The Trump administration has suspended nearly 7,000 borrowers in Minnesota from small business loans, citing suspected fraud.
HHS freezes Minnesota childcare funds amid fraud claims
The federal Department of Health and Human Services froze all childcare payments to Minnesota, citing what it calls ‘blatant fraud’ at state daycares.
The Trump administration is blocking almost 7,000 small business loans in Minnesota, the latest federal action in a fraud scandal that has enveloped the state.
Kelly Loeffler, administrator of the Small Business Administration, said borrowers suspected of “fraudulent activity” were approved for thousands of COVID-era loans totaling as much as $400 million. The federal loans stemmed from programs meant to help small businesses, especially during the COVID-19 pandemic.
“These individuals will be banned from all SBA loan programs, including disaster loans, going forward,” Loeffler said in a statement on X. “We will also refer every case, where appropriate, to federal law enforcement for prosecution and repayment.”
Loeffler did not provide any additional details about the borrowers or the businesses whose loans were being frozen. She added that such efforts will stretch beyond Minnesota, writing, “This is just the first state.”
It was the latest action taken by the Trump administration to combat what has been described as rampant fraud in the state.
As part of the same enforcement effort the Department of Health and Human Services froze childcare payments to Minnesota. Meanwhile, the Department of Homeland Security and the FBI both recently announced increased investigative efforts in the Democrat-led state, focused on suspected fraud involving taxpayer dollars.
For years, the Biden administration had been investigating the fraud, including theft from Medicaid programs, in the state, leading to dozens of arrests and convictions. Those efforts have continued during Trump’s second term in office.
In what prosecutors described as the largest COVID-era fraud scheme in the nation, dozens of scammers in Minnesota bilked more than $250 million from a federally funded program meant to feed hungry children through the nonprofit Feeding Our Future.
Federal prosecutors have charged more than 80 people with being involved in the scheme since 2022, the majority of them U.S. citizens of Somali descent. At least 60 suspects have been convicted.
In recent weeks, President Donald Trump has seized on the scandal, calling out Minnesota Gov. Tim Walz, who ran against him as the 2024 Democratic vice presidential candidate. The president has also called out the Somali community in the state, at one point calling them “garbage,” in a tirade local officials criticized as racist and un-American.
White House press secretary Karoline Leavitt said in late December the administration is exploring the denaturalization of those Somali-Americans in Minnesota responsible for the fraud, a move that would seek to strip U.S. citizenship from those who illegally obtained tax dollars intended for social services.
Increasingly under the spotlight, Walz, who is up for reelection this year, has taken several actions to combat the scams, including directing state agencies to intensify their efforts to identify and root out fraud.
In December, Walz unveiled a statewide fraud prevention program and appointed a former FBI agent to head the initiative. The former vice presidential candidate has been called by Republicans in Congress to testify about the fraud scandal before the House Oversight Committee in February.
Contributing: Joey Garrison
