In a highly unusual move, federal prosecutors seized $2 million from a former Twin Cities mental-health agency accused of submitting fraudulent bills for home services involving hundreds of Minnesota children and adults.

The U.S. attorney's office said it seized the funds after an investigation found that Complementary Support Services (CSS), a nonprofit based in Richfield, had fraudulently billed Medicaid.

The money represents a portion of the more than $12 million that CSS allegedly obtained through its fraudulent billing practices, the U.S. attorney's office said in a civil forfeiture action filed Tuesday.

The civil action is a signal that prosecutors could be moving closer to filing criminal charges against those involved in the now-defunct agency.

In interviews, former CSS employees have described an agency whose directors circumvented state rules on record keeping and supervision.

"I feel vindicated knowing that someone may finally be held accountable," said Katy Armendariz, a former program director at CSS who said she alerted federal prosecutors in 2014.

CSS is accused of having "batch signed" client progress records without providing proper oversight and without reviewing the care provided to clients, as well as fraudulently billing for "documentation time" and then falsely labeling such time as therapy, according to court documents. Prosecutors allege the fraud began as early as 2007.

Priscilla Lord, a Minneapolis attorney representing CSS, said the agency denies the allegations and has reached a tentative settlement with the state and federal prosecutors rather than go to a trial.

"In this case, there has been no admission of wrongdoing ... and there was nothing proven in the court of law," she said.

According to the civil forfeiture action, CSS in November 2013 initiated a wire transfer of $2 million from a bank account to a separate checking account held by a Wisconsin day care center, doing business as Our Kids Soar Academy, in Rice Lake, Wis. The transfer was made less than a month after CSS was served with an official document request, known as a civil investigative demand. All or nearly all of the funds transferred were proceeds from violations of federal law, the U.S. attorney's office alleges.