Minnesota Fraud Hearing: Senators Ernst, Hawley Investigate New Whistleblower Claims

[0:00] At a Senate Small Business Administration committee hearing, Senators Joni Ernst and Josh Hawley [0:06] questioned Minnesota Department of Human Services officials over alleged fraud tied to risky [0:11] contracting practices and issues previously reported at child care centers. Watch the top [0:17] moments right here. According to your testimony, in early 2019, while you were serving as a [0:24] Minnesota Department of Human Services contract specialist, you raised concerns about risky [0:30] contracting practices that would leave the department open to double dipping. Could you [0:37] give us an example of this double dipping risk to the state and explain what kind of response [0:44] you receive from your department head when you raise this potential issue? [0:51] Thank you, Chair. This was a group of contracts that that I really fought about, because I [0:57] think it was important. It was about it was a group totaling about $12 million. And it was [1:02] for pregnant and parenting women who were addicted. And so that's a that's a very important service. [1:10] I want to read that service. However, we had just put that in our Medicaid package. So it [1:17] was billable to insurance, there was no reason that we would be giving grant [1:21] dollars for it. And not only was there no reason for us to do it. But there was also no way for us [1:29] to tell if the agency that we gave it to build twice the double dipping there, there was no way [1:38] for us to see that. And so when I, I've I've thought about this one for probably three or four months [1:45] before it was finally assigned to a probationary employee, a brand new employee who who did the contracts, [1:52] and oddly enough, was later promoted into my job when I was removed. But the the the the response I [2:01] got from leadership was anywhere from, I don't understand what the problem is, we've always done this, [2:08] to just just a complete dismissal to try to get me to stop talking about it. And this, again, is one of [2:20] those very uncontroversial, very cut and dried situations. I do not know how someone could logically [2:30] disagree with me. And are you you aware of anyone else that was reprimanded or had any other personnel [2:40] action taking against them in this similar situation? Yes, it was very common for employees to be [2:51] stifled was the word that was used against me that I needed to be stifled. There was many efforts to do [2:57] that. It worked in a lot of cases, there is much less public speaking. Now, there is a large group of [3:08] anonymous tweeters who, who do communicate on this. But there are very rare instances where someone will [3:15] come forward publicly. Okay, and just to reiterate, you were removed out of that equation because you [3:22] questioned those contracts, but someone with absolutely much less experience than was given [3:30] those contracts, didn't question it, and then was later promoted into your position. Correct. Okay, [3:37] I just want to make sure I heard you correctly there. Mr. Swanson, by now everyone has heard of [3:44] Minnesota's infamous Leering Center, Quality Leering Center. But you were on the ground serving as a [3:52] criminal investigator for Minnesota's Child Care Assistance Program, and you were uncovering many [3:57] of those similar fraud schemes. Can you briefly explain to us the kickback system that fraudsters use to [4:05] enroll children at these child care centers? Madam Chair, yes, in Minnesota, and I would assume most other [4:15] states that have a program like this, the child care centers can only bill for children [4:24] when their parents are on public assistance. And the parents have to be engaged in either an [4:30] educational or work related activity that would necessitate the need for child care. What we saw [4:38] time after time was that the fraudulent child care centers would go along go around to immigrant [4:45] communities and they would offer, you know, kickbacks to these mothers if they would tell their caseworker [4:52] that my child is going to be going to this particular child care center for five or six or seven days a [4:58] week. And essentially what they would do is they would tell the mothers that we don't want you to [5:05] bring the kids to our child care center. You take care of your kids at home, but we'll pay you. It started [5:10] out with $200 a month per child. It went up to about $300 a month by the time I left. So a mother of five [5:19] children would, you know, be taking in $1,000 a month to take care of their kids at home. And then in order [5:25] to fulfill the education or work requirement, the child care center would falsify employment documents [5:35] so the mothers could take those to their caseworker and show them that they were working at the child [5:40] care center. Oh, for heaven's sakes. Okay. Well, Mr. Swanson, if you look at the front of the quality [5:48] leering center right below the sign and above the entrance to the building, there's a video camera [5:54] and a sign that states the premises are under 24 hour surveillance. So sign right here. Are all child [6:03] care centers required to have security cameras? No, Madam Chair, they're not. Do you think that [6:10] would those videos be archived so that investigators could access them if they did have surveillance cameras [6:17] like this one? Madam Chair, there were a few centers that we investigated that had [6:25] video cameras that were archived and we had staff on our digital forensics unit that were able to [6:33] retrieve the footage. But in Minnesota, no child care center was required to have any sort of video [6:41] surveillance system, but some did. Very interesting. And as investigators, if you had availability [6:51] to cameras, you would be able to go back and view that, correct? That's correct, Chair. Okay. So right [6:59] here at the leering center, do you think we would be able to get videotape from the leering center and see [7:05] if there were children coming and going? Um, you know, if their system was set up, you know, and designed, [7:11] um, um, you know, so we could retrieve the video archives, um, you, you could. Okay. Thank you very [7:19] much. Um, it's interesting. We didn't have children coming and going from that leering center, even though [7:26] there's video surveillance. Mr. Bernstein, if I could just start with you, you worked in the Minnesota [7:32] Department of Human Services. Is that right? Correct. 