Fraud investigation is believing your lying eyes
bitsaboutmoney.com115 points by dangrossman 5 hours ago
115 points by dangrossman 5 hours ago
Take a look at the actual 2019 OLA report McKenzie cites. This characterization is wrong in ways that matter.
The "50% fraud" claim? It comes from one investigator (Swanson) using what the OLA explicitly calls "a higher level view, a view that does not require the kind of proof needed in a criminal or administrative proceeding." His methodology? If kids are poorly supervised, "running from room to room while adult employees spend hours in hallways chatting".... he counts the entire payment as fraud. That's not "billing for phantom children" it's "I don't like how this daycare is run."
The OLA's actual finding: "We did not find evidence to substantiate the allegation that the level of CCAP fraud in Minnesota is $100 million annually." Proven fraud over several years was $5-6 million.
Terrorism? "We were unable to substantiate the allegation that individuals in Minnesota sent CCAP fraud money to a foreign country where a terrorist organization obtained and used the money." They checked with the U.S. Attorney's Office.. none of Minnesota's terrorism cases involved CCAP money.
McKenzie writes "beyond intellectually serious dispute" about claims the primary source he cites explicitly could not substantiate.
Meanwhile the president is posting videos of the Obamas as apes and calling Somalis "garbage", having federal prosecutors throwing out arbitrary $9 billion estimates in press conferences.
See for yourself: https://www.auditor.leg.state.mn.us/sreview/ccap.pdf
The Swanson memo memorializes the consensus of his investigatory group and, put to question by OLA and legislators, they stick with that story:
Page 14 of PDF:
[The OLA] did not find evidence to substantiate Stillman’s allegation that there is $100 million in CCAP fraud annually. We did, on the other hand, find that the state’s CCAP fraud investigators generally agree with Stillman’s opinions about the level of CCAP fraud, as well as why it is so pervasive.
(Stillman is a line level investigator who gave a media statement which was explosive. Swanson, who authored in the internal memo, was his manager.)
I do mention that other officials only agreed to characterize as fraud fraud which had resulted in convictions. We now, years later, have nine figures just from the convictions (and guilty pleas). These officials pointedly refuse to put any number on fraud other than the number incident to convictions.
Moreover: you should be very clearly correct if you accuse someone of citing a document as making claims it does not say. That is a serious accusation. BAM's citation of this piece is "the state’s own investigators believed that, over the past several years, greater than fifty percent of all reimbursements to daycare centers were fraudulent." This is _absolutely true_ and _is in the report as claimed_.
OP didn't claim you of misrepresenting facts in the document directly; OP claimed you of grossly mischaracterizing those facts in order to support claims the document does not support. The document is cited as supporting massive fraud "beyond intellectually serious dispute" while the scale of the fraud is disputed in the cited document.
But, on the other hand, I suppose intellectually serious dispute requires both sides to be intellectually serious. One good step in that direction would be to arrange one's citations such that they are supporting the claims you are citing them for.
I will also remark, as others have, that it's odd to make a big deal about this particular fraud when there's a lot more fraud happening a lot more obviously in a lot more of the nation. This is not to question Minnesota officials who are, rightly and appropriately, investigating suspected fraud in their zone of investigation; but it is worth questioning voices who have, apropos of nothing I can discern, made decisions about what's important to talk about and what isn't, and further made decisions to misrepresent allegations in alignment with people who very aggressively lie for evil reasons. As others have pointed out, the essay's core is seemingly cromulent, and it doesn't need you to do that.
<LLC voice> We have reviewed your feedback on our editorial choices, and are comfortable that we have characterized the claims in the report accurately. We stand by "Minnesota has suffered a decade-long campaign of industrial-scale fraud against several social programs. This is beyond intellectually serious dispute." This is editorial analysis, informed—as is stated in the plain text—by the experience of several programs. Feeding our Future, for example, is cited in the piece, with analysis. It has resulted in dozens of convictions and guilty pleas, and federal prosecutors characterize it as having defrauded the public of nine figures.
