Fraud in Minnesota: DHS employees say they experienced retaliation for speaking up

Fraud in Minnesota: Witnesses say they faced retaliation for speaking up

Two Minnesotans testified that they experienced retaliation for speaking up about fraud within the state's Department of Human Services. FOX 9's Karen Scullin has the latest details. 

WASHINGTON, D.C. (FOX 9) - Two Minnesotans shared their experiences with fraud and retaliation in Minnesota’s Department of Human Services during a U.S. Senate hearing.

Minnesota voices highlight fraud concerns at Senate hearing 

Fraud in MN: State employees testify at Capitol Hill

The U.S. Senate Small Business Committee hosted a hearing where two Minnesotans testified on widespread fraud across the state. FOX 9's Karen Scullin has the latest details. 

What we know:

Jay Swanson, a former manager of recipient and child care provider investigations at Minnesota’s Department of Human Services, and Faye Bernstein, a current compliance specialist at the department, testified before the U.S. Senate Small Business Committee. 

The hearing, titled "Blowing the Whistle: Inside the Grift That Keeps on Giving," focused on fraud and whistleblower experiences.

Bernstein described how her concerns about risky financial practices and conflicts of interest were dismissed by leadership. 

"But the response I got from leadership was anywhere from, 'I don't understand what the problem is, we've always done this Faye,' to just a complete dismissal to try to get me to stop talking about it," said Faye Bernstein, a compliance specialist for the Minnesota Department of Human Services.

Swanson detailed issues with child care centers receiving taxpayer funds, including applicants with no background in child care and suspicious changes in ownership. He also described a kickback system involving fraudulent centers and parents. 

"What we saw time after time was that the fraudulent child care centers would go on, go around to immigrant communities, and they would offer, you know, kickbacks to these mothers 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,’ and essentially what they would do is they would tell the mothers that, 'We don't want you to bring the kids to our child care center, you take care of your kids at home, but we'll pay you,'" said Jay Swanson, a retired manager of the recipient and child care provider investigations for the Minnesota Department of Human Services.

Both Bernstein and Swanson said they faced heavy retaliation for raising their concerns, with Swanson stating there was a lack of concern from upper management and efforts to reduce the chance of criminal prosecution for suspected fraud from 2017 on.

The hearing also included a reporter who has covered fraud in Ohio and the CEO of Citizens for Responsibility and Ethics in Washington, D.C.

Bernstein said she believes in social services programs for those who need them but saw problems with how things were being done. 

"It was anything from obvious conflicts of interest to large, large advances being given. If the contract was for 3 or $4 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 got your money, and they haven't done a thing for you," said Bernstein.

Swanson resigned in 2019 after raising concerns about fraud and management’s response.

Local perspective:

Minnesota’s Department of Human Services has faced scrutiny in recent years over the handling of taxpayer funds and oversight of child care providers. 

The testimony from Swanson and Bernstein adds to ongoing conversations in the state about accountability and transparency in public programs.

The committee’s focus on Minnesota whistleblowers highlights the state’s role in shaping national discussions about fraud prevention and whistleblower protections.

What's next:

The Small Business Committee will use information from the hearing as it works to prevent fraud in small business and other sectors. Lawmakers are expected to consider the testimony as they look at ways to strengthen oversight and support for whistleblowers.

The committee did not announce any immediate actions but indicated that the hearing’s findings will inform future policy decisions.

What we don't know:

It is not yet clear what specific legislative or policy changes, if any, will result from the committee’s hearing or how Minnesota’s Department of Human Services will respond to the testimony.