Fraud expert exposes how hidden networks drove Minnesota fraud, other major scams: ‘Criminal enterprise’
Criminals can turn stolen identities bought on the dark web into seemingly legitimate businesses — then use those companies to bill taxpayers for healthcare and other services that were never provided, according to a fraud expert who detailed the scheme to Fox News Digital.
The companies can hide in plain sight: Criminals create LLCs using information that may receive little scrutiny, pair them with stolen identities and submit fraudulent claims for everything from wheelchairs and diabetes treatments to childcare and autism services, according to Haywood Talcove, CEO of LexisNexis Risk Solutions Government.
But Talcove said the financial losses are only the beginning, warning the schemes can fuel “criminal enterprises.”
“They are using our money against us, whether it’s in social media campaigns, whether it is for human trafficking, drugs, disrupting our economy,” Talcove told Fox News Digital.
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“When you think about fraud, don’t think about, ‘It’s great that we stopped a fraud ring that stole $5 million.’ Think about that as a criminal enterprise that goes beyond just stealing out of a benefit program.”
Despite fraud schemes surfacing nationwide, Talcove said Minnesota was “particularly egregious” because the state had little incentive to stop the fraud.
“Minnesota was particularly egregious once they started looking because it was really easy to find,” he said.
Talcove said one factor allowing the schemes to flourish in Minnesota and across the country is weak verification during the LLC registration process and reliance on “self-reported information.”
“In the case of Minnesota, you went and got your LLC, you opened up a childcare facility, and then the next thing you knew you were billing CMS [Centers for Medicare & Medicaid Services] for childcare or autism care, and nobody checked.”
The Trump administration launched an anti-fraud crackdown this year after Minnesota’s Feeding Our Future scandal, creating a task force led by Vice President JD Vance. The scheme allegedly stole $250 million from a federally funded child nutrition program during the pandemic, and many of those charged have since been convicted or sentenced to prison.
Without third-party audits, Talcove said many criminals slip through the cracks, racking up millions before they’re caught.
“One of the fundamental problems with these programs that are literally spending trillions of taxpayer dollars, they have nobody doing investigations or such a small, tiny amount of people that it’s not even possible to investigate,” he said.
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But Talcove said when these schemes are investigated, they expose much more than fraud.
“They’re not just involved in stealing Medicare, Medicaid, or food stamps, or unemployment insurance,” he said. “They have other interests.”
Talcove alleged some criminals use stolen funds to finance sex trafficking by bringing women from other countries and “renting them out” across the U.S., all while profiting from their “ill-gotten gains.”
“What they have to look for is beyond the fraud that they found to see if they’re involved in drugs, human trafficking, threats to our democracy, weapons,” he said.
Calling the fraud a “national security issue,” Talcove said some investigations have uncovered criminal groups involved in benefit fraud, including foreign cybercrime organizations such as APT41, a Chinese-linked hacking group.
“When you start looking at the criminal groups that are involved, APT41 and some of their peers and associates, as well as some of the other groups from North Korea and other countries, it is, right now, a national security issue,” he said.
However, not all the money is sent to “overseas criminal organizations,” according to Talcove.
“Now, some of it, granted, is being used for luxury goods, homes, cars, vacations, but a lot of it is just going right back to the transnational location that it came from,” he said.
Talcove warned that unless investigators dig deeper, fraudsters will continue to exploit the system.
“They tend to get away with it because the investigation stops once you find the fraud,” he said.
Turning to the government’s role, Talcove said Democrats and Republicans must work together to tackle the nation’s growing debt, starting with stronger efforts to combat fraud.
“My hope is the fiscal situation that we’re currently in, driven by what’s going on with the bond market, is going to force elected leaders at the state and federal level to start paying attention,” he said.
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