You are welcome to your own opinion as to what could motivate a publication which routinely writes about fraud and finance to write about fraud and finance. Past issues you may enjoy include a year-long investigation into a single incident of fraud in NYC, a topological look at the fraud supply chain in credit cards, discussions of how the FTX fraud was uniquely enabled by their partner bank failing to properly configure their AML engine, and similar. </LLC voice>
Seriously, it's beyond amazing how much mud this thread has been flinging at you. If the analysis you've offered is somehow not above board, it seems impossible to point out the clear facts of the matter in a way that nobody would object to.
I'm very amenable to the argument made in the blog post, but the tone and sidecars attached made it feel quite off, like if I looked into it, it'd turn out there was a rush to get the main idea down so we could get the sidecars attached.
Spent about 30 minutes consulting the report you mention, OP's post, and your reply, and there's clearly issues.
In the essay, you wrote that industrial-scale fraud is "beyond intellectually serious dispute," cited the OLA report, and presented the 50% figure as the finding that "staggers the imagination." (this should have been a tell)
When challenged, you retreat to: "My citation that investigators believed this is absolutely true."
Those are completely different claims. "An investigator believed X" is not "X is beyond intellectually serious dispute" — especially when the same report on the same pages says:
- The OLA itself: "We did not find evidence to substantiate the allegation" (p. 5)
- The DHS Inspector General: "I do not trust the allegation that 50 percent of CCAP money is being paid fraudulently" (p. 12)
- The investigators themselves had "varying levels of certainty — some thought it could be less, and some said they did not have enough experience to have an opinion" (p. 9)
- Swanson explicitly used "a view that does not require the kind of proof needed in a criminal or administrative proceeding" (p. 10), counting the entire payment to any center with poorly-supervised kids as "fraud"
That's not "beyond intellectually serious dispute." It is, literally, a documented dispute, inside the very report you cite as settling the matter.
And "nine figures from convictions"? That's Feeding Our Future, a federal food nutrition program. The OLA report is about CCAP, a state childcare program. Proven CCAP fraud remains at $5-6 million. You're retroactively validating a CCAP claim with convictions from a different program.
FoF claimed to supply meals at the same physical locations as CCAP and paid the same owners. As mentioned, one of nine of the operators profiled, who was previously raided in an investigation into alleged overbilling of CCAP, received $1.5M from FoF. FoF is in fact not a federal nutrition program but actually the name of a non-profit which received grants from a federal nutrition program for forwarding to third parties. CCAP is also funded by federal block funding.
The operator overlap is real, and the correction that FoF is a non-profit rather than a federal program is fair. I'll take both points.
But look at what's happened across this exchange:
Essay: Industrial-scale CCAP fraud is "beyond intellectually serious dispute." The evidence: the OLA report shows investigators believed 50%+ of reimbursements were fraudulent.
When challenged that the OLA explicitly could not substantiate $100M and proven fraud was $5-6M: you retreat to "my citation that investigators believed this is absolutely true and is in the report as claimed."
When challenged that "investigators believed X" ≠ "X is beyond intellectually serious dispute" — especially when the same report documents the IG saying "I do not trust the allegation," DHS leadership calling $100M "not credible," investigators having "varying levels of certainty" with some having "not enough experience to have an opinion," and the OLA itself saying "we cannot offer a reliable estimate": you pivot to FoF operator overlap.
You still haven't addressed the actual critique. The overlap proves that some fraudsters work across programs. Not disputed, not surprising, and consistent with your essay's point about fraud lifecycles. What it doesn't do is retroactively substantiate Swanson's 50% CCAP figure. His methodology, spelled out in the very email the OLA appended, counted all payments to any center where children were poorly supervised as 100% fraudulent, a standard he himself distinguished from "the kind of proof needed in a criminal or administrative proceeding." FoF fraud was fabricating meal claims for meals never served. CCAP fraud is billing for children not present. Different programs, different billing mechanisms, different oversight bodies (MDE vs. DHS), different proven scales by orders of magnitude. That some of the same people ran both doesn't collapse the distinction.
"CCAP is also funded by federal block funding" seems designed to blur a line that matters. Many programs are federally funded. That doesn't make convictions in one program evidence of the fraud rate in another.
