a thorough audit is conducted, a clean opinion is rendered, and evidence of surety coverage is provided.
Governor Walz Subpoenaed
The Congressional Committee and the Workforce issued a subpoena last week to Governor Walz. Based on the Minnesota Department of Education and Workforce providing documentation to earlier two requests, the Committee indicated in the subpoena that “actions taken by you and other executive officers were insufficient to address the massive fraud.” Walz has been quoted as saying, “This wasn’t malfeasance.” Come on, Walz, you can do better.
Bob Bishopis a forensic investigator and retired CPA.
