9 Search Warrants Served in Major Minnesota Medicaid Housing Scam Probe

9 Search Warrants Served in Major Minnesota Medicaid Housing Scam Probe

MINNEAPOLIS — Federal agents raided multiple Twin Cities businesses and residences Wednesday as part of a sweeping investigation into what authorities describe as a massive Medicaid housing fraud scheme involving Minnesota’s Housing Stabilization Services (HSS) program. The program, which launched in 2020, was the first of its kind in the nation to use Medicaid dollars to help people with disabilities and other vulnerable populations find and maintain stable housing.

According to a newly unsealed search warrant, nine federal search warrants were executed at five business offices and four private homes across the metro, with investigators alleging rampant abuse of the program by so-called “fly-by-night” providers that billed for services never rendered.

A Program With Noble Intent—and Alarming Growth

Minnesota’s Housing Stabilization Services program was designed to serve individuals facing homelessness, living with mental illness, substance use disorders, or physical disabilities. Initially projected to cost $2.6 million annually, the program quickly spiraled beyond expectations. It paid out $21 million in its first year, soared to $104 million by 2024, and disbursed over $61 million in the first half of 2025 alone.

But behind those ballooning numbers, federal agents say they found something else: fabricated services, forged documentation, and systemic exploitation of some of Minnesota’s most marginalized residents.

FBI: Rampant Abuse and Fictional Clients

In a search warrant affidavit, FBI Special Agent Kurt Beulke described an “explosion in fly-by-night providers” and “a massive scheme to defraud” taxpayers. One example cited involved Leo Human Services, based in Brooklyn Park. The company reportedly claimed 92 hours of services for a man named Derric F., but when interviewed, Derric told investigators he only occasionally heard from Leo and remained homeless as of June 2025.

Leo also allegedly billed Medicaid $12,000 for services supposedly provided to Rachel L., who had recently completed a drug treatment program. But Rachel told investigators she never received help from Leo—and didn't even remember meeting anyone from the company. Her personal information, according to the affidavit, was also used by a second provider, Brilliant Minds, to bill for services she never received.

These cases, federal agents assert, are part of a broader pattern in which providers exploit clients' personal stories to pad fraudulent claims—while the clients themselves remain unhoused and underserved.

Locations Raided

Federal authorities served search warrants at the following business entities and residences:

• Brilliant Minds Services (St. Paul)
• Leo Human Services (Brooklyn Park)
• Liberty Plus LLC (Roseville)
• Pristine Health LLC (St. Paul)
• Faladcare Inc. (Little Canada & Woodbury)
• Private homes in St. Paul and Blaine, including one shared by two brothers who own Leo and Liberty Plus

Map showing where federal agents served search warrants connected to a state housing fraud investigation. (FOX 9)

Notably, 22 separate HSS providers were also operating out of the Griggs-Midway Building on University Avenue in St. Paul. Collectively, those entities billed the state $8 million over a 17-month period.

The Scale of Alleged Fraud

• 14 providers each billed over $1.2 million in just 16 months, totaling approximately $22 million
• Some companies billed $30,000–$50,000 for services tied to a single client
• Documentation submitted to Medicaid was often falsified or incomplete, according to the FBI

Government Response and Legislative Reforms

In response to early signs of abuse, the Minnesota Department of Human Services (DHS) had already halted payments to three of the now-targeted providers. The agency says it also opened separate investigations into all five entities named in the federal search warrants.

Temporary DHS Commissioner Shireen Gandhi praised the collaboration between DHS, the Bureau of Criminal Apprehension, the Minnesota Attorney General’s Office, and federal law enforcement. “We are using every tool at our disposal to detect and prevent Medicaid fraud,” Gandhi said in a statement.

Lawmakers have also tightened program oversight. Recent reforms include:

• High-risk provider screenings
• Unannounced site visits
• Fingerprinting of ownership
• Stricter billing documentation requirements
• 100-hour annual cap on reimbursable services per recipient

Broader Context: A Pattern of Exploitation

The case is the latest in a troubling pattern of large-scale public program fraud in Minnesota. During the pandemic, the now-infamous Feeding Our Future scandal saw over $250 million in federal child nutrition funds siphoned off through fake meal programs. Additional investigations are ongoing into other Medicaid-related services, including fraudulent autism therapy billing.

Acting U.S. Attorney Joseph Thompson did not mince words:

“Minnesota has a fraud problem—and not a small one. For too long, organized fraud schemes like this have flourished in plain sight, draining public resources dry. Today’s warrants are another step in a much bigger reckoning.”

What Comes Next

As of now, no criminal charges have been filed, and those named in the search warrants are not publicly accused of a crime. However, investigators say Wednesday’s raids mark a significant escalation in the ongoing civil and criminal probe. Additional enforcement actions and potential indictments are likely as authorities build their case.

Why This Matters to Minnesotans

• Taxpayer Accountability: Over $100 million in public funds are at stake.
• Protecting the Vulnerable: Individuals living with homelessness, addiction, or disabilities depend on these services to survive.
• Restoring Trust: Fraud undermines public confidence in safety-net programs.

MinneapoliMedia will continue to follow developments in the case, including any formal charges, policy updates, and future reform efforts to ensure the HSS program delivers on its promise to serve those who need it most.

MinneapoliMedia