Feds say they're investigating 'massive scheme to defraud' Minnesota's Housing Stabilization Services Program

Mara H. Gottfried, Pioneer Press on Jul 16, 2025

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ST. PAUL, Minn. — As part of a federal investigation into a “massive scheme to defraud” Minnesota’s Housing Stabilization Services program, law enforcement carried out search warrants in the Twin Cities on Wednesday.

Eight locations were listed in the search warrant affidavit, including in St. Paul, Roseville and Little Canada. No one was under arrest as of Wednesday afternoon, according to the U.S. Attorney’s Office for Minnesota.

“Minnesota has a fraud problem — and not a small one,” Acting U.S. Attorney for Minnesota Joe Thompson said in a Wednesday statement. “For too long, organized fraud schemes like this have flourished in plain 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 Housing Stabilization program is a new Minnesota Medical Assistance benefit intended to help seniors and people with disabilities — including mental illness and substance use disorders — find and maintain housing, said the affidavit by a special agent in the FBI’s Minneapolis office.

“The program has proved to be extremely vulnerable to fraud,” the agent wrote. “Since Minnesota became the first state to offer Medicaid coverage for Housing Stabilization Services, dozens of new companies have been created and enrolled in the program. These companies, and the individuals who run them, have taken advantage of the housing crisis and the drug addiction crisis in Minnesota to prey on individuals who need help getting back on their feet as they recover from drug addiction.”

The agent said the companies do this by contacting people in halfway houses and residential drug treatment facilities who are eligible for Medicaid and offering to help them find housing. After registering them to receive housing stabilization services, “the companies fraudulently claim to provide dozens of program service hours to their new ‘clients,'” the affidavit continued. “In reality, client after client has reported that they received little or no actual services or assistance from these companies.

“But the companies engaged in this scheme have received millions of dollars in Medicaid funds for housing stabilization services they did not actually provide,” the affidavit continues.

DHS responds

The search warrants are “the result of the critical partnerships” between the Minnesota Department of Human Services, which oversees the state’s Housing Stabilization Services program, and other agencies and are “an important example of our shared commitment to work together to ensure Medicaid program integrity,” said Shireen Gandhi, DHS temporary commissioner, in a statement.

DHS’ Office of Inspector General “regularly provides investigative data and information about Medicaid provider targets to our law enforcement partners so they can build actionable cases to hold bad actors accountable,” Gandhi said.

“When credible signs of fraud were seen with these providers the DHS Office of Inspector General (OIG) immediately briefed law enforcement officials on the situation,” the statement said. “DHS has open investigations into all of the five providers targeted today by our law enforcement partners, and DHS previously stopped payments to three of the providers.

“Fraud in public programs hurts the people we are working to help,” Gandhi continued. “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 DHS will continue to work with law enforcement and “thanks to legislative action this past session, DHS has additional tools, including the discretion to disclose when a stop payment is issued, effective July 1, 2025. These enhancements will help prevent fraud from happening on the front end as well as enable DHS to take swift public action when credible evidence of fraud is found on the back end.”

Facilities searched

The locations that were listed in the search warrant affidavit to be searched were:

—Brilliant Minds Services in an office building on University Avenue near Fairview Avenue in St. Paul.

—Pristine Health LLC on Grand Avenue near Oxford Street in St. Paul.

—Liberty Plus LLC on Minnesota 36 in Roseville.

—Faladcare Inc. offices on Middle Street in Little Canada and Hudson Road in Woodbury.

—Leo Human Services in a building on Northland Circle in Brooklyn Park.

—Two houses, one on Stewart Avenue between West Seventh Street and Shepard Road in St. Paul, and the other on 127th Avenue Northeast in Blaine.

No one answered the phones at the businesses. The number for Brilliant Minds Services was disconnected when the Pioneer Press tried calling Wednesday.

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