St. Paul, MN – Minnesota Governor Tim Walz has pledged full cooperation with federal investigators after the FBI launched a sweeping probe into alleged fraud within one of the state’s most sensitive housing programs. The investigation targets the Housing Stabilization Services program, which was designed to help older adults and people with disabilities — including those battling substance use disorders and mental illness — secure stable housing.
The program, hailed as a lifeline for vulnerable Minnesotans, is now at the center of a scandal that could erode public trust in state-run assistance efforts.
FBI Raids Target Suspected Fraud
Federal agents executed search warrants at eight locations across the Twin Cities, focusing on five service providers accused of billing for services that were never delivered. Acting U.S. Attorney Joe Thompson confirmed the raids, saying the program “proved to be extremely vulnerable to fraud” and signaling that more cases could follow.
The raids underscore mounting concerns that Minnesota’s well-intentioned social safety net has become a target for abuse. Thompson emphasized that the investigation is part of a broader reckoning in the state:
“Minnesota is a generous state, but generosity can create vulnerabilities. We have to strike the right balance between compassion and accountability.”
Walz Vows Crackdown on ‘Bad Actors’
Governor Walz, who has faced both praise and criticism for his management of state programs, responded forcefully to the FBI’s actions.
“If you’re going to commit these crimes in Minnesota, you are going to get caught,” Walz said in an interview with WCCO, adding that the state is already moving to tighten oversight.
The governor pointed to new safeguards implemented this year, including a restructured Office of the Inspector General and additional tools to monitor Medicaid spending. Walz suggested that artificial intelligence technology could play a role in detecting suspicious billing patterns in the future, lamenting that lawmakers had not yet secured the funding to deploy such tools statewide.
“You’re always gonna find people trying to cheat the system,” Walz admitted. “But this legislative session gave us new tools, stronger oversight, and leadership that is serious about rooting this out. We’re not looking the other way.”
A History of Fraud Concerns
This is not the first time Minnesota has found itself under scrutiny for large-scale fraud within state-run programs. Past scandals involving childcare subsidies and nonprofit food programs have already raised questions about oversight gaps. Former U.S. Attorney Andrew Luger previously warned of systemic vulnerabilities, and Thompson echoed those concerns in his remarks this week.
Housing Stabilization Services, launched as part of Minnesota’s Medicaid expansion efforts, has grown rapidly in recent years. With millions of dollars flowing through the program, federal officials say it became an attractive target for fraudsters who exploited its billing system.
Balancing Compassion and Oversight
Walz defended the state’s overall approach, stressing that Minnesota’s generosity is rooted in deeply held values.
“This is a state that errs on the side of making sure children have food, that people struggling with addiction have a roof over their heads, that seniors and people with disabilities are not left behind,” Walz explained. “But we have to be realistic — some people will try to exploit that generosity for personal gain. That’s why accountability measures matter.”
The governor made clear that while fraud cannot be tolerated, he does not want to see the program gutted or its mission undermined. “We can’t allow bad actors to define or destroy what has been a vital program for thousands of Minnesotans,” he said.
What’s Next
Federal prosecutors have not yet announced charges, but Thompson indicated that indictments are likely in the coming months. If proven, the allegations could involve millions of dollars in fraudulent claims.
Meanwhile, the Walz administration says it will work with lawmakers to secure additional oversight funding in the next legislative session, with a particular focus on advanced fraud detection tools.
The unfolding scandal is likely to fuel partisan debates at the statehouse, with Republicans expected to argue that the fraud highlights structural failures in Democratic leadership, while Democrats push back by pointing to reforms already underway.
For the families who depend on Housing Stabilization Services, the stakes are deeply personal. The FBI probe raises uncomfortable questions about whether public resources meant for Minnesota’s most vulnerable have been siphoned away — and whether safeguards will be strong enough to prevent history from repeating itself.