Minnesota’s Billions Stolen: Federal Crackdown Exposes Childcare Fraud Empire

Paul Riverbank, 1/15/2026Billions lost to child care fraud shake Minnesota, prompting sweeping investigations, political fallout, and a tough new federal bill. Calls for oversight and reform intensify as the scandal rocks state and national leaders.

Nick Shirley, an unassuming figure with a quick step and a tendency to linger over details most would miss, started filming these places a couple of months ago. It was daytime, the hours kids are supposed to be running and laughing and making the kind of joyous noise that makes a classroom shake. Instead, Shirley found silence—over and over. He asked caretakers, “Where are the children? Why is a space meant for dozens of kids so…vacant?” He didn’t always get an answer. Sometimes the door shut