Some Minnesota families are in danger of losing child care after the US Department of Health and Human Services announced a freeze on child care payments to the state Tuesday amid a federal investigation into allegations of fraud, providers say.
It's the latest show of federal force in the state — home to the country'slargest Somali population.
Deputy Secretary of HHSJim O'Neillannounced the funding freeze on X Tuesday, weeks afterICE launched operationsin the Minneapolis-St. Paul area to specifically target undocumented Somali immigrants, precipitated by revelations aboutwidespread fraudas well as President Donald Trump's comments that he "doesn't want" Somalis in the country.
The stepped-up effort also comes days afterYouTube content creator Nick Shirley, who has created anti-immigrant and anti-Muslim videos in the past, posted a viral video in which he claimed to find widespread fraud at Somali-run child care centers. Thevideo, which includes limited evidence for the creator's allegations, has received more than 2.6 million views on YouTube as of Wednesday and was retweeted by Vice President JD Vance,FBI Director Kash Patel and former Department of Government Efficiency le ader Elon Musk.
To receive funding, child care centers suspected of committing fraud will be subject to an "additional level of verification," including providing complaints, internal state discrepancies and attendance and inspection records, HHS spokesperson Andrew Nixon told CNN. "Administrative data" will be expected from other centers in the country, he added.
"Funds will be released only when states prove they are being spent legitimately," O'Neill said.
Minnesota receives $185 million in federal child care funding for 19,000 children, the agency said in its post. The announcement did not specify any alternate plans for families across the state who will be affected by the freeze.
"If we allow this funding freeze to happen, all Minnesotans are going to suffer," Minnesota state Rep. Carlie Kotyza-Witthuhn, co-chair of the Children and Families Committee, said at a news conference Wednesday. "Instead of tearing down our Somali community and our child care centers, let's lift them up. Let's make sure that our children have safe places to learn and grow."
"Minnesota is one of the more expensive states in the nation to afford child care," Kotyza-Witthuhn continued."These aren't exorbitant amounts of money. They're just real numbers because it is costly to provide quality care for kids."
While there are legal avenues for the federal and state government to ensure programs are being run properly, "this hasty scorched earth attack is not just wrong, it may well be illegal, and my team and I remain committed to protecting the people of Minnesota to the fullest extent of the law," Carin Mrotz, a senior adviser with the Minnesota Attorney General's office, said in a statement on behalf of state Attorney General Keith Ellison.
Child care center providers at the news conference warned the funding freeze could soon have a direct impact on the families they serve.
One child care center director said 75% of the children at her program quality for state child care funding, and that her center would close in a month without assistance funding. Another, Maria Snyder, said many families at her St. Paul center are one paycheck away from becoming homeless.
"I'm generally scared for what can happen next if funding is stopped, and I can't help but think that this is part of a larger design plan and strategy to cut public funding," Snyder said.
She said child care providers are subject to "extremely detailed," randomized audits that include attendance records.
Small Business Administration head Kelly LoefflerannouncedMonday that agency funding to Minnesota would be suspended to "investigate $430 million in suspected PPP fraud across the state." She did not say whether that investigation into the Covid-eraPaycheck Protection Programinvolved any businesses seen in Shirley's video.
By Monday, DHS began postingvideosshowing agents from Homeland Security Investigations entering what it called "suspected fraud sites," as some members of the state legislature demanded a new investigation.
"If true, the revelations … highlight obvious misuse of taxpayer dollars and raise serious questions about the oversight and integrity of programs aimed to help children," said aMonday lettersigned by 30 Republican state senators.
Minnesota Gov. Tim Walzsaid Tuesday his administration has spent years cracking down on fraud, by "referring cases to law enforcement, shutting down and auditing high-risk programs." He also asked the state legislature for more authority to take aggressive action, a spokesperson for the governor told CNN.
The governor and other state leaders have been called to testify in front of the Republican-led House Oversight Committee in two separate hearings starting next week.
Here's what we know about the investigations and the viral video.
Surge follows viral video
What officials called a surge of federal resources follows a viral YouTube video by Shirley, a 23-year-old self-styled independent journalist who posts content on social media with a conservative bent.
One law enforcement official told CNN the buildup of DHS agents in Minneapolis on Monday, including visits to some 30 businesses, was due in part to the video.