Here's what's frustrating: I think the essay's core argument is genuinely strong, and it doesn't need the overclaim. The OLA report is already damning on its own honest terms: proven fraud of $5-6M in a program with paper sign-in sheets prosecutors called "almost comical," no electronic attendance verification, 60-day billing windows, a certification statement removed from billing forms in 2013, and the investigators themselves saying centers "open faster than they can close the existing ones down." The report makes it clear fraud was likely substantially higher than proven convictions. That's already a devastating indictment of program oversight. Your argument about base rates, weak controls, and Shirley fishing in a troubled pond all follows from that, from the report as it actually reads.
But "likely substantially higher than $5-6M, in a program with terrible controls" is a very different claim than "50%+ fraud, beyond intellectually serious dispute." Your essay presents the latter. The report supports the former. And the gap matters, because the essay is being read right now, today. in a context where the president is calling Somalis "garbage," prosecutors are throwing out $9 billion estimates in press conferences, and five states just had billions in child care funding frozen. Overstating what the evidence supports isn't a minor rhetorical choice in that environment. It's exactly the kind of epistemic failure the essay warns about when it talks about "irresponsible demagogues" filling the vacuum.
The thing which is beyond intellectually serious dispute is industrial-scaled fraud.
You keep wanting to make me "own" the CCAP's estimate. I will not reciprocally try to make you "own" $5 million, because I am charitable and because history has been unkind to the officials who made it.
I do ask you to own: "Minnesota HAS NOT suffered industrial-scale fraud across several social programs." Otherwise this is judging a high school debate competition, and I've had better.
Patrick is too polite to mention it, but frauds work much better if the fraudsters are also fully integrated into the political machine of the people nominally investigating the fraud.
I don't think that's in evidence. Institutionalized and ideologically-driven apathy towards the fraud, sure, but that's not uncommon (see: the defense industry; the finance industry).
A distinction without a difference imo. I think most people rightfully surmise the defense and financial industries are rife with, if not outright fraud, at least waste and abuse. We could use better language perhaps.
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>cryptoracist
He hates cryptographers?
The man has nothing nice to say about Bigfoot.
The alternative explanation that he is against cryptocurrency actually is true.
Crypto[insult] is just a shorthand for saying "I don't actually have evidence to support my accusation."
No, it’s a term for a particular brand of racism -
Like complimenting someone for being ‘articulate,’ or ‘one of the good ones.’ Sounds innocent enough, until you understand the racist underpinnings.
See above, where it is being used as an insult without any evidence to back it up. This is the most common usage, and usage defines the true meaning of the word.
So it's a made up term from people who want to discredit people they don't like by calling them "secret racist" without having any proof.
I should warn you that the user you are replying to is a crypto-paedophile. Be careful. There is no evidence to describe how he might retaliate.
All terms are made up by humans
Yeah but calling someone a racist is a serious accusation, you better bring receipts or be liable for defamation. Calling them a "secret racist" instead isn't the workaround that absolves you from this.
> Yeah but calling someone a racist is a serious accusation, you better bring receipts or be liable for defamation
There are a large number of countries with their own systems of law, and its possible that in one of them calling someone a racist might be subject to defamation law, but in most I am aware of that's going to be a problem because its not even a well-enough-defined fact claim to be legally true or false.
You cannot in fact be made liable for defamation for calling someone a racist.
(Patrick, a close friend I have known for many years, is not a racist.)
Its hilarious how short human memory is. To me Minnesota just seems like a replay of Tammany Hall in NYC
Then I think you need to read more about Tammany Hall, because it was not simply a widespread pattern of fraud in social services.
There was few social services at the time. It was a patronage system. Different rewards but buying votes all the same. My point is that patronage is a long storied American tradition so I don’t know why people are al shocked that such schemes are still ongoing. Republican and anti castro cubans is or was a similar patronage system.
On Shirely, and the reaction: there's a markedly different valence to a fraud 'investigation' seeking to arrest, try, convict, and imprison _fraudsters_ vs one seeking (through a thin veil) to mar an entire community and bring about their violent dispossession at the hands of unaccountable little green men. It would not be an unreasonable person that strongly supports the former and opposes the latter.
