4 arrested, 3 Minneapolis child care centers charged in $1 million fraud scheme

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Four people have been arrested and three child care centers have been charged with billing the government to take care of "phantom students" to the tune of more than $1 million.

Hennepin County Attorney Mike Freeman announced Tuesday that the arrests were made after raids on four child care centers. Three of the businesses have been charged with theft by swindle, along with four employees, the Star Tribune reports.

The three centers are: Minnesota Child Care Service, Inc., 2500 Minnehaha Ave.; Children’s Choice Center, Inc., 2700 Summer St. NE and Ummah Child Care Services, Inc., 2505 Fifth Ave. S, all in Minneapolis. The county attorney's office has also frozen $219,000 in their bank accounts.

The arrests follow an 18-month investigation of overbilling by the providers, in which they allegedly sought state and federal funding from the Child Care Assistance Program for more children than they were actually caring for.

FOX 9 reports the program is designed to help low-income families pay for child care, and the total amount involved in the fraudulent billing scheme could total more than $1 million.

"These centers do provide legitimate support and services, but they also bill the government anywhere from 15 to 30 percent for kids who weren't there," said Freeman at a Tuesday afternoon news conference. "If there were 200 kids in the center, they would bill the government for 300."

According to the criminal complaint, investigators became suspicious about how much money the four centers were billing to the state. So they obtained warrants and installed hidden cameras that could view the entrances to the child care centers. Agents then watched the videos and counted the number of children going into the buildings.

After checking the billings to the state for the same time period, they found that the centers were claiming many more children were attending the child care centers than were actually there.

For example, in one two-week period late last year, Minnesota Child Care Services submitted a claim for 2,183 children during one two-week period late last year.

But when investigators reviewed the surveillance video, they determined that only 1,200 children had actually attended on those days, and the center was seeking payment for 950 "phantom" children.

The fourth center that was raided remains under investigation, and more arrests could come later, Freeman said.

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