Minnesota lawmakers press for answers on daycare fraud investigation

(FOX 9) - State lawmakers are learning what is going on inside the Department of Human Services and its investigation into fraud in the state's childcare program. Some within the department say the fraud could total $100 million and that some of that money could be going to terror groups overseas.  

At a hearing Monday, lawmakers pressed for answers. 

Everyone agreed on at least one thing: there is fraud in Minnesota's childcare program, also known as CCAP. The question is how massive is that fraud? Where is the money going, and did the Department of Human Services turn a blind eye to the fraud?

Scott Stillman is the former state forensics investigator turned whistleblower who claims Minnesota's childcare program is rife with fraud, as much as $100 million.

“This has the potential to be Minnesota’s Watergate,” he said. “The door is locked and no one can get in, but the bill is for 100 kids.”

Stillman told a house subcommittee the money is going overseas to terror groups, allegations first reported by the FOX 9 Investigators. 

Stillman, who resigned from DHS in March, made another explosive allegation Monday: that powerful politicians may be standing in the way of the investigation. 

“Money from the daycare investigation is going to politicians state and federal," he said. “I processes 30 computers and phones and the investigators said I can't accept evidence. A prominent politician told me I can't do that because the individual contributed to their campaign."

DHS’ internal watchdog, Inspector General Carolyn Ham, told lawmakers that while 16 daycare centers were shut down because of fraud, there's no evidence the fraud totals $100 million, which would be half the program's budget. 

“We have stopped payment to 16 centers out of 1,700. Those cases are bad, but only 16, and that is the problem with extrapolating,” Ham said.

Lawmakers also heard from the legislative auditor, who says his investigation will be made public at the end of January.  

“Frankly, as we've gotten into this issue, we've seen their complexity and, frankly, the need to talk to a lot of people," Jim Nobles said.

But the allegations keep coming.

Now DHS admits it hired an outside consultant, PFM Group, to examine the work of its own 11 investigators in the Inspector General's unit - investigators now investigating the investigators.

Lawmakers wondered if DHS is shopping for answers it wants to hear.

According to one fraud investigator who testified Monday, one of the reasons fraud was so common is that operators of the daycare centers can play a shell game between the owners of the daycare, the managers and the billers. They each afford the other plausible deniability, which makes it very hard to prove intent.