In the video posted Friday, Shirley visits and tries to enter several child care centers in Minnesota he suggests are not actually operational, although he claims they're receiving government funding through the state'sChild Care Assistance Program, or CCAP, which provides child care funds for low-income families.
On Tuesday, Shirley told CNN's Whitney Wild he is "100% sure" the allegations in his video are true. A man whose research was featured in the video told CNN he obtained all of the information from publicly available websites and that it was not given to him by Republican politicians. CNN is looking into Shirley's claims.
CNN is looking into the centers identified in the video and has reached out to several of them. The video also shows Shirley escorted out of one building by police after reports he was trespassing and harassing people.
"While we have questions about some of the methods that were used in the video, we do take the concerns that the video raises about fraud very seriously," Minnesota Department of Children, Youth, and Families(DCYF)Commissioner Tikki Brown said in a Monday news conference, CNN affiliate KAREreported.
Multiple attempts by CNN to reach Brown and DCYF have been unsuccessful.
One South Minneapolis day center said they have been receiving threatening voicemails and there was a break-in at their facility after the video was released.
Important documentation on child enrollment and staff employent was taken and there was extensive vandalism, the center said a news conference.
CNN has reached out to the day care for comment and additional information.
Ibrahim Ali, a manager at Quality Learning Center, one of the centers featured in the video, who said his parents own the facility,told KAREon Monday that Shirley's video was recorded when the business was scheduled to be closed. A sign on the door says its operating hours are 2 to 10 p.m.
"There's no fraud going on whatsoever," Ali told KARE.
Shirley told CNN he visited that center on December 16 around 11:00 a.m. and made a follow up visit "later in the day" on the following day.
CNN observed families dropping children off at Quality Learning Center on Tuesday.
Astate licensing reviewfor the business from June lists several violations — including a lack of required training for some staff and inadequate documentation for medications — but nothing suggesting the business was unoccupied.
The state Department of Human ServicessaysCCAP payments to day care facilities can be withheld for fraud, but not for "licensing violations alone."
CNN tried to reach Quality Learning Center on Monday, but there was no answer at listed numbers.
It is not unusual for child care centers to keep their doors locked or to require a key card for entry due to safety concerns, according to Clare Sanford, the vice president of government and community relations for theMinnesota Child Care Association.
CCAP funding — the kind of funding Shirley says is being stolen — is based on the eligible children enrolled at a facility, not its total capacity.
Child care centers face strict regulations in Minnesota, Sanford told CNN. Under the law, each licensed center should be visited at least once a year by an unannounced licensor, who spends hours running through a checklist of roughly 400 items, she explained.
The video does not address those regulations. Its explosive impact is one example of the growing power of the right-wing media ecosystem, largely fueled by independent creators whom the president has favored over traditional news networks. Shirley wasinvited to speak with Trumpat the White House in October, part ofa roundtable discussion on Antifawith other conservative online creators. He previously filmeda video at the Capitol attackon January 6, 2021, a look at"deported migrant scammers in NYC,"and an interview withAttorney General Pam Bondi.
Hearings and investigations underway by Congress, DHS and FBI
The House Oversight Committee has called Minnesota state representatives to testify before the panel ona January 7 hearingcentered around "fraud and misuse of federal funds" in the state.
The investigative panel run by Republican Rep. James Comer is also expected to hear testimony fromWalzand Minnesota Attorney General Keith Ellison in a separate hearing on February 10.
"Fraud that steals from taxpayers and robs vulnerable children will remain a top FBI priority in Minnesota and nationwide," the FBI director saidin a post on X.
Officials at DHS have announced their own investigation into alleged fraud.
CNN has reached out to the agencies regarding whether any arrests have been made in the latest investigations.
Five Republicans in the state legislature are calling on Walz to resign.
"People in our districts raise this issue constantly. It is the number one issue we hear about," they said in astatementMonday. "They want to know why nobody is being held accountable. They want to know when somebody is going to fix it. And they want to know why the governor isn't resigning."
State Speaker of the House Lisa Demuth said the chamber's Fraud Prevention Committee has beeninvestigatingallegations of fraud regarding CCAP funding for months.
"No one's lost their job," Demuthsaidin a Monday news conference. "No one has been publicly disciplined in any way."
The state's child care auditors refer an average of five cases a year to law enforcement for criminal investigation, the Department of Human Services said in areportpresented to the House committee in February.
