Sharp growth raised ‘red flags’ about meal program fraud, state official testifies
A state regulator testified in the first Feeding Our Future trial Tuesday that she was concerned about fraud in government child nutrition programs after seeing massive growth in meal reimbursement requests during the COVID-19 pandemic.
Seven people allegedly connected to the small Shakopee restaurant Empire Cuisine and Market are charged with stealing $47 million in what the Minnesota U.S. Attorney’s Office says was a much wider conspiracy to defraud federal meal programs for children in need.
Emily Honer, who oversees the programs on the state level at the Minnesota Department of Education, said that before COVID, a child care center might serve food to 100 or 200 kids each day. When the federal government allowed restaurants to participate, Honer said Empire’s owners submitted applications to serve 2,000 children daily, a “incredibly high amount” that raised red flags.
Responding to questions from Assistant U.S. Attorney Joseph Thompson, Honer said that the U.S. Department of Agriculture, which manages the Summer Food Service and Child and Adult Care Food Programs, waived key requirements during the pandemic to ensure that children would continue to receive meals.
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Because child care centers, YMCAs, and other meal sites were closed, the USDA suspended a requirement that children eat together in “congregate” settings. The department also allowed parents to pick up meals in bulk.
Honer said that Partners in Nutrition, a nonprofit that sponsored meal sites, asked MDE in early 2020 if restaurants could participate in the Summer Food Service Program. After checking with the USDA’s regional office, Honer told managers of the nonprofit that restaurants had approval to take part.
“That would not previously have been allowed prior to COVID because a site had to primarily be in operation for child care,” Honer said.
By the summer of 2020 Honer testified that she grew increasingly concerned about the large number of meal site applications from restaurants. After checking the Minnesota Secretary of State’s business registration website, Honer said she learned that many of the restaurants, including Empire Cuisine, had opened only recently.
“Our questions were: Is this site even open? Is this site able to serve the many children that you applied for?” Honer said.
She said the new meal sites began requesting payments for food that they purported to have served, and both the number of meals and the dollar amounts appeared to be unusually high.
“The claims coming in were either right at the max of the meals applied for or were incredibly high in generating amounts of federal reimbursement.”
Honer noted that prior to the pandemic, Feeding Our Future typically requested reimbursements of around $40,000 at a time. But by the fall of 2020, the organization requested payments of $1 million each before requesting a single payment of $8 million that December for a week’s worth of meals.
By comparison, Honer said, the Minneapolis Public Schools, one of the state’s largest districts, received $17 million in federal reimbursement for food it served to children in all of 2020.
Honer testified that when she and her staff were unable to get “reasonable answers” from Feeding Our Future and Partners in Nutrition, they contacted the USDA’s inspector general.
After the USDA told MDE that the restaurants were not in compliance with program rules, Honer said that MDE stopped allowing restaurants to participate as sites for serving meals.
But that did not stop the flow of taxpayer money from MDE to Empire Cuisine. Honer said that the business continued submitting reimbursement claims not as a meal site, but as a food vendor for other sites. She said the amount of claims from Empire increased every month.
Honer said she continued to express her concerns to MDE leaders and the USDA, and in early 2021 she signed off on notifications to Feeding Our Future and Partners in Nutrition that they were in “serious deficiency” with respect to program compliance. She also contacted the FBI.
Honer said she also approved orders to stop payments to Feeding Our Future. But in 2021, amid a lawsuit that Feeding Our Future filed against MDE, a Ramsey County judge told the agency that it did not have the authority to stop the payments.
Defense attorneys contend that their clients operated legitimate businesses and followed the programs’ rules.
Under cross examination from attorney Frederick Goetz, who represents defendant Mukhtar M. Shariff, Honer admitted that the USDA had also waived many of the compliance requirements, such as onsite monitoring, in favor of “desk audit” reviews of the food site and their sponsors’ paperwork.
Despite the concerns she raised with her superiors, the USDA, and the FBI, Honer admitted that she never conducted a desk audit. She also said that MDE approved a meal site application and multiple reimbursements for food purchases by the ThinkTechAct Foundation, which purported to serve meals to several thousand children each day at a Bloomington mosque.
Prosecutors allege the defendants used the foundation as a vehicle for laundering money, but Honer admitted that her agency paid claims without reviewing any underlying documentation.