On Monday, January 6, 2025, Governor Walz issued the first Executive Order of 2025, EO 25-01, which creates a centralized state fraud investigations unit administered and overseen by the Minnesota Bureau of Criminal Apprehension (“BCA”). The BCA’s new Financial Crimes and Fraud Section (“Fraud Section”) will focus on financial crimes, insurance fraud, and state government program fraud.

Governor Walz’s administration has faced intense criticism over the past few years for not doing enough to combat the rampant fraud that has taken place in Minnesota state government programs, especially with respect to the matter that has received national attention – the Feeding Our Future scandal, which has dogged the administration for almost his entire time as Governor.

Even Biden appointee, U.S. Attorney Andy Luger, has declared that “Minnesota has a fraud problem.” In an interview last month, Luger stated that “a lot more needs to be done, and people need to have serious conversations and getting to the root of this and stopping it before it happens.”  Luger went on to say that “no other state had a Feeding Our Future….[And] no other states have had the kinds of problems we’ve had with government fraud….” Not surprisingly, Governor Walz’s administration has been under attack by House and Senate Republicans for many years over what they believe has been lackluster investigation and enforcement of obvious financial fraud taking place throughout Minnesota government programs.

Under EO 25-01, the Minnesota Department of Commerce Fraud Bureau, which conducts investigations into insurance fraud and financial crimes, will enter into an interagency agreement with the BCA until a formal reorganization order is issued next month by the Minnesota Department of Administration. Under the reorganization order, Commerce Fraud Bureau personnel, funding, and responsibilities will move to the BCA.

In addition to the other directives contained in the EO, all state agencies and departments are required to ensure that all government employees will understand their obligations to prevent fraud and know how to report suspected fraud, including reporting to the BCA Fraud Section, and cooperating with any investigation it undertakes. Astonishingly, these duties and responsibilities did not already exist as part of every State employee’s onboarding and annual training.

The Governor also intends to introduce a legislative package to strengthen state program fraud investigation and enforcement, including adding nine staff members to the Minnesota Attorney General’s Medicaid Fraud Control Unit; giving agencies expanded authority to stop payments from going to people and entities suspected, charged, or convicted of fraud or financial crimes, including using artificial intelligence (“AI”) to detect suspected fraud; and adding staff across a number of agencies, including Department of Human Services to expand its fraud unit, among other changes.

Minnesota Republicans are sure to have their own strong anti-fraud legislative package, which Governor Walz stated, he welcomed.

Although much remains to be seen about the future workings of the Fraud Section, there is no question that Minnesota providers who receive payment from Minnesota government programs will be subject to significantly greater investigation and enforcement efforts by the State.

Please stay tuned for further regulatory and legislative updates from our group.

January 8, 2025