U.S. News
Federal Aid to Minnesota Frozen Amid Fraud Probe
Clear Facts
- The Small Business Administration (SBA) has halted over $5.5 million in annual federal support to resource partners in Minnesota.
- Administrator Kelly Loeffler cited a breakdown in public trust and ongoing fraud investigations tied to billions in lost Medicaid funds as the reasons.
- Loeffler directly blamed Governor Tim Walz’s administration for failing to protect taxpayer dollars and allowing widespread abuse.
The SBA’s decision suspends millions in aid to Minnesota, citing concerns over fraud tied to the state’s resource partners. The move follows U.S. Attorney Joseph Thompson’s estimate that a substantial portion of $18 billion in Medicaid funding was lost to criminal activity.
“I am notifying you that effective immediately and until further notice, the SBA is halting the disbursement of federal funds to SBA resource partners operating in the state of Minnesota, totaling over $5.5 million in annual support,” Loeffler wrote to Governor Walz.
Loeffler criticized Minnesota leadership, stating the state failed taxpayers by not enforcing adequate oversight. She pointed to recent convictions and ongoing criminal investigations as evidence of systemic problems within the welfare system.
“This action is the result of a fundamental breakdown in the public trust. Under your leadership, Minnesota failed to safeguard taxpayer dollars, and SBA will not continue to place federal resources at risk in a state where oversight measures are ignored and accountability is abandoned.”
She also noted, citing Thompson, that a Somali fraud network reportedly stole $1 billion through schemes centered in Minneapolis. At least half of certain Medicaid programs funded by Minnesota taxpayers were allegedly diverted to criminals, with losses estimated at $9 billion.
Loeffler highlighted ongoing federal investigations from agencies like the USDA and Treasury into Minnesota’s handling of welfare programs. She also flagged $2.5 million in pandemic-era loan funds as connected to the Somali fraud scheme, with another $430 million in subsidies suspected to be fraudulent but still funded and in some cases forgiven during the current administration.
“The volume and concentration of potential fraud is staggering, matched in its egregiousness only by your response to those who attempted to stop it.”
Loeffler accused the Walz administration of resisting oversight and accountability, as well as dismissing criticism as “racism” rather than addressing the fraud. Walz has responded by emphasizing that anyone committing fraud, regardless of background, will face justice, but also stated “demonizing an entire population” is not acceptable.
The SBA will stop $2.22 million in Small Business Development Center awards, $450,000 in women’s business center funding, $2.6 million in microloans, and about $550,000 in additional disbursements for 2025.
“SBA’s responsibility is to taxpayers and small business owners, not to criminals or the politicians who enable them – We will continue to do what you did not: protect federal dollars on behalf of the American people,” Loeffler said.
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