Walz, moving to get ahead of fraud issue, taps new point man for state’s response

Former FBI agent and superintendent of the Minnesota Bureau of Criminal Apprehension Tim O’Malley will serve as Minnesota’s new director of program integrity to help the state address a sprawling fraud crisis in social services programs.

Gov. Tim Walz announced Friday that he had appointed O’Malley to the newly created position. O’Malley previously led the BCA under Republican Gov. Tim Pawlenty and worked for the Archdiocese of St. Paul and Minneapolis addressing clergy sexual abuse.

O’Malley will report directly to Walz, but he and Walz told reporters he would have autonomy in his work.

The appointment comes as the Walz administration faces criticism over its response to fraud in state programs, one of the governor’s biggest political vulnerabilities as he seeks a third consecutive term. Republicans vying for a chance to challenge the governor next fall have centered fraud in their campaign messages and criticized Walz’s efforts to address it as insufficient or overdue.

At a news conference Friday, Walz said, “any amount of fraud is too much.”

“We are a state that chooses not to let people go hungry or homeless or uneducated,” Walz said. “However, that generosity has been taken advantage of by an organized group of fraudsters and criminals.”

Walz said he’s furious about fraud and that it’s not a victimless crime, as it takes program funding from people who are in need.

Walz and the Department of Human Services, which administers Medicaid, have taken steps over the summer and fall to get a hold on fraud, including ordering an outside review of billing in 14 high-risk services.

Republicans have pushed for an independent inspector general that would not report to Walz.

“[Walz] failed to root out fraud in his agencies, he failed to hold anyone accountable, he failed to take responsibility for what he allowed to happen, and now he wants to sweep all his failures under the rug,” said Minnesota House Speaker Lisa Demuth, a Republican running for governor.

Minnesota officials have acknowledged a fraud problem in the state’s Medicaid program. So far, nine individuals have been indicted in federal court. Eight are accused of defrauding the state’s Housing Stabilization Services program. One is accused of stealing from Early Intensive Developmental and Behavioral Intervention, which provides services to young people with autism spectrum disorder.

That defendant was also involved, according to prosecutors, in the Feeding Our Future scheme, which stole money from a federal child nutrition program to finance luxury purchases.

Temporary DHS Commissioner Shireen Gandhi said the department’s inspector general’s office has more than 1,300 open cases. The department, she said, has “zero-tolerance” for fraud.

“As we do more to get ahead of the criminals, there are going to be more credible allegations of fraud,” Gandhi said. She said if someone is caught stealing from Medicaid, “I hope you go to prison.”

O’Malley called fraud a “widespread problem” in Minnesota and across the country and vowed to attack it.

“It erodes trust and must be addressed head on,” O’Malley said. “Minnesotans deserve to know that their tax dollars are being put to good use, and they deserve to know that they can trust our public institutions.”

O’Malley said he’s not taking the job to serve Walz.

Along with O’Malley’s appointment, the Walz administration announced it would contract with an outside firm run by former law enforcement and federal agents to help establish a fraud prevention plan.

Drew Evans, superintendent of the Bureau of Criminal Apprehension, said the work would be difficult and ongoing.

“Bad actors are constantly looking for ways to scam systems,” Evans said, “and so [the] state’s effort to develop these strong barriers to prevent fraud will need to be ongoing.”

Walz also criticized President Donald Trump’s recent comments calling Somali Minnesotans “garbage” and targeting them for immigration enforcement. He said Trump doesn’t know how the Medicaid program works and repeated what he heard about Somalis stealing money.

While many of the defendants in the Medicaid fraud and Feeding Our Future are of East African descent, Aimee Bock, the leader of Feeding Our Future, is a white woman.