The U.S. attorney in Minnesota on Thursday announced charges against eight people who allegedly took millions of dollars from a state housing program that is "riddled with fraud."

The eight people charged received millions in Medicaid money from Housing Stabilization Services, according to acting U.S. Attorney Joseph Thompson. Each has been charged with wire fraud:

• Moktar Hassan Aden, 30
• Mustafa Dayib Ali, 29
• Khalid Ahmed Dayib, 26
• Abdifitah Mohamud Mohamed, 27
• Christopher Adesoji Falade, 62
• Emmanuel Oluwademilade Falade, 32
• Asad Ahmed Adow, 26
• Anwar Ahmed Adow, 25  

The alleged fraudsters made contact with people who were eligible for the housing program, then billed Medicaid for services they did not provide to those individuals, Thompson said.

"Most of these individuals did not receive the stable housing they so desperately needed," he said. "The money was just simply stolen."

Thompson said this is "just the first round of indictments" connected to HSS, and future charges will come in "waves."

HSS is under the umbrella of the Minnesota Department of Human Services and has previously been accused of being the target of widespread fraud. Federal agents in a search warrant outlined a scheme to steal taxpayer money by filing bogus claims that companies stated providers worked with clients when they actually received little or no services.

When the program started in 2020, the estimate was that it would cost taxpayers about $2.5 million a year. But by 2021, costs reached $21 million, and last year they ballooned to $104 million. Thompson said Thursday he believes most of those payouts were fraudulent.

"The charges announced today are the result of ongoing collaboration between the Minnesota Department of Human Services and our law enforcement partners to root out fraud in state programs and hold criminals accountable," temporary Commissioner Shireen Gandhi said. "Let today's actions serve as a warning to anyone who steals from Minnesota taxpayers: you will be prosecuted to the fullest extent possible by our law enforcement partners."  

Eric Grumdahl, the assistant commissioner for homelessness and housing supports for DHS, left the agency on Tuesday. His departure came on the eve of a Minnesota House Fraud Prevention and State Agency Oversight Committee meeting focused on HSS.

The reason for Grumdahl's exit is unclear. He was not among those charged on Thursday.

DHS is working to terminate the housing program altogether because it "does not have the necessary controls to stop bad actors."  

A "systematic and wholesale attack on our state government programs"

Thompson said the investigation into HSS has "significant" overlap with the Feeding Our Future scandal, which saw $250 million in pandemic aid fraudulently taken, as well as fraud cases in other state programs.

"I've been prosecuting these cases for years and I've literally run out of ways to express what is happening in our state and in our state programs and to explain the coming iceberg I see as we reckon with the fraud," Thompson said.

Minnesota has seen a "systematic and wholesale attack on our state government programs in a way that has overwhelmed the system in many ways," Thompson said.

"It really has called into question everything that we're doing with these programs," he said.

Though "the state and it politicians are starting to take notice about the problem," Thompson said, more must be done — before the prosecution stage — to combat the problem.

"We cannot prosecute our way out of this problem," he said. "We must do more at the front end to stop the outflow of money."

Minnesota Gov. Tim Walz on Wednesday issued an executive order aimed at cracking down on fraud. The order directs multiple state agencies to comb through their data to identify and address fraud, as well as to report it to regulators, among other measures.

Members of the Minnesota House Fraud Prevention and State Agency Oversight Policy Committee applauded Thursday's charges.

"I'm grateful to folks for pursuing this and a lot of anger that public resources that were intended to support vulnerable people ended up in somebody's pockets," DFL Rep. Dave Pinto said.

"[Thompson] described it himself as a flood of fraud," Republican Rep. Walter Hudson said. "We have a scenario here where it's become a cesspool of corruption."

Fraud fallout hits honest providers

Meanwhile, the misused money leaves a housing crisis unsolved. 

In the rush to crack down on fraud, providers like Emile Ayeah in Brooklyn Center say the people who need help are stuck in the middle.

"We are dealing with real people, it's sad," he said.

As of August, state officials say there are 120 active investigations and 115 payment withholdings in a program with nearly 2,000 providers.

Ayah says this scandal taints the good work by providers like him. 

"It is hurting for some of us that actual work with these clients and know what they are going through," he said. "Some of them are living in horrible conditions or outside and are looking to us for help." 

Ayah believes DHS failed to put proper safeguards against fraud in place.

"When they come up with programs, they need to really think about it. I'm sure they have professionals in the department to figure out how they can make such a program is secure," he said.

State officials say some housing providers will continue operations until the program is terminated. They have not said exactly when it will end.