Could Minnesota officials have stopped Feeding our Future fraud sooner?

Why did it take almost two years for government officials to shut down Feeding Our Future and cut off payments to individuals now accused of orchestrating the nation's largest pandemic fraud?

That question has become a topic of intense political debate since federal prosecutors charged dozens of people last month, accusing them of robbing a federal meals program of $250 million. Republicans running against Democratic Gov. Tim Walz and Attorney General Keith Ellison have sought to blame them for being slow to respond to the scandal.

Walz, Ellison and state education officials said they did everything they could, from unsuccessfully trying to shut down Feeding Our Future to alerting federal authorities about their suspicions of wrongdoing when those efforts faltered in early 2021. U.S. Attorney Andrew Luger and other federal authorities praised state officials for collaborating on a successful investigation.

But in statements to the Star Tribune this week, Ellison's office pointed the finger at federal authorities for taking 17 months to issue indictments. The federal investigation began April 2021 with a tip from the Minnesota Department of Education (MDE).

"Ultimately, only federal law-enforcement authorities can answer why it took them 9-10 months from the time they accepted referral of the case from MDE to execute search warrants and order MDE to shut off payments to FOF," John Stiles, Ellison's deputy chief of staff, said in an email. "Only they can answer why it took them another 8 months after the search warrants to land indictments."

Luger's office declined to comment for this story, but he praised federal investigators for working at "breakneck speed" when the indictments were announced in September.

"People worked long days and nights, over many months, to make it possible to bring these charges," said Luger, the chief federal law enforcement officer in Minnesota.

The Attorney General's Office is the first state entity to publicly question whether federal authorities acted urgently enough to shutter Feeding Our Future. A Star Tribune review of state and federal records shows that Minnesota officials provided federal authorities with little or no evidence that Feeding Our Future was misappropriating government funds.

The FBI had to build a case from scratch, obtaining records from "hundreds of bank accounts" and following the money to dozens of conspirators, according to search warrants filed in January. Those bank records led to indictments that laid out how millions of dollars meant to feed needy children was used to buy cars, jewelry and expensive real estate, with the perpetrators covering their tracks by submitting fake attendance sheets and phony invoices, according to court records.

The Attorney General's Office has broad authority to conduct civil fraud investigations and could have initiated its own probe or demanded the nonprofit's bank records before the feds stepped in. Ellison's office began representing the Education Department in court when Feeding Our Future sued the department in November 2020 for blocking its expansion plans.

If Ellison's office had used its investigative power to pull bank records, it could have found that the alleged conspirators paid at least $524,579 in bribes and laundered $3.2 million in program funds between July 2020 and March 2021, prior to the FBI's involvement, according to a Star Tribune review of the federal indictments.

Ellison did not launch his own investigation into Feeding Our Future until February 2022, after the nonprofit ceased operations and had pocketed about $250 million in federal funds.

Ellison declined an interview request. In a written response to questions from the Star Tribune, Stiles said it's possible the Attorney General's Office could have obtained "some evidence to discern fraud or misdirection" if it had demanded records from Feeding Our Future earlier. Such findings could have jump-started the federal investigation or given state regulators ammunition to act on their own.

Stiles said it is more likely that Feeding Our Future would have fought aggressively against a records request in court, potentially filing a "sham lawsuit" or motions to quash it, delaying the office from obtaining the information.

While a delay could have occurred, the Minnesota Supreme Court has upheld the attorney general's right to seek such records when that authority has been challenged.

Stiles noted that federal investigations often move quickly, pointing to the 2008 raids on the home and offices of Tom Petters, who was later convicted of organizing a $3.65 billion Ponzi scheme.

"It is up to federal authorities to explain why they were capable of executing search warrants in the Petters case within 16 days but took up to 10 months to do the same in Feeding Our Future," Stiles said.

'Prefer not to be kept informed'

One major difference in the Petters case, records show, was the existence of a whistleblower who was willing to wear a wire against her co-conspirators, including members of Petters' inner circle. The cooperation of former Petters executive Deanna Coleman led to guilty pleas from four of Petters' associates and several hedge-fund managers who did business with Petters.

In the Feeding Our Future investigation, the only known whistleblowers came from outside the organization, records show.

Most of those tips came from Partners in Nutrition, the former employer of Feeding Our Future director Aimee Bock, who was fired for misconduct by Partners in 2018, shortly before she sought state approval to operate Feeding Our Future, state and federal records show.

In June 2018, before a single dollar had been paid to Feeding Our Future, former Partners director Christine Twait told an MDE official involved in overseeing the food program that Bock had no right to run Feeding Our Future because she had "forged" the signature of another director on incorporation documents.

The MDE official did not act on Twait's concerns.

"I prefer that you work directly with Aimee for a resolution of the dispute among the governing board members of Feeding Our Future," the official said in an email to Twait on the same day. "Unless there is a conviction for any business-related offense, or the organization is no longer in good standing with the IRS, I prefer not to be kept informed of developments related to the dispute."

