A federal prosecutor highlights ‘fraud tourism,’ where people with no connection to the state allegedly siphoned money from safety-net programs there

By Scott Calvert – Dec. 19, 2025 6:38 pm ET – Wall Street Journal

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Assistant U.S. Attorney Joseph Thompson, at the lectern, said prosecutors are scrutinizing more than a dozen Medicaid programs. Kerem Yücel/Minnesota Public Radio/AP

In Minnesota, a huge, multiyear social-services fraud scandal keeps growing. Federal prosecutors this week charged six more people with allegedly participating in a sprawling effort to defraud the state’s safety-net system. Overall, 92 defendants, many of them residents of Somali descent, have been charged, and 60 have been convicted, according to prosecutors. 

The investigation remains active, and Assistant U.S. Attorney Joseph Thompson said prosecutors are scrutinizing 14 Medicaid programs meant to help low-income people that collectively have spent $18 billion since 2018. He said while it isn’t clear how much of the $18 billion was fraud, “we know a significant amount was.”

“What we see in Minnesota is not a handful of bad actors committing crimes. It’s a staggering industrial-scale fraud,” Thompson said at a news conference Thursday.

Here’s what to know: 

New charges

The six additional defendants were charged with allegedly taking part in schemes to defraud government-funded housing and autism-services programs. In addition, a defendant charged in September pleaded guilty Thursday, prosecutors said. 

Another defendant’s alleged scheme led to more than $6 million in fraudulent reimbursements, and prosecutors say the 27-year-old spent more than $100,000 of fraud proceeds on a semi-truck and sent more than $200,000 to Kenya.

‘Fraud tourism’

Two of the defendants charged Thursday are Philadelphia residents who prosecutors allege committed “fraud tourism.” The two men had no connection to Minnesota before enrolling two companies in the state’s Medicaid-funded housing stabilization services program, Thompson said. 

After returning to Philadelphia, prosecutors allege, they began submitting fraudulent claims to Minnesota’s Medicaid program and obtained more than $3.5 million in fraudulent payments.

“They came here because they knew and understood that Minnesota was a place where taxpayer money could be taken with little risk and few consequences,” Thompson said.

Minnesota ‘outlier’

Federal prosecutors in Minnesota say the evolving fraud cases show the state is a national outlier “in a bad way.” “You don’t see fraud on this scale in other states,” Thompson said, adding, “Every day we look under a rock and find a new $50 million fraud scheme.”

He said Medicaid or Medicare fraud traditionally involves overbilling for services provided. 

“What we’re seeing is programs that are just entirely fraudulent. These aren’t companies that are providing some services but overbilling Medicare or Medicaid. These are companies that are providing essentially no services. They’re essentially shell companies created to defraud the program.”

Other states

Fraud does pop up in other states. Federal authorities in Massachusetts on Wednesday charged two men with fraud in a nearly $7 million food stamp scheme, part of what they said was a Trump administration-led effort to crack down on fraud in the government’s Supplemental Nutrition Assistance Program.

The nonpartisan and nonpolitical Government Accountability Office has estimated that “the federal government loses between $233 billion and $521 billion annually to fraud,” based on data from 2018 to 2022. Programs experiencing the largest share of improper payments, which aren’t always caused by fraud, include Medicare, Medicaid, the earned-income tax credit and SNAP, according to the GAO.

The GAO pointed to a problem with organized groups defrauding the government. Its analysis of Justice Department statements and court records from March 2020 through December 2024 found that nearly half of the 1,875 defendants convicted of crimes related to Covid-19 pandemic fraud also had faced conspiracy charges, suggesting the involvement of an organized group. 

Trump response

The safety-net scheme has put Minnesota’s Democratic Gov. Tim Walz and the large Somali community there in the spotlight, though local leaders say the scandal doesn’t reflect the community broadly. 

The fraud has prompted scrutiny by the Trump administration of how the state is administering programs that receive federal funds. In a recent video, Dr. Mehmet Oz, the Centers for Medicare and Medicaid Services administrator, criticized Walz and said to restore “the integrity of the Medicaid program,” Minnesota must provide CMS with weekly updates on how the state is stopping fraud, among other measures.

The Trump administration’s top child-welfare official, meanwhile, wrote Minnesota officials requesting information, by Dec. 26, about recipients of a federal program that reimburses states for certain foster-care and adoption expenses, among other programs.

The letter referenced “recent federal prosecutions and additional allegations that substantial portions of federal resources were fraudulently diverted away from the American families they were intended to assist.”

At a news conference Friday, Walz said he was grateful for the latest criminal charges. “If you commit fraud, you should go to prison,” he said. Walz also noted, however, that it was his administration that paused payments for the 14 state Medicaid programs. He had also ordered a third-party audit of the programs to look for signs of “suspicious billing activity.”

“This is on my watch,” he said. “I am accountable for this and, more importantly, I am the one that will fix it.”

Write to Scott Calvert at scott.calvert@wsj.com