Authorities have targeted fraud in the state previously, including in July, when the FBI raided five businesses in the Twin Cities which had allegedly committed Medicaid housing assistance fraud,according to the Minnesota Star Tribune.
Half or more of the roughly $18 billion in Medicaid funds that supported 14 Minnesota-run programs since 2018 may have been stolen due to fraud, a federal prosecutor said on December 18,according to The Associated Press.
"The magnitude cannot be overstated," First Assistant US Attorney Joe Thompson said. "What we see in Minnesota is not a handful of bad actors committing crimes. It's staggering, industrial-scale fraud."
Walz accused Thompson of pulling the $9 billion figure out of thin air.
"You should be equally outraged about one dollar or whatever that number is, but they're using that number without the proof behind it," Walz said in a December 19 news conference,according to KARE. "To extrapolate what that number is for sensationalism, or to make statements about it, it doesn't really help us."
"I am accountable for this, and more importantly, I am the one that will fix it," Walz added.
Dozens arrested in previous fraud scandal
Most of the outrage regarding allegations of fraud in the Somali community has focused onFeeding Our Future, a nonprofit prosecutors say falsely claimed to be providing meals to needy children during the Covid-19 pandemic. Federal charges were brought against dozens of people — the vast majority of them Somali — beginning in 2022.
A raft of state audits into lax oversight of Minnesota funds was dismissed by Walz,CNN reported last year. This came amid allegations the Somali community's strong support for — and contributions to — Democrats helped shield them from scrutiny.
An early investigation by the Minnesota Department of Education into alleged fraud by Feeding Our Future was stymied in part by a lawsuit filed by the organization and its founder, Aimee Bock — who is not Somali — alleging the investigation was discriminatory. She later voluntarily dropped the suit a week after federal agents raided her home and the nonprofit's offices.
Bock waslater convictedof seven federal charges, including bribery. She has not yet been sentenced, but a judge denied her request for a new trial.
Thompson, the lead federal prosecutor in the case, said authorities have recovered only about $60 million of the $250 million stolen in the Feeding Our Future conspiracy, according to the AP.
"I hear they ripped off — Somalians ripped off that state for billions of dollars," Trump said. "Billions. Every year, billions of dollars, and they contribute nothing."
President has long-standing grudge against Somalis
The fraud allegations — producing more than 40 convictions in the Feeding Our Future case alone — have proved a lightning rod for Trump's invectives against Somalis. The president has long railed against Minnesota's Somali diaspora, the vast majority of whom are US citizens. Around 84,000 people of Somali descent live in the Minneapolis-St. Paul area, many of whom resettled after fleeing a bloody and lasting civil war in their home country.
His attention to Somali immigrants and Americans of Somali descent date to his first presidential term, when he included Somalia on a travel ban alongside other Muslim-majority nations.
Although state leaders have rejected the label, the Trump administration calls Minnesota a "sanctuary jurisdiction."
US Rep. Ilhan Omar, a naturalized citizen who came to the country from Somalia as a refugee, has been a frequent target of the president's ire.
Earlier in December,Trump saidOmar and "her friends" shouldn't be allowed to serve as members of Congress. He also called Somalis in Minnesota "garbage" who should "go back to where they came from."
"When they come from hell, and they complain and do nothing but bitch, we don't want 'em in our country," Trump said in a cabinet meeting this month. Vance loudly rapped his fist on the conference table in support.
Somalis and their advocates, however, point out the group convicted of fraud does not reflect the entire community.
"The Somali community in the Twin Cities is overwhelmingly made up of hardworking families, small business owners, healthcare workers, students, and taxpayers who contribute every day to Minnesota's economy and civic life," Jaylani Hussein, the executive director of the Council on American-Islamic Relation's Minnesota chapter, told CNN in an email.
"There's a few bad apples, you know, that committed crimes and broke the law, " Kamali Ali, a 39-year-old who came to the US from Somalia as a child,previously told CNNafter the ICE operation targeting Somalis was announced. "But at the same time, you can't do a collective punishment."
CNN's Sarah Owermohle, Whitney Wild, Hannah Rabinowitz, Omar Jimenez, TuAnh Dam, Rob Kuznia, Emma Tucker and Rebekah Riess contributed to this report.
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