Eight people now face federal charges related to a multi-million dollar Housing Stabilization Fraud scheme.
The announcement followed search warrants executed at eight separate locations across the state, involving what Acting U.S. Attorney Joseph H. Thompson called "just the first eight people" accused of fraudulently billing for housing stabilization services that were not provided.
More people are expected to be charged.
Thompson says the scheme was particularly egregious, because it took advantage of vulnerable people.
"They identified vulnerable individuals," said Thompson. "Medicaid-eligible individuals, many of whom were being released from drug or alcohol rehab facilities. They signed them up to receive housing stabilization services, to help them purportedly, to help them find stable housing."
He says the estimated loss to state and federal Medicaid programs has exceeded $100 million and that the investigation is ongoing.
Minnesota was the first state in the country to utilize Medicaid coverage for housing stabilization.
According to the charges from Thompson, the alleged scheme saw Moktar Hassan Aden, 30, Mustafa Dayib Ali, 29, Khalid Ahmed Dayib, 26, and Abdifitah Mohamud Mohamed, 27 pocket between about $300,000 and $400,000.
Separately charged were Asad Ahmed Adow, 26, the owner of Leo Human Services LLC based in Brooklyn Park, and Ahmed Adow, 25, owner of Liberty Plus LLC of Roseville. The last two defendants are Christopher Adesoji Falade and Emmanuel Oluwademilade Falade.
“I want to be clear on the scope of the crisis," Thompson added. "What we see are schemes stacked upon schemes, draining resources meant for those in need. It feels never ending. I have spent my career as a fraud prosecutor and the depth of the fraud in Minnesota takes my breath away. The fraud must be stopped.”
According to the U.S. Attorney's Office, before the Housing Stabilization program’s inaugural year, it was predicted to cost about $2.6 million annually. That proved to be inaccurate.
In 2021 alone, the Program paid out more than $21 million in claims. That figure ballooned in the following years: $42 million in 2022, $74 million in 2023, $104 million in 2024. In just the first six months of 2025, the Program paid out another $61 million.
Fraud in state-administered programs has been a flashpoint in Minnesota, and for Gov. Walz, issue since the initial Feeding Our Future indictments in 2022.
Thompson said Thursday the state was "drowning in fraud," while his predecessor, former U.S. Attorney Andrew Luger, told WCCO Radio last December that Minnesota has "a fraud problem" after FBI agents searched at least two Minnesota autism centers as part of an investigation into alleged Medicaid fraud.
"These programs have been abused over and over to the point where the fraud has overtaken the legitimate services," says Thompson. "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."
Minnesota House Speaker Lisa Demuth (R), told WCCO's Chad Hartman that there were far too many warnings for this type of fraud to continue.
"House Republicans have been saying for years that there is fraud," Demuth said. "Yet there was no acknowledgement from the governor, from the executive office. There was nothing there. They would ignore it, and we started finally having Office of Legislative Auditor reports, the OLA reports, that really pointed to different agencies, different departments saying there's a lack of Internal controls. We have been pushing for those things."
She also says the prosecutions are a good thing, but it was too late.
"I'm glad those are happening. What we have been wanting to do was prevent fraud in the first place," Demuth added.
The federal investigation revealed that many providers defrauded the system, and acquired the names of beneficiaries from facilities like addiction treatment centers. They then used those individuals’ information to submit inflated and fake reimbursement claims.
“Fraudsters must be held accountable, and today’s indictments are a step in the right direction,” said Minnesota Attorney General Ellison in a statement. “I hope this sends a message to all those who would take advantage of Minnesotans’ generosity and desire to help those in need. My office gladly partnered with federal law enforcement in these investigations that led to these indictments by interviewing key witnesses, executing search warrants, analyzing data, and more. I am grateful to our partners in state and federal law enforcement for their work on these indictments and I look forward to continuing our work of curbing fraud in Minnesota."
In August, the Minnesota Department of Human Services (DHS), under the guidance of its own DHS Office of Inspector General (OIG), moved to terminate the Housing Stabilization Services (HSS) program.
Governor issues executive order directing state agencies to step up their efforts in fighting fraud
Also Wednesday, Minnesota Governor Tim Walz issued an executive order directing state agencies to step up their efforts in fighting fraud.
At the same time, the Minnesota Department of Human Services says Eric Grumdahl, who had been serving as its assistant commissioner for homelessness and housing supports, is no longer there.
Demuth, who appointed Republican Rep. Kristen Robbins as Chair of the House Fraud Prevention Committee, said Grumdahl's dismissal is the first time anyone, in any state department, was "held responsible" for the layers of fraud being uncovered.
Robbins talked about that with Vineeta Sawkar on the WCCO Morning News, and casting doubt on the timing.
"They announced the day of the hearing, that the person responsible for the Housing Stabilization Program had been terminated the day before and was not going to be there to testify," Robbins explained. "So, if that's not, you know, trying to hide the ball, I'm not sure what it is."
Democrats are saying the hearings have been heavy on criticism, but light on solid ideas or solutions. DFL Rep. Dave Pinto even calling the committee an 'exercise in campaign politics.'
Chair Robbins is a candidate in the 2026 governor's race.
There have been several cases of fraud within Minnesota in the last few years, including the massive Feeding Our Future scandal.