Whistleblower Bernstein says lax gov't oversight made Minnesota 'great environment for fraud'

The web of social services fraud that’s taken place in Minnesota, largely committed by residents from Somalia, siphoned billions of tax dollars meant to help the vulnerable. 

But years before the national headlines, insiders were sounding the alarm about a system primed for abuse on a wide scale. One of them is Faye Bernstein.

“What I was concerned about is that we had very risky practices. We had a great environment for fraud,” Bernstein told "Full Measure" in a recent interview in Minneapolis.

In 2019, Bernstein was a compliance officer for the Minnesota Department of Human Services when she says she spotted red flags. Her job was to make sure welfare-related contracts followed the rules.

“There was not any of the normal guardrails,” she says. “There was nothing that would prevent [fraud]. And then if I did point that out, or anyone else pointed that out, you were immediately targeted, and you were ‘the bad employee.’ And from that point on, there was nothing you could do. Everything you did was wrong.”

Bernstein says managers at the Human Services agency first pegged her as a troublemaker when she refused to approve seven problematic contracts. They totaled over a million taxpayer dollars. A colleague signed off on them anyway, and Bernstein says she faced retaliation.

“My job duties were lessened and lessened," she said. "I realized that I was being excluded.”

Seven years after Bernstein began blowing the whistle, an independent audit in January confirmed ongoing shortfalls. It concluded recently, after the fraud made headlines, that employees at the agency either “backdated or created” documents involving mental health contracts during the audit of their work. 

The audit ultimately concluded the agency “did not comply with most requirements” and “did not have adequate internal controls over grant funds.”

Another red flag: Minnesota’s Medicaid spending on autism services. It surged from about $1 million in 2017 to $343 million in 2024 – without meaningful oversight.

Minnesota state Rep. Kristin Robbins has heard from numerous whistleblowers. She heads up the Legislature’s main fraud-prevention committee.

Robbins says after state audits in 2019 exposed millions in childcare fraud that lack of action kept the system vulnerable to abuse.

“So this big explosive report came out, and rather than saying, ‘OK, go to town, go do all these criminal investigations,’ the criminal investigation unit was shut down, and they were told, ‘No, we're not doing criminal investigations in childcare anymore. You can look at overpayments and then any overpayments you find can get referred to an overpayments committee, and we'll decide if we'll seek reimbursement, but they were no longer pursuing criminal investigation or charges on childcare fraud,” Robbins says.

She also connects the dots between Minnesota’s childcare fraud and the other welfare scandals that have unfolded.

“There was a group of people involved from the Somali community who created a group called the Minnesota Minority Childcare Association," she told "Full Measure." 

“And that group would try to lobby against changes that would tighten the internal controls. So anytime the legislature did come forward with a proposal to say, ‘Oh, well, we should tighten this up or tighten that up,’ this Minority Childcare Association would say, ‘No, we shouldn't do that. That will hurt our families. That's, you know, not gonna work.’ And many of those people who were involved in the Minnesota Minority Childcare Association then later, became defendants and charged and convicted in the Feeding Our Future Scandal. So the childcare led to the Feeding Our Future Scandal."

The “Feeding Our Future scandal” is the nation’s biggest known COVID fraud scheme. Prosecutors say Minnesota nonprofits, vastly run by Somali-Americans or immigrants, “falsely claimed to have served 91 million meals, for which they fraudulently received nearly $250 million in federal funds. That money did not go to feed kids. Instead, it was used to fund their lavish lifestyles.”

Total estimated Minnesota fraud: At least $9 billion tax dollars since 2018 across 14 high-risk welfare or social services programs. Nearly 100 people have been charged so far, the vast majority Somali Americans or immigrants. Two-thirds have been convicted so far in multiple interconnected schemes.

For more on this story, watch "Full Measure with Sharyl Attkisson” Sunday. Attkisson's most recent book is "Follow the $cience: How Big Pharma Misleads, Obscures, and Prevails."