In the legal and compliance space, it is easy to ignore significant incidents involving domestic bribery and fraud.  We are fixated on FCPA foreign bribery cases, as well as domestic healthcare fraud, anti-kickback violations and Stark Law incidents. But when it comes to significant domestic fraud, the Justice Department has its hands full with fraud cases involving federal aid programs implemented during the COVID-19 pandemic. The Justice Department is racking up significant prosecutions because of large fraud schemes and attempts to recover stolen funds.

In a recent announcement, DOJ announced its largest fraud prosecution to date, charging 47 defendants with conspiring to gain $250 million by stealing from a federal program providing free meals to children during the pandemic.  The 47 defendants were charged in six indictments and three criminal informations with conspiracy to commit wire fraud, money laundering and bribery.

Aimee Bock, the founder of the nonprofit Feeding Our Future, which participated in the Federal Child Nutrition Program, set up a massive fraud scheme by directing employees to recruit people to establish nutrition program sites in Minnesota.  The conspirators set up around 250 sites, but most had only a few employees and no experience in serving large volumes of food to children.

As the primary sponsor, Feeding Our Future had to sponsor any sites and monitor the sites for compliance.  Feeding Our Future was responsible for monitoring the sites and preparing reimbursement requests.  The federal payments were made to Feeding Our Future, which then disbursed amounts to the individual sites.

The defendants fraudulently claimed to serve thousands of meals a day and shell companies were created to register with the program and launder the proceeds.  As an example, the indictment explained that one of sponsored sites was known as Stigma-Free Mankato Site and was set up by three defendants.  They claimed the site was serving 3000 children per day, and a shell company, Horseed Management was set up to serve as a meal vendor providing the food.

Feeding our Futures received about $3.4 million in federal funds 2019 and $200 million in 2021.  The co-conspirators  spent the money on luxury vehicles, travel and real estate in Ohio, Kentucky, Kenya and Turkey.

The co-conspirators created fake meal count sheets and attendance rosters and filled them up with fake names and ages of children who allegedly picked up meals.  The co-conspirators used a Microsoft Excel algorithm to assign random ages between 7 and 17 in the age column. Feeding Our Future then submitted false claims to the government and were reimbursed for meals that were never distributed.

Feeding Our Future was paid over $18 million in administrative fees in addition to bribes it was paid by companies sponsored by Feeding our Future that were written off as “consulting fees” paid to shell companies. Individuals seeking to operate fraudulent sites under the sponsorship of Feeding Our Future had to pay a kickback to Feeding Our Future employees.

When the Minnesota Department of Education inquired into the Feeding Our Future sites, Bock provided false assurances that the sites were being monitored.  in response to additional inquiries, Bock lodged claims of discrimination against the nonprofit.  The Minnesota Department then denied Feeding Our Future any further sites. Bock filed a lawsuit claiming retaliation.

In total, Feeding Our Future opened more than 250 sites in Minnesota and fraudulently obtained and disbursed more than $240 million  in Federal Child Nutrition Program funds.