Minnesota lacked fraud evidence vs Feeding Our Future before FBI got involved

One thing was missing in Minnesota's months-long legal battle against Feeding Our Future: specific evidence of fraud presented to a judge.

The FBI later did what the Minnesota Department of Education and Minnesota attorney general's office did not, producing an avalanche of evidence that has resulted in 49 indictments in what federal prosecutors consider the biggest pandemic fraud scheme in the country. The feds say at least $250 million meant to feed low-income kids was stolen.

FOX 9 reviewed more than 230 pages of newly released transcripts from court hearings and cross-referenced them with several hundred additional pages of court filings. They reveal how the state unsuccessfully tried to convince a Ramsey County judge by relying on technical violations and complaints of fraud that the judge dismissed as unsubstantiated.

State officials first hinted at wrongdoing in November 2020, after they stopped processing applications for new meal sites, which triggered a lawsuit from Feeding Our Future.

"In one case, one of these sites, the site owner, a day care, didn't even know that (Feeding Our Future) had submitted an application to serve food in its parking lot," said Kristine Nogosek, a Minnesota assistant attorney general, told Judge John Guthmann.

It wasn't the last time that the state hinted at fraud to the judge. But it didn't present specific evidence in court, even as the legal battle intensified before the next hearing in April 2021.

State education officials had issued a stop pay order on March 29 and refused to accept new site applications from Feeding Our Future. Feeding Our Future was a prime sponsor of meal sites on behalf of partner groups that were supposed to serve the meals. Feeding Our Future's lawyer, Rhyddid Watkins, opened the April 2021 hearing by telling Guthmann that "the gloves are off."

In the transcript from that day, the state presented a mostly technical argument. The state's lawyers said Feeding Our Future didn't get an audit from a licensed accountant, and there were questions about the group's federal nonprofit disclosures.

Here, the state's lawyers also told Guthmann about three calls that the Minnesota Department of Education had received about Feeding Our Future. Three site operators said they hadn't provided any meals, but Feeding Our Future had been paid for meals at those sites, Nogosek told the judge.

"But those are unsubstantiated allegations," Guthmann said. "So you're taking the position that if you receive a complaint, you can unilaterally stop making payment pending investigation of that complaint?"

"Um, no, your Honor," Nogosek said, according to the court transcript.

Guthmann pointed to a federal regulation that required the state to approve applications and pay claims unless it had specific reasons to deny them. Several times, he asked the state's lawyers for any such reasons but did not receive them.

What happened next has been well-reported.

Guthmann told Nogosek that the state had a "real problem" if it didn't pay Feeding Our Future's claims. Education officials, seeing the writing on the wall, reversed themselves and restarted payments to Feeding Our Future in late April 2021. That same month, they contacted the FBI, according to federal documents.

This year, federal agents shed light on why Minnesota's initial fraud allegations were so vague.

"MDE did not have access to the participating companies' bank records so was unable to conclusively determine whether they were misappropriating Federal Child Nutrition Program funds," agents wrote in January 2022.

State officials have said that they lacked the investigators and prosecutors that the federal government has. Through a spokesman, Attorney General Keith Ellison has declined repeated interview requests from FOX 9 over the past week.