Federal Indictments Expose Widespread Fraud in Minnesota Housing Program, Prompt State Crackdown

Federal Indictments Expose Widespread Fraud in Minnesota Housing Program, Prompt State Crackdown

ST. PAUL, Minn. — Federal prosecutors have charged eight individuals in what they describe as a large-scale scheme to defraud Minnesota’s Housing Stabilization Services (HSS) program, intensifying scrutiny of the state’s oversight and prompting swift responses from Governor Tim Walz and legislative leaders.

The indictments, announced Sept. 17 by Acting U.S. Attorney Joe Thompson, allege that four companies — Brilliant Minds Services, Faladcare, Inc., Leo Human Services, and Liberty Plus — orchestrated fraudulent billing schemes that siphoned millions of dollars from HSS. The program, launched in 2020, was designed to help seniors and people with disabilities find and maintain stable housing.

A Program “Riddled With Fraud”

According to federal court documents, the defendants created sham companies that billed the Minnesota Department of Human Services (DHS) for services never provided. Prosecutors allege the companies targeted vulnerable individuals, including those leaving substance-use treatment facilities, using their personal information to submit inflated or false claims.

Thompson described the HSS program as “riddled with fraud,” stating that much of the hundreds of millions of dollars spent since its inception had been stolen rather than reaching those in need. He emphasized that this is “the first wave” of charges and that more indictments are expected as the investigation continues.

State Response

On the same day charges were filed, Governor Tim Walz signed an executive order directing state agencies to strengthen fraud prevention and enforcement efforts. Measures include disenrolling inactive Medicaid providers and requiring prepayment reviews for high-risk providers.

The DHS, which administers HSS, has already suspended payments to dozens of providers amid credible allegations of fraud and announced earlier this year that it would phase out the program entirely.

Lawmakers Weigh In

Senate Majority Leader Erin Murphy (DFL–St. Paul) called the indictments “a serious problem” and underscored the need for stronger safeguards.

“While I appreciate we have continued work to do, I am encouraged,” Murphy said. “Significant personnel changes and Governor Walz’s executive order this week will help that agency stop fraud as soon as possible. I will continue to work with agencies, prosecutors, experts, Senator Heather Gustafson (DFL–Vadnais Heights), and legislators to stop the theft of money meant for people in need.”

Sen. Gustafson has been a leading advocate for anti-fraud measures. She authored a bipartisan Senate bill that would have created an independent Office of the Inspector General with subpoena power and authority to investigate and audit state programs. The bill passed the Senate but stalled in the House.

What’s Next

Federal officials say more charges are forthcoming as investigators continue probing the scheme, which spans multiple providers and millions in fraudulent claims. Meanwhile, state leaders are under pressure to reassure Minnesotans that taxpayer dollars intended to help the most vulnerable will not continue to be siphoned off by fraudsters.

Minneapolimedia