Whistleblower reported daycare fraud and possible link to terrorism to DHS management

(KMSP) - A government whistleblower said he warned upper management at the Department of Human Services about massive daycare fraud more than a year ago.

Emails obtained by the Fox 9 Investigators show the Minnesota government agency was told millions of stolen tax dollars were going overseas and likely a portion of the money was being skimmed by terrorism organizations.

Scott Stillman spent eight years managing the state's digital forensics lab, meaning he mined data from computers and smart phones.

"I have never seen anything like this level or scope in my 27-year career as an investigator," he told Fox 9.

When the state started going after daycare centers suspected of fraud, Stillman was directly involved in the investigations.

Some of the businesses were gaming the system to steal millions in government subsidies meant to help low-income families with their childcare expenses.

In many of the cases, parents would check in their children at a daycare, only to leave a few minutes later with the kids and sometimes no children would show up at the center. However, it would still bill the state for a full day of childcare.

Stillman was so alarmed by what he found that in March of 2017 he fired off a series of emails to his supervisors at DHS.

"We are working on and overwhelmed by a significant amount of fraud cases involving organized crime, defrauding hundreds of millions of dollars annually in taxpayer monies," he wrote.

Stillman read from one of the emails he wrote which the Fox 9 Investigators obtained through a public records request.

DHS took two months before it turned over the emails, and much of what it provided was redacted.

"They were not easy to write," he said. “But I felt I had an obligation because I think there's a strong possibility this money is being used against innocent civilians and against our military."

According to Stillman, he alerted a number of people in DHS including the Commissioner's Chief of Staff with the following message: "Significant amount of these defrauded dollars are being sent overseas to countries and organizations connected to entities known to fund terrorists and terrorism."

At a Monday press briefing, the governor told Fox 9 his office was not told about the warnings.

Sources tell the Fox 9 Investigators people within the governor's office were told about the concerns a couple of years ago.

“My chief of staff, current and previous staff, from what I'm told, did not get any information alleging there was that kind of theft," Dayton said.

The state currently has 10 daycare centers under investigation for fraudulent billing of childcare services.

Each of the suspect centers has received several millions of dollars in government subsidies.

According to public records and government sources, Somali immigrants own most of the daycare centers.

Fox 9 asked the Department of Human Services about the emails Stillman sent in 2017 and more specifically who, in the chain of command, was aware of them and when.

DHS responded with a statement: "The Deputy Commissioner, communications and legal staff learned there may be emails on this subject when Fox 9 made its data request in March. The then-chief compliance officer was informed at the time the emails were originally sent."

"I would like to have an independent federal investigation of the handling of DHS programs, specifically daycares and the Medicaid fraud program by Homeland Security of the Department of Justice."

Stillman is no longer with the state. He resigned from his position in March after 10 years on the job.