Minnesota Fraud Hearing: Senators Ernst, Hawley Investigate New Whistleblower Claims

Added: 2026-05-21

[00:00:00]At a Senate Small Business Administration Committee hearing, Senators Joanie Ernst and Josh Holly questioned Minnesota Department of Human Services officials over alleged fraud tied to risky contracting practices and issues previously reported at child care centers. Watch the top moments right here. According to your testimony, in early 2019, while you were serving as a Minnesota Department of Human Services contract specialist, you raised concerns about risky contracting practices that would leave the department open to double dipping. Could you give us an example of uh this double dipping risk to the state and explain what kind of response you received from your department head when you raised this potential issue.

[00:00:51]>> Thank you, chair. This uh was a group of contracts that that I I really thought about because I think it was important.

[00:00:58]It was about uh it was a group uh totaling about $12 million and it was for pregnant and parenting women who were addicted. And so that's a that's a very important service. I wanted that service.

[00:01:12]>> However, we had just put that in our Medicaid package. So it was billable to insurance. There was no reason that we would be giving grant dollars for it.

[00:01:23]And not only was there no reason for us to do it, but there was also no way for us to tell if the agency that we gave it to build twice the double dipping there.

[00:01:36]There was no way for us to see that. And so when I I I thought about this one for probably three or four months before it was finally assigned to a probationary employee, a brand new employee who who did the contracts and oddly enough was later promoted into my job when I was removed. Um but the the the the response I got from leadership was anywhere from I don't understand what the problem is.

[00:02:06]We've always done this FA to uh just just a complete dismissal to to try to get me to stop talking about it. And this again is one of those very uncontroversial, very cut and dried situations. I do not know how someone could logically disagree with me. Mhm. And are you you aware of anyone else that was reprimanded or had any other personnel action taken against them in this similar situation?

[00:02:44]>> Yes, it was very common for uh employees to be stifled was the word that was used against me that I needed to be stifled.

[00:02:56]There was many efforts to do that. Um it it worked in a lot of cases. there is much less public speaking now. There is a large group of uh anonymous tweeters who who do communicate on this but there are very rare instances where someone will come forward publicly.

[00:03:17]>> Okay. And just to reiterate, you were uh removed out of that equation because you questioned those contracts, but someone with absolutely uh much less experience than was given those contracts didn't question it and then was later promoted into your position.

[00:03:36]>> Correct.

[00:03:36]>> Okay. I just wanted to make sure I heard you correctly there. Um Mr. Swanson. By now, everyone has heard of Minnesota's infamous Laring Center, uh, Quality Liring Center, but you were on the ground serving as a criminal investigator for Minnesota's childcare assistance program, and you were uncovering many of those similar fraud schemes. Can you briefly explain to us the kickback system that fraudsters use to enroll children at these child care centers?

[00:04:10]Um, Madame Chair, yes. Um, in Minnesota and I would assume most other states that have a program like this um the child care centers can only bill for um children um when their parents are on public assistance um and the parents have to be engaged in either an educational or work-related activity that would uh necessitate the need for child care. Uh what we saw time after time was that um the fraudulent child care centers would go along go around to immigrant communities and they would offer you know kickbacks to these mothers uh if they would tell their caseworker that my child is going to be going to this particular child care center for five or six or seven days a week. Um, and essentially what they would do is they would tell the mothers that, uh, we don't want you to bring the kids to our child care center. You take care of your kids at home, uh, but we'll pay you. It started out at $200 a month per child. It went up to about $300 a month by the time I left. Um, so a mother of five children would, you know, uh, be taking in $1,000 a month uh, to take care of their kids at home. And then in order to fulfill the education or work requirement, uh they the child care center would falsify uh employment documents so the mothers could take those to their caseworker and show them that they were working at the child care center.

[00:05:41]>> Oh, for heaven's sakes. Okay. Well, Mr. Swanson. If you look at the front uh of the Quality Laring Center, right below the sign and above the entrance to the building, uh there's a video camera and a sign that states the premises are under 24-hour surveillance. Um so sign right here. Are all childc care centers required to have security cameras?

[00:06:07]>> No, Madam Chair, they're not. Uh, do you think that would those videos be archived so that investigators could access access them if they did have surveillance cameras like this one?

[00:06:19]>> Madam Chair, there were a few centers that we investigated that had um um video cameras that were archived and we had uh staff in our digital forensics unit uh that uh were able to uh retrieve the footage. Um but uh in Minnesota, no child care center was required to have any sort of um video surveillance system, but some did.

[00:06:43]>> Very interesting. Um and as investigators, if you had availability to cameras, you would be able to go back and view that. Correct.

[00:06:56]>> That's correct, Chair.

[00:06:57]>> Okay. Um, so right here at the Laring Center, do you think we would be able to get videotape from the Laring Center and see if there were children coming and going?