20 years or more. And at the agency [7:39] there, you served in roles related to contract management and compliance. Is that basically [7:43] right? Several years ago, looking here at your written testimony, you say that you started to [7:47] notice some inconsistencies in contracts that came across your desk. Can you just describe [7:53] what those inconsistencies or irregularities were, what they looked like? It was anything from obvious [8:00] conflicts of interest to large, uh, large advances being given. Uh, if the contract was for three or [8:09] four million dollars, we were giving million dollar advances before any work had occurred. [8:14] That is a very risky thing to do. A business can just close up and they've, they've got your money [8:19] and they haven't done a thing for you. Um, there was. To whom were these, if I might ask, to whom were [8:27] these advances going? What kind of entities do you recall? What kind of entities are we talking about? [8:32] So states do not in general do their own social services. They do not do services for the residents [8:39] of their state. They contract out that work to most often nonprofits, occasionally profits, but most often [8:47] nonprofits. And so those are then considered grant contracts. And those grant contracts, uh, are, are [8:56] well-regulated in statute, well-defined in statute, and we were doing many things. We, that, that were [9:03] not compliant with statute. There, there would be a contract with a dollar amount that had no formula, [9:11] nothing that I could find that would establish why that dollar amount was. Could you detect a pattern [9:17] in these inconsistencies? I, in, in general, no, but I, but I did notice a slight preference [9:27] for, uh, our tribes. Our, our, our, our tribes were, uh, one situation where I saw contracts that I, [9:38] no one could explain to me why they were the dollar amount that they were. [9:41] What happened when you reported these inconsistencies to your superiors? [9:46] I was called racist, you know, and then I was, I was walked out. I was, there was quite a smear [9:54] campaign. I was investigated. Uh, I have, uh, about 400 pages of, uh, investigatory information about [10:05] me. You'd worked there for 20 years at, at this point. I mean, you have a long track record. [10:09] Yes. As a civil servant, as a public servant, you, you bring this to the attention of your supervisors, [10:15] as you are supposed to do. And it sounds to me like you were retaliated against. I mean, [10:19] is that a fair thing to say? Yes, absolutely. And how, what, how did this end? I mean, [10:23] how long did this go on? What was the result of it? It actually still goes on. This started for me [10:28] seven years ago, but I am still just shuffled from one job to another. A supervisor about a year [10:34] ago said, well, we have to find you something else to do now. So now I redact documents. Um, I have [10:40] nine years of college and I, I put black marks on documents for media requests. Do you think in [10:45] light of the revelations of, of widespread fraud and abuse in the state that maybe, maybe there's a [10:52] systemic problem in state government that you, you exposed in part, but that probably extends far [10:59] beyond you. I mean, is that fair to say? There absolutely is. And I, and I, and I now realize that [11:04] it was long before me. Are you familiar with the case of Keith Ellison? Yes. Keith Ellison testified [11:12] under oath before a committee of, of this body not long ago and insisted to me that he had never [11:18] done anything wrong and didn't know anything about any of the fraud and abuse. The only problem is, [11:22] is that there are records, tape recordings of various fraudsters coming to see him associated with [11:29] the scandals that the chairwoman was just talking about a moment ago, coming to see him complaining about [11:34] people. I think in your department, the fraudsters were saying, Oh, we're getting pushback. [11:39] Who knows? Maybe it was you. We're getting investigated. Can you do something about it? [11:43] And Ellison said, Oh, well, I'll see what I can do. And they offered him campaign contributions [11:47] and he took them unbelievably. And we know this is all true because they recorded it all. [11:53] It's a problem. We work with scumbags. They'll double cross you just like they'll double cross [11:57] anybody. The whole thing is on tape. I can't think of a greater instance of abuse of public trust. [12:04] And if your own attorney general was doing it, who knows how deep, how far, how wide this [12:08] fraud goes. It's extraordinary. I don't understand what people like him are in prison, [12:12] but I want to applaud you Ms. Bernstein for doing your job. And I think it is absolutely shameful [12:18] that you have been retaliated against and treated like scum when you are a 20 year civil servant, [12:24] proud Minnesotan, just doing your job. I don't know what your politics are. I don't think it matters. [12:29] I'm sure it didn't matter to you when you did your job and yet you're treated like that. And meanwhile, [12:33] people like Ellison are fed it and lauded and he's a star in his party. It's unbelievable. [12:39] He's a crook. It's exceptional. We need more people like you who are doing their jobs and who [12:46] are fighting for the public and fighting for what is right and true and just. I want to thank you for [12:50] coming forward for more content like this. Stay tuned to Congress clips and thanks for watching.