Hmm, you completely lost me at "little green men". What/who is this referring to? Extraterrestrials?
The last time I heard about "little green men" (other than ETs) was to describe obviously-but-unofficially Russian soldiers who invaded Crimea in 2014 and claimed to be natives who wanted Russia to annex the region.
https://en.wikipedia.org/wiki/Russian_occupation_of_Crimea
I guess it's now being used as pejorative against groups of vaguely military style. Like the DHS agents conducting Metro Surge.
> They will sometimes organize recruitment very openly, using the same channels you use for recruiting at any other time: open Facebook groups, Reddit threads, and similar. They will film TikTok videos flashing their ill-gotten gains, and explaining steps in order for how you, too, can get paid.
> As a fraud investigator, you are allowed and encouraged to read Facebook at work.
I tend to believe this, but it would be a lot more compelling with links to a case where Facebook/TikTok posts were useful evidence.
There are tons of these out there.
In late 2024 there was the whole "Infinite money glitch" tiktok trend that was just check fraud.
This is a poor example though, because I don't think anyone got away with it? And it was viral, but not organized.
Good example, though my impression was that was a quasi-viral TikTok trend that caught up random fools, not organized fraud?
Is that contradictory? Seems like organized fraud would need a supply of random fools, and a viral trend, if you can manage one, isn’t a bad way to get that.
Organized fraud preys on disorganized fools, but this fraud didn't require or benefit from organization. You could just go do it on your own, and pocket the money until you got a visit from the cops.
Here's a rap video, the entirety of which bragging about fraud against the government:
https://www.youtube.com/watch?v=K0ck7hTsug8
"I just been swipin' for EDD
Go to the bank, get a stack at least
This ** here better than sellin' Ps
I made some racks that I couldn't believe
Ten cards, that's two-hunnid large"
(For context, "EDD" is California’s Employment Development Department.)
Much better bangers about fraud:
Dead Prez - Hell yeah: https://youtu.be/kGjSq4HqP9Y?si=_z6jb0Vfo7_PiITQ&t=82
Maxo Kream - 5200: https://www.youtube.com/watch?v=7kC9j6Zp-kg
Maxo was actually arrested for racketeering, though not due to this song specifically (I don't think).
With Google I can find out that he was prosecuted after his video came out. I'll count it. https://abc7.com/post/nuke-bizzle-rapper-edd-fraud/12024561/
It's interesting to note that some states restrict the use of rap music lyrics as evidence:
https://legalclarity.org/using-rap-lyrics-as-evidence-in-cri...
> Responsible actors in civil society have a mandate to aggressively detect and interdict fraud. If they do not, they cede the field to irresponsible demagogues. They will not be careful in their conclusions. They will not be gentle in their proposals. They will not carefully weigh consequences upon the innocent. But they will be telling a truth that the great and the good are not.
Leaving this to the conclusion does the piece a disservice. One can quibble (and it would be good to here) the extent to which the government isn't pursuing the sorts of fraud discussed, but this as a thesis makes clearer the argument throughout for earlier and more aggressive pursuit.
Instead of giving parents vouchers, that they then use at a fraudulent daycare, in exchange for a fake job, while they take care of their children at home, parents should just get money, so that they can stay home taking care of their children if they prefer that.
Or get a proper kindergarten run by the government. Radical idea, I know
I never understood why we have public schools but not public kindergartens.
All I remember hearing about this is how creepy and racist it was to look for kids at a black-owned daycare. It was a scam the whole time?
According to OP, there is substantial evidence indicating about 50% of the daycares are scams. I've seen Nick Shirley's video, I don't think he demonstrated any concrete about any of the sites he visited (he's not a very good investigator), but if the 50% number is correct... well, the broken clock was probably right at least a couple of times that day.
The 2019 OLA report "Child Care Assistance Program: Assessment of Fraud Allegations" is what makes the claim that greater than 50% of reimbursements to child care providers under these specific programs were fraudulent. That estimate is broadly and bipartisanly considered to be directionally true.