[00:07:08]>> Um, you know, if their system was set up, you know, and designed um um, you know, so we could retrieve the video archives. Um, you you could >> Okay, thank you very much. Um, it's interesting. We didn't have children coming and going from that Larrying Center even though there's video surveillance.

[00:07:28]>> Bernstein, if I could just start with you, you worked in the Minnesota Department of Human Services. Is that right? For correct, >> 20 years, correct? Or more.

[00:07:38]>> And at the agency there, you served in roles related to contract management and compliance. Is that basically right?

[00:07:44]Several years ago, looking here at your written testimony, you say that you started to notice some inconsistencies in contracts that came across your desk.

[00:07:51]Can you just describe what those inconsistencies or irregularities were, what they looked like?

[00:07:57]>> It was anything from obvious conflicts of interest to large uh large advances being given. uh if the contract was for three or4 million, we were giving million-dollar advances before any work had occurred. That is a very risky thing to do. A business can just close up and they've they've got your money and they haven't done a thing for you. Um there was >> to whom were these if I might ask to whom were these advances going? What kind of entities do you recall? What kind of entities were we talking about?

[00:08:32]>> So states do not in general do their own social services. is they do not do services for the residents of their state. They contract out that work to most often nonprofits, occasionally profits, but most often nonprofits. And so those are then considered grant contracts.

[00:08:53]And those grant contracts uh are are well regulated in statute, well defined in statute. And we were doing many things we that that were not compliant with statute. there there would be a contract with a dollar amount that had no formula, nothing that I could find that would establish why that dollar amount was.

[00:09:16]>> Could you detect a pattern in these inconsistencies?

[00:09:20]>> I in in general, no. But I but I did notice a slight preference for uh our tribes. our our our our tribes were uh one situation where I saw contracts that I no one could explain to me why they were the dollar amount that they were.

[00:09:42]>> What happened when you reported these inconsistencies to your superiors?

[00:09:47]>> I was called racist, you know, and then I was I was walked out. I was there was quite a smear campaign. I was investigated. Uh, I have about 400 pages of uh investigatory information about me.

[00:10:06]>> You'd worked there for 20 years at at this point. I mean, you have a long track record.

[00:10:10]>> Yes.

[00:10:10]>> As a civil servant, as a public servant.

[00:10:13]You you bring this to the attention of your supervisors as you are supposed to do and it sounds to me like you were retaliated against. I mean, is that a fair thing to say?

[00:10:20]>> Yes, absolutely.

[00:10:22]>> And how what how did this end? I mean, how long did this go on? What was the result of it? It actually still goes on.

[00:10:27]This started for me seven years ago, but I am still just shuffled from one job to another. A supervisor about a year ago said, 'Well, we have to find you something else to do now. So now I redact documents. Um, I have nine years of college and I I put black marks on documents for media requests. Do you think in light of the revelations of of widespread fraud and abuse in the state that maybe maybe there's a systemic problem in state government that you you exposed in part but that probably extends far beyond you? I mean, is that fair to say?

[00:11:01]>> There absolutely is and and I and I now realize that it was long before me.

[00:11:07]>> Are you familiar with the the case of Keith Ellison?

[00:11:10]>> Yes. Keith Ellison testified under oath before a committee of of this body not long ago and insisted to me that he had never done anything wrong and didn't know anything about any of the fraud and abuse. The only problem is is that there are records, tape recordings of various fraudsters coming to see him associated with the scandals that uh the chairwoman was just talking about a moment ago. Coming to see him complaining about people I think in your department the fraudsters were saying, "Oh, we're getting push back." Who knows? Maybe it was you. we're getting investigated. Can you do something about it? And Ellison said, "Oh, well, I'll see what I can do." And they offered him campaign contributions.

[00:11:48]And he took them unbelievably. And we know this is all true because they recorded it all. It's the problem when you work with scumbags. They they'll double cross you just like they'll double cross anybody. The whole thing is on tape. I can't think of a greater instance of abuse of public trust. And if your own attorney general was doing it, who knows how deep, how far, how wide this fraud goes. This is extraordinary. I don't understand why people like him are in prison. But I want to applaud you, M. Bernstein, for doing your job. And I think it is absolutely shameful that you have been retaliated against and treated like scum when you are a 20ear civil servant, proud motan just doing your job. I don't know what your politics are. I don't think it matters. I'm sure it didn't matter to you when you did your job. And yet, you're treated like that. And meanwhile, people like Ellison are fedded and lauded. And he's a star in his party. It's unbelievable. He's a crook. It's exceptional. We need more people like you who are doing their jobs and who are fighting for the public and fighting for what is right and true and just. And I want to thank you for coming forward. For more content like this, stay tuned to Congress Clips.