The Minnesota Department of Education wants to terminate a food distribution contract with a second nonprofit named in FBI search warrants in January.
The department notified Partners in Quality Care this week of the action, which would prevent the St. Paul organization from continuing to participate in federal child nutrition programs.
The department took similar action last month against the St. Anthony nonprofit Feeding Our Future.
Partners in Quality Care and Feeding Our Future oversee federal reimbursements to child care centers, community centers and other sites that provide meals to children in need. The nonprofits act as intermediaries for the federal money, which is distributed to them by the Minnesota Department of Education (MDE).
In search warrants unsealed in January, the FBI alleged that Partners in Quality, which also is known as Partners in Nutrition, paid more than $25 million to three subcontractors who spent "little, if any, money to purchase food or provide meals to children."
Instead, the FBI said, the owners of the subcontractors used most of the money for personal expenses.
The FBI raided Feeding Our Future's office and the bulk of the investigation focuses on that nonprofit. Investigators say the organization and some of its more than 100 subcontractors defrauded the government, spending millions of dollars on lavish personal expenses instead of providing meals to kids.
No one has been arrested or criminally charged.
The Education Department suspended payments two weeks ago to Partners in Quality Care and Feeding Our Future. The department also immediately terminated its contract with Feeding Our Future.
Kara Lomen, the executive director of Partners in Quality Care, and Christine Twait, a board member and former executive director, declined interview requests. But in separate statements, they said the organization is confident it has complied with the law and will appeal the Education Department's proposed termination.
Lomen said Partners in Quality Care wasn't searched by the FBI and immediately cut ties with the vendors named in FBI search warrants.
"We are hopeful that matters with our organization and [the Education Department] can be worked out so that the important work of the sites we sponsor can continue," Twait said in a statement.
Aimee Bock, executive director of Feeding Our Future, has told the Star Tribune she never stole money or saw any evidence of fraud among subcontractors. She said she thinks she's being targeted by investigators because she sued the state and worked with mostly minority businesses.
Because the Education Department has suspended its reimbursements, Partners in Quality Care cannot reimburse its sites for the cost of meals.
That leaves organizations such as St. David's Center for Child and Family Development in Minnetonka without funding for the two snacks a day it serves to 125 preschoolers. The center is reimbursed for the costs by the U.S. Department of Agriculture's child nutrition programs.
Child care centers are often overwhelmed just with providing child care and therefore tap sponsors such as Partners in Quality Care to handle the complex paperwork for the reimbursements, said Matt McNiff, assistant director of early childhood programs at St. David's. With that funding paused, he said, St. David's must fundraise to pay for the snacks, look for a new sponsor or figure out how to submit reimbursement requests internally.
"It's a whole other administrative burden," he said.
McNiff said he has had a positive experience working with Partners in Quality Care.
In St. Paul, Sharon Ross at House of Refuge said she is continuing to provide meal packs, such as beans, macaroni and corn, to families in need each week. But she said she can't pay her 29 employees or food supplier because she hasn't been reimbursed by Partners in Quality Care since December.
"We're just confused and concerned," Ross said. "How do I continue to pay the vendors to provide the food? We're still serving families. We just don't know where the money is going to come or even if it's going to come."
Education Department officials declined to comment Thursday but previously said they would work with community organizations, sponsors and sites to ensure children and families have access to food.
Filling a gap
Lomen, Twait and Bock incorporated Feeding Our Future in 2015, according to court documents and the Minnesota Secretary of State's Office. Bock worked at Partners in Nutrition as director of operations but left in 2018.
According to court records, Partners in Nutrition was formed to help fill a "nutrition gap" for thousands of disadvantaged children in Minnesota. In its application to the Education Department, the group projected it could operate nearly 100 sites by 2019, serving 66,500 meals per month. It said about 65% of recipients would be Black and 23% would be Asian.
As the nonprofit's executive director, Twait said she was well suited to the task, telling Education Department officials that she was a registered dietitian with a master's degree in nutrition and an undergraduate degree in finance. In 2016, Twait testified she already had six years of experience working on publicly funded child nutrition programs.
In a letter supporting the company's application for funding in 2015, the executive director of Hunger Impact Partners, a Minneapolis advocacy and research organization, estimated that at least 98,820 children in the seven-county metro area were not being served by a federal program that pays to provide food to the poor. The group said millions of meals were still needed annually.
Partners in Nutrition wanted to participate in the Child and Adult Care Food Program, a USDA program that reimburses mostly after-school programs and child care centers for providing food for kids in need. Partners in Nutrition quickly met opposition from Education Department, which in 2016 denied the group's application to operate multiple meal sites, saying it had failed to prove it was "financially viable," court records show.
After Partners in Nutrition unsuccessfully appealed the decision, the group sued the department, claiming it was "imposing insurmountable obstacles" by imposing criteria that had never been applied to another nonprofit.
To satisfy the department's concerns about the group's finances, Twait offered to personally extend a $300,000 line of credit to the nonprofit as well as an "unrestricted gift" of $100,000, court records show. Twait later increased that line of credit to $1 million to further bolster the group's finances.
At the time the Education Department denied its application, Partners in Nutrition had total assets of less than $250,000, court records show.
The moves failed to satisfy the department, court records show. In an August 2016 letter to Twait, it said the nonprofit failed to show how the line of credit "would be significant or helpful in terms of establishing financial viability."
Partners in Nutrition then took its case to the Minnesota Court of Appeals, which concluded in 2017 that the department tried to impose standards on the group that "appear nowhere in the federal regulations."
The court said the department's actions were "arbitrary and capricious" and ordered it to reconsider its denial. A month later, the group's application to operate multiple sites was approved.
In a recent interview with the Star Tribune, Bock said the department denied funding when it saw Partners in Nutrition worked with communities of color.
"None of [the sites the organization contracted with] were traditional, white-owned centers," she said. "They were operated by minority communities, low-income communities, communities of color. ... We had been unconditionally approved until they saw who our community partners were."
Twait and Lomen are no longer involved with Feeding Our Future, Bock added. The FBI began investigating Feeding Our Future last May.