Have you read the document? I often find these things that we believe to be true wind up being a game of telephone. We further have no prior (is the metric of this sort of like how everyone has committed a crime given sufficient prosecutorial attention)?
I've also never heard of this report before this year as someone quite attuned to what happens in Minnesota.
One document contributor contends, notably, that if "adult “employees” spend hours in hallways chatting with other adults [...] the entire amount paid to that provider in a given year is the fraud amount."
I'll leave the assessment of that definition to readers. https://www.auditor.leg.state.mn.us/sreview/ccap.pdf
Under "In which we briefly return to Minnesota":
> And I think journalism and civil society should do some genuine soul-searching on how we knew—knew—the state of that pond, but didn’t consider it particularly important or newsworthy until someone started fishing on camera.
In... the same section where he cites all of the evidence the government has put together against the fraudsters. What is the issue? That these investigations should have been more prominently featured in the mainstream news? Would that have helped or hurt investigations?
> Of course, as the New York Times very carefully wordsmithed recently:
>> Minnesota officials said in early January that the state conducted compliance checks at nine child-care centers after Mr. Shirley posted his video and found them “operating as expected,” although it had “ongoing investigations” at four of them. One of the centers, which Mr. Shirley singled out because it misspelled the word “Learning” on its sign, has since voluntarily closed.
> An inattentive reader might conclude from this paragraph that the Times disputes Shirley’s reporting.
The New York Times is literally quoting what the Minnesota officials said. What were they supposed to do, add on "but a kid on YouTube says differently"?
I don't think the serious response to Nick Shirley's "journalism" is that there was no fraud; rather, it's that he came into the situation with a thinly veiled agenda and fed his audience exactly what they wanted to hear. Did his video make it more or less likely that we'll be able to investigate and resolve the fraud situation in MN? I guess that depends on how serious you think the laughably corrupt Trump administration is, but the fact that they seized on this as an excuse to send in 3000 ICE agents is not exactly promising.
The report to the government about a more than 50% fraud rate was from six years ago. The Minnesota government was not serious about dealing with problem. Most businesses would not last that long with a 50% customer fraud rate.
Yes, there were some investigations and convictions, but nothing to on a scale that would deal with problem, nor any systematic change to a level paying huge amounts of money to scammers.
He cites the 50% number from Jay Swanson, a CCAP Investigations Unit manager, and then dismisses criticism of the number by saying the criticism requires an unreasonable standard (only criminal convictions).
But if you read the cited source of how Swanson came up with that number he said it wasn't just for over-billing (claiming more kids than the places actually had).
Instead, by his estimation, the employees working are not actually working because 'children are unsupervised, running from room to room while adult “employees” spend hours in hallways chatting with other adults' and so all of the funds to those providers are fraudulent. [1]
I think it's pretty easy to criticize the logic for that 50% fraud rate number without requiring criminal convictions.
[1] https://www.auditor.leg.state.mn.us/sreview/ccap.pdf#page=16
This is a great argument. I wish this is what we were discussing rather than Nick Shirley and the partisan politics of the issue.
Oddly enough starting an article with a defense of Nick Shirley leads to the comments on an article being about that.
I mean, I wouldn't have led off that way either, but I know what Patrick is talking about and I read the article. I genuinely believe the current administration is the worst in the history of the country, and I also believe that to oppose it effectively we need every government body we run to be completely on the ball, so it's really dispiriting to see people reflexively defend misconduct and incompetence. That shouldn't be a habit we share with the party we oppose.
(I can't speak for Patrick's politics, only for mine.)
5 years ago. And it looks like the state was actually taking pretty aggressive moves against the fraud including ongoing investigations and legislation to shut down the fraud. [1]
There was active prosecution ongoing literally right up until Shirly's video. That's taking the matter seriously.
[1] https://en.wikipedia.org/wiki/2020s_Minnesota_fraud_scandals
>There was active prosecution ongoing literally right up until Shirly's video
Oh yeah, the prosecution was sooo active that all the daycares listed as operational and receiving funding, had no kids in them, had blacked out or boarded up windows, misspelled signs, and if you went in to ask for enrollment 3 angry men would come out shouting at you. How many legit daycares have you seen that look like that?
