First Federal Charges in Housing Program Labeled 'Riddled with Fraud'

A Major Fraud Scheme Unveiled in Minnesota’s Housing Stabilization Services

Federal prosecutors have charged eight individuals in what they describe as a large-scale fraud scheme targeting Minnesota’s Housing Stabilization Services (HSS) program. The case involves the alleged misappropriation of millions of dollars from the Medicaid-funded benefit, which was designed to help vulnerable populations secure stable housing.

During a news conference, the U.S. Attorney’s Office revealed the “first wave” of wire fraud charges tied to a widespread effort to defraud the Medicaid system by establishing fake housing companies. Acting U.S. Attorney Joe Thompson emphasized that the HSS program has been plagued by fraudulent activity, with many of the accused operating out of dilapidated offices and other locations that housed multiple illegal health care operations.

Thompson explained that the defendants targeted Medicaid-eligible individuals, particularly those recovering from drug or alcohol addiction, and enrolled them in the housing stabilization program. These individuals were then billed for services that were never actually provided. “The money was just simply stolen,” Thompson said, noting that the latest indictment includes over $10 million in stolen funds.

This case is part of a growing scandal surrounding the HSS program, which was launched in 2020 as the first state to opt into the Medicaid-funded benefit. Initially projected to cost around $2.6 million annually, the program’s expenses quickly spiraled out of control. In 2024 alone, more than 700 providers received over $100 million in payments, according to data shared with the Minnesota Star Tribune.

Eric Grumdahl, the state official overseeing housing instability programs, recently left his position as assistant commissioner of the Homelessness, Housing and Support Services Administration. His departure occurred just one day before Governor Tim Walz signed an executive order aimed at combating fraud within the program. The order includes measures such as data-driven billing reviews, increased transparency, and coordination between different agency inspectors general.

In July, federal investigators conducted searches at five Minnesota businesses following numerous complaints about the program. One agent described the system as “extremely vulnerable to fraud.” Search warrants revealed that 22 providers operating out of a single St. Paul building had billed the state over $8 million between January 2024 and May 2025.

The Department of Human Services (DHS) is now seeking to terminate the program and has cut off payments to 115 providers who billed the state for over $100 million. However, it remains unclear how much of that amount may be fraudulent.

DHS officials have traditionally delayed cutting off payments while investigations are underway to avoid alerting potential fraudsters. But now, they claim they will stop payments at the first credible allegations of wrongdoing.

In response to the indictments, temporary DHS Commissioner Shireen Gandhi stated that the charges serve as a warning to those involved in fraud. “These actions are the result of ongoing collaboration between the Minnesota Department of Human Services and law enforcement partners to root out fraud and hold criminals accountable,” she said.

Minnesota Attorney General Keith Ellison echoed similar sentiments, expressing disappointment over the state legislature’s failure to fund the expansion of the Medicaid Fraud Control Unit. “My team and I will continue to fight Medicaid fraud and protect our tax dollars,” Ellison said.

Key Defendants and Legal Responses

The first defendants in the case include several individuals whose attorneys have not yet commented. Joseph Tamburino, representing Asad Adow, declined to comment. Similarly, no response was received from Patrick Cotter, Anwar Adow’s attorney.

Acting U.S. Attorney Thompson described the latest indictment as an “all too familiar” pattern in Minnesota, drawing parallels to the Feeding Our Future case, where over 70 individuals were charged with defrauding a child nutrition program during the pandemic. While none of the current defendants are linked to that case, there is overlap in the methods used.

Thompson noted that these cases highlight a broader issue: the “trust but verify” system that underpins Minnesota’s social services has failed. “Fraud has overtaken legitimate services,” he said, emphasizing that the state’s programs have been repeatedly abused.

James Clark, inspector general for the Minnesota Department of Human Services, testified in a legislative hearing that fraud is increasingly becoming a business model among providers. “Greedy people and businesses have learned how to exploit our programs,” Clark said.

Sofia Barnett and Jessie Van Berkel of the Minnesota Star Tribune contributed to this story.