Feds search state housing program sites in probe of ‘massive’ fraud scheme

Federal investigators searched locations tied to five Minnesota businesses Wednesday as they look into what they are calling a “massive scheme” to defraud the state’s Housing Stabilization Services program.

Companies have received millions in Medicaid money for services they did not provide, according to a search warrant application that says the Housing Stabilization Services program has proven “extremely vulnerable to fraud.”

The state program is supposed to help find and maintain housing for older adults and people with disabilities, including mental illness and substance use disorder. Minnesota was one of the first states to launch that kind of Medicaid-funded benefit in 2020.

“As with many other state government benefit programs in Minnesota, there has been an explosion in fly-by-night providers who enrolled in the Housing Stabilization Services program and immediately began receiving large Medicaid payouts,” according to a search warrant affidavit submitted by FBI special agent Kurt Beulke.

In the affidavit, he says companies have taken advantage of the housing and drug addiction crises to prey on people who need help to get back on their feet as they recover from addiction. Companies and individuals contact Medicaid-eligible people who are in halfway homes and residential treatment facilities and offer to help them find stable housing, then register them for housing stabilization services.

They fraudulently claim to provide dozens of hours of services to the clients while, “In reality, client after client has reported that they received little or no actual services or assistance from these companies” the search warrant affidavit says.

Locations listed in Beulke’s affidavits include the offices of Brilliant Minds Services LLC in St. Paul, Leo Human Services LLC in Brooklyn Park, Liberty Plus LLC in Roseville, Pristine Health LLC in St. Paul, two office locations of Faladcare Inc. in Little Canada and Woodbury and two residential homes in Blaine and St. Paul.

No charges have been filed.

Calls to the service providers Wednesday went unanswered or to nonfunctioning numbers. In the case of a number for Faladcare, a man answered and dismissed fraud allegations but said he was not authorized to speak on behalf of the business.

“Minnesota has a fraud problem — and not a small one,” acting U.S. Attorney Joseph H. Thompson said in a statement Wednesday. “For too long, organized fraud schemes like this have flourished in plan sight, draining public resources dry. Today’s warrants are another step in a much bigger reckoning. This state needs to confront the scale of its fraud problem — because ignoring it is no longer an option.”

The number of people using housing stabilization services and providers billing for it have surged since it was created. Housing advocates and providers have long raised concerns, saying the program is difficult to work with and has created conditions ripe for fraud.

The search warrants executed at the providers were the result of “critical partnerships” between the Minnesota Department of Human Services, the Minnesota Department of Public Safety Bureau of Criminal Apprehension, the Office of the Attorney General and federal offices, temporary DHS Commissioner Shireen Gandhi said in a statement. She said the partnerships are “an important example of our shared commitment to work together to ensure Medicaid program integrity.”

The DHS Office of Inspector General immediately briefed law enforcement when there were credible signs of fraud by providers, Gandhi said.

“Fraud in public programs hurts the people we are working to help. By coordinating the administrative oversight of DHS with the legal enforcement activity of our law enforcement partners, Minnesota is able to bring those committing Medicaid fraud to justice and, often, able to facilitate monetary recovery,” she said.

When the state launched the program it estimated it would cost about $2.6 million annually. But by 2024 the program had paid out more than $104 million in claims for services purportedly provided to more than 21,300 people, the search warrant affidavit says. It adds that in the first six months of this year, the program paid more than $61 million that reportedly went to more than 21,000 people.

A state provider directory lists more than 1,700 housing stabilization providers. Hundreds of organizations have been billing the state for these services in recent years. They haven’t needed a state license to do the work.

The investigation found an association among many of the program’s top billers, and notes that 22 different providers report to be operating out of the Griggs-Midway Building in St. Paul. From January 2024 through May 2025, the affidavit says, the 22 providers received more than $8 million in Medicaid payments for housing stabilization services.

The affidavits include many stories of people who said they were wronged by providers, including a woman who signed up to receive housing assistance from Liberty Plus but said the company never found her a place to live or otherwise helped her. She said Liberty Plus “ignored her,” often failing to return calls, and when she tried calling, she sometimes found its phone number had been disconnected.

Anwar Ahmed Adow created Liberty Plus and is the brother of Asad Ahmed Adow, who owns Leo Human Services, investigators found.

Affidavits note Leo Human Services received more than $2.7 million in housing stabilization funds between November 2022 and April 2025 and claimed to have helped about 290 people. But supposed clients reportedly told investigators they didn’t receive the services for which the company billed and many remain homeless.

“Provider notes provided by Leo to DHS appear to be fake and possibly generated by artificial intelligence and/or copied and pasted to duplicate entries,” the affidavits said.

One client of Leo Human Services told agents she was referred to the Housing Stabilization Services provider while in drug treatment. She said she could not recall ever meeting with someone from the business and didn’t get any help from it — but the organization billed for and received more than $12,000 for purportedly providing services the entire time she was in treatment in 2023 and 2024, according to Beulke.

As concerns have emerged about organizations abusing the housing program, state lawmakers and the Department of Human Services recently added additional oversight measures.

New providers, as well as those changing ownership or re-enrolling, now need to go through a “high-risk” screening process. They are subject to unannounced site visits, as well as fingerprint background studies for owners, according to DHS.

During the recent legislative session, state leaders passed laws requiring that the agencies document delivery of all services and limit services provided per recipient, such as putting a 100-hour annual cap on housing transition services. Lawmakers also mandated that managers at housing stabilization agencies need compliance training starting in 2027, including training on billing, fraud prevention and penalties, workplace safety and more.

In July, DHS started pre-enrollment risk assessments of housing stabilization agencies. They look into an agency’s history of performing similar services, whether it is performing work at a significantly larger scale and if it has the capability to do so. DHS also assesses financial information and internal controls and whether a provider is in compliance with state and federal requirements.

Eva Herscowitz and Sofia Barnett of the Minnesota Star Tribune contributed to this story.