Yes, because when I enroll a child in a daycare I start by wandering around the facilities with a camera man and then I demand to see the children. But sure is suspicious that this place has no kids in it when I visit it outside it's posted operation hours.
Nick did a day worth of shooting, didn't follow up, and didn't check basic things like hours of operation.
Right, everybody, especially the author of this piece, agrees that what Shirley did was bad and stupid. And also unnecessary, because we had documentary evidence from the Minnesota government itself showing the scale of the fraud here.
I doubt Patrick is the world's biggest Nick Shirley fan, but that's not really how it's conveyed in the article.
Shirley gets acknowledged to have "poor epistemic standards" (which is an almost euphemistic way of describing his approach) but Patrick goes on to say that "the journalism develops one bit of evidence...." and even appears to insinuate the NYT erred in reporting it in the context of the Minnesota government's response that the state's own compliance checks had found them open shortly afterwards but that some of them were under investigation.
There's an interesting point to be made that detailed, bipartisan evidence collected by suitably qualified officials that some daycenters were closed at times they were claimed to be open gets less attention than a YouTuber with an agenda rocking up at nurseries at what may or may not have been their opening times, but that's not how it's actually expressed. Rather it seems to be arguing for face value judgements of his video and against journalists that felt compelled to point out that whilst evidence of daycare fraud by Somalis in Minnesota definitely existed, Shirley's videos probably shouldn't be considered part of it.
The way I phrased that point was "The investigators allege repeatedly visiting daycare centers which did not, factually, have children physically present at the facility despite reimbursement paperwork identifying specific children being present at that specific time. The investigators demonstrated these lies on timestamped video, and perhaps in another life would have been YouTube stars."
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The mainstream media was reporting on it 6 years ago. They reported on the 50 convictions too, which people whose information environment is YouTube tend to be unaware of.
Of all the things that threaten the future of mainstream reporting, YouTubers running round Ohio for an hour trying to find people who think Haitians are eatinng the local pets isn't one of them.
He does not in fact call what Shirley did "bad and stupid". He calls him a journalist!
>I start by wandering around the facilities with a camera man
How does one wandering around with a camera affect the fact that the daycares had blacked out or boarded up windows, misspelled signs, and if you went in to ask for enrollment then 3 angry men would come out shouting at you?
Do you even hear yourself? Are they Schrodinger's daycares? Do they become compliant the moment you stop filming them?
Tell you what, go get a camera man and go visit your local daycare center. Post on youtube how they respond.
I predict that they would not spontaneously board up the windows and introduce spelling errors into their signage.
You're beating it around the bush going offtopic and ignoring my question:
How does having a camera impact the daycare having a misspelled sign and boarded up windows?
> You're beating it around the bush going offtopic and ignoring my question:
No I'm not, you just don't like the answer. But at least you've edited to remove the "3 guys yelling at you" portion as I think even you can see how that might be a reasonable thing to do to a creep going around you business filming everything.
> daycare having a misspelled sign and boarded up windows?
The answer to this question is simple, a poor one. And I suspect that a daycare that primarily gets it's funds from people using government welfare likely isn't rolling in the dough. Broken windows are expensive to fix, boards are cheap. A misspelled sign is embarrassing but again could easily be something that the owner of the facilities just wasn't assed to pay to replace and properly fix.
My spouse worked for years in that sort of daycare which is why it's unsurprising to me that a daycare in that state exists. She, for example, did a full summer in Utah without AC while the kids were fed baloney sandwiches every day. Her's wasn't a daycare committing fraud, it was just an owner that was cutting costs at every corner to make sure their own personal wealth wasn't impacted.
A shitty daycare isn't an indicator of fraud. It's an indicator that the state has low regulation standards for daycares. Lots of states have that, and a lot of these places end up staying in operation because states decide that keeping open an F grade daycare is cheap and better for the community vs closing it because it's crap quality. They certainly don't often want to take control of such a business and they know a competently ran one isn't likely to replace it if it is shutdown.