Partners also brought its concerns to the Attorney General's office in 2018 and 2019, according to records released this week by Ellison's spokesman. In the 2019 complaint. Partners Director Kara Lomen accused Bock of stealing electronic files, breaking recruitment rules and engaging in other illegal behavior.

In response to both complaints, officials with the Attorney General's Office suggested Partners officials take their concerns to other state and federal agencies, including the state Education Department, the Minnesota Secretary of State and the U.S. Department of Agriculture, which oversees the meals program at the federal level.

"I appreciate your concerns," a deputy attorney general wrote to Lomen in response to her 2019 complaint. "It must be worrisome to learn that your signature has been forged on corporate documents and that a corporation may have engaged in unauthorized and illegal practices that affect your own business."

Partners was booted from the meals program this year after federal authorities accused the nonprofit of working with contractors who received fraudulent payments. Partners quickly severed ties to those firms and is now challenging the department's actions in federal court.

In response to questions from the Star Tribune, the Attorney General's Office said this week that it repeatedly warned Feeding Our Future in 2019 that it "may be soliciting charitable contributions" in violation of state rules for failing to register with the state. Feeding Our Future registered six weeks after the first warning letter went out, according to the statement.

The IRS revoked Feeding Our Future's nonprofit status in February 2020 after the organization failed to file required tax forms for three years. The organization also failed to provide a required audit in 2020.

The state Education Department cited those lapses when it moved to terminate Feeding Our Future's involvement in the meals program in January 2021. The department ended that proceeding in June 2021 after Feeding Our Future addressed the problems.

Though court records show that state regulators were suspicious about the growing volume of reimbursement claims from Feeding Our Future, the department and its representatives at the Attorney General's Office never directly accused the nonprofit of fraud.

The Education Department reported its suspicions to the USDA, but MDE officials said the federal agency — which oversees the meals program — did not take action. The Education Department never asked the Minnesota Attorney General's Office to conduct a civil investigation, Stiles said. Under state law, the attorney general has authority to investigate fraud.

A series of 'missteps'

The issue came to a head at a hearing in April 2021, when MDE sought permission from Ramsey County District Judge John Guthmann to withhold $20 million in reimbursement claims from Feeding Our Future.

Kristine Nogosek, an assistant attorney general who defended the department against Feeding Our Future's lawsuit, told Guthmann that regulators had received "very concerning" calls from at least three site operators that indicated Feeding Our Future was being reimbursed for meals never served, according to a transcript of the hearing.

Feeding Our Future's attorney, Rhyddid Watkins, told Guthmann that he agreed that the state could withhold funds if it determined the nonprofit "knowingly submitted fraudulent claims." But he said no such evidence had been provided to the court.

Guthmann agreed, calling the department's concerns "unsubstantiated allegations," according to the transcript.

Court records show that Feeding Our Future won all the major battles in its lawsuit, with the judge backing the nonprofit's demand that the state take action on its growing backlog of proposed meal sites. The judge also agreed that the state had acted without cause in halting payments to the nonprofit.

In a written statement, Walz spokeswoman Claire Lancaster said the governor was supportive of his Education Department's efforts to address the "concerning activity" with Feeding Our Future. Walz declined an interview request.

Asked if the governor has a plan to prevent such fraud from happening again, Lancaster said Walz "takes misuse of taxpayer dollars extremely seriously" and is awaiting findings from the Education Department's after-action review and a separate report from the state legislative auditor.

Two former senior members of the Minnesota Attorney General's Office, both Democrats who asked not to be named for fear of retribution, were critical of Ellison's handling of the case. The two said the department could have used its broad investigative powers to collect bank records and other financial documents well before the feds got involved. They said that might have allowed the state to prove fraud and shut down Feeding Our Future before the bulk of payments were made.

Beverly Heydinger, a former deputy attorney general who left the office in 1998, agreed there may have been "missteps" in the state's handling of the case.

"It is a big deal, and it is easy to look back in retrospect and say: Had you known then what you know now, could you have done this or could you done that?" Heydinger said. "But I don't think there is anything to suggest that the attorney general was asleep at the wheel."

The Feeding Our Future case lacked the kind of teamwork displayed in some recent partnerships between state and federal investigators. In several high-profile investigations, including an $11 million telemarketing scheme, the U.S. Attorney's Office took over after the Minnesota Attorney General's Office had already collected evidence and taken steps to shut down scams.

Former federal prosecutor Mark Osler, who now teaches law at the University of St. Thomas, said federal authorities seemed to move with sufficient urgency against Feeding Our Future to close down an ongoing criminal enterprise while building a strong case.

"When you are dealing with something this complicated, you can do it one of two ways: fast and shallow or you can do it slower and deeper," Osler said. "It takes more work to get the root out."