Hennepin County raids day-care centers as part of fraud investigation; 4 arrested

Four people were arrested Tuesday and two more arrests are likely in connection with charges filed against three Minneapolis day-care centers that primarily serve poorer children, authorities said.

The raids that led to the arrests were part of a broader effort aimed at rooting out fraudulent billing practices that drain state money meant to help low-income families with child-care costs.

Felony charges were filed against Minnesota Child Care Services, 2500 Minnehaha Av.; Children's Choice Center, 2700 Summer St. NE., and Ummah Child Care Center, 2505 5th Av. S., authorities announced at an afternoon news conference at the Hennepin County Government Center.

The centers are accused of overbilling the state's Child Care Assistance Program (CCAP) by claiming that they cared for more children than were actually present. For example, during a two-week span at the end of last year, Minnesota Child Care Services billed the state for 2,183 children, while a video revealed that no more than 1,233 children were actually attending — a difference of 950 children.

"We have individuals helping themselves to the money that's supposed to be helping families and children," said Jerry Kerber, inspector general for the state Department of Human Services (DHS), the agency that first flagged unusually large billing amounts from Minnesota Child Care Services. DHS then asked the state Bureau of Criminal Apprehension to lead the probe.

"They cheated big and they got caught," Hennepin County Attorney Mike Freeman said of the day-care operators, many of whom have relationships and overlapping employment or ownership at the targeted facilities.

Freeman said the investigation is continuing and that he expects a fourth day-care center to be charged.

The CCAP assistance program, funded through state, federal and county taxes, aims to help low-income families by providing free and low-cost day care so parents can work. For centers that take the poorer children, the program makes up the difference between the actual cost of care and what the parents can pay. Last year, the program provided $215 million to day cares throughout Minnesota.

The program reimburses at rates from $86.24 per day for an infant to $53.74 for a school-age child. It currently serves 30,000, with some 5,300 families on a waiting list for subsidized day care.

For now, the day cares will remain open so families can continue to get care for their children. Freeman and Kerber emphasized that the theft allegations involve employees of the centers, not parents.

Ummah became a licensed day care in August 2013 and "quickly became one of the largest" recipients of child-care assistance money in the state, the charges said. Last year, the day care received $1.5 million in subsidies and was on track to exceed that this year, having received $1.2 million already.

Meanwhile, the center has received correction orders from the state licensing division for staff qualifications, hazards, cleanliness, training and crib violations.

Each of those centers faces one charge of theft by swindle, a felony, while Child Care Services faces two counts.

Child Care Services became licensed in April 2012. By 2013, it was the largest recipient of child care assistance program funds, the charges said. The center received $2.7 million in 2013 and $3 million last year. The center is on track to be the largest recipient of subsidies again this year, the charges said.

Largely in response to this investigation, the 2015 Legislature gave DHS a raft of anti-fraud powers that allow the state to recoup money fraudulently obtained. Previously, prosecution and investigation of fraud in the program was divided among the state's 87 individual county prosecutors, who lacked the resources to pursue complicated fraud cases across jurisdictions.

Messages left at the day cares weren't returned.

Somali community activist Omar Jamal, who knows a key suspect in the investigation, said documentation for provider reimbursement is complicated and encouraged the state to provide more training for new businesspeople.

In May, the DHS shut down Salama Child Care Center, a Minneapolis day care that had allegedly billed the state for hundreds of hours of services that were never provided. That case is unrelated.