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Alleged child care fraud biggest in state history

In 1976, when Ronald Reagan made a campaign issue of welfare cheats by highlighting the case of Linda Taylor — the notorious Chicago “welfare queen” who obtained illicit benefits — the future president kicked off a heated debate about the prevalence of public benefit fraud that continues to this day.

Then and now, many liberals saw Reagan’s claim as little more than rank demagoguery, pointing to the ample exaggerations in his account of the Cadillac-driving, fur-wearing con artist who got fat off the public teat. Some even suggested — wrongly, it turned out — that Reagan had outright fabricated the entire yarn.

For many conservatives, the story confirmed the view that carelessly run government social service agencies had become low hanging fruit for hustlers like Taylor — a claim subsequently invoked countless times to undergird arguments in favor of cutting “wasteful” social services programs and devoting more resources to ferreting out abuses.

The “massive” fraud case brought last week against the operators of a now-shuttered chain of Twin Cities child care centers probably won’t do much to settle that decades-old debate.

But if the charges hold up, the infamous welfare queen of yesteryear — ultimately convicted of illegally obtaining $8,000 in benefits through the use of four aliases — will look like a piker by comparison.

According to the complaint filed in Ramsey County District Court, a husband and wife from Fridley — Yasmin A. Ali, 33, and Ahmed A. Mohamed, 46 — bilked the state of more than $4 million as part of a complex scheme in which they recruited aid-eligible parents to enroll their children in the day care, created no show jobs for the parents to satisfy work requirements and submitted false records to the Department of Human Services.

All told, prosecutors lodged 96 felony counts against Ali, Mohamed and two of their alleged accomplices, Joshua Miller, 31, of St. Paul, and Jordan C. Smith, 31, of Cottage Grove. The charges including racketeering, tax evasion, and theft by swindle.

Ramsey County Attorney John Choi said the 27-month-long, multi-agency investigation of the Deqo Family Center — which operated day care centers in Minneapolis, St. Paul and Apple Valley before the DHS revoked its license last year — validates recent expansions of fraud enforcement programs at both the county and state level.

Choi said financial fraud has been a top priority since he was on the campaign trail, where he heard numerous complaints about the increased prevalence of identity theft and other financial scams.

“People who may at one point have been dealing drugs or doing other illegal things are migrating into this particular area, especially over the past eight years or so,” said Choi. “Financial fraud is one of the areas that were not being addressed properly.”

Choi said he has since dedicated two staff prosecutors to focus on such cases, along with two investigators who are “specifically devoted to doing public benefit fraud work.”

He said he is asking for help to further expand the initiative. “We’re trying to figure out a way to get some more state funding in this area,” he said, citing “a dramatic increase” in referrals from state agencies.

According to the Department of Human Services, the defendants in the Deqo case defrauded the state’s Child Care Assistance Program of $3.19 million over a four-year period — by far the largest dollar figure in such a case in CCAP history. The defendants are also accused of defrauding Medicaid of $500,000 through an associated home health care company, All Nations Home Health Care, LLC.

The charges come more than three years after the Legislative Auditor criticized DHS for lax oversight of the CCAP program. That finding prompted a major overhaul at the agency, including the establishment of an Office of Inspector General, a 179-member investigatory and compliance team modeled after the OIG office at the U.S. Department of Health and Human Services.

This year, DHS hired four investigators specifically for its child care fraud unit, as well as a data analyst. In addition, the agency contracted for the services of two Bureau of Criminal Apprehension investigators in 2013.

“I think this is a clear indication that this was the right thing to do and the very reason we undertook efforts to beef up the oversight,” said Sen. Tony Lourey, DFL-Kerrick, the chief author of legislation in 2013 that provided funding for the new positions.

But Lourey said he is also concerned that the eye-popping numbers contained in the Deqo complaint will foster the impression that the child care assistance program is rife with fraud.

“We’re all committed to making sure our scarce public resources are being used for the best purposes. We try to prevent cases like this because they feed into a perspective that is often unwarranted,” said Lourey. “CCAP dollars, by and large, are a very good investment. I’d hate to see this story subsume that.”

Lourey, who has not yet been briefed on the details of the investigation, said it’s too early to say whether the size of the alleged fraud would justify a further expansion of the OIG team.

“There’s a sweet spot with compliance review. Would we get a return if we invested more? I don’t know,” said Lourey. “But we will have further conversations about whether we’re at the right place.”

Given the scale of the alleged case does DHS need to promulgate more stringent regulations for CCAP?

Lourey said it’s too early to say but cautioned that such measures could prove counterproductive “if we make it too hard for parents and providers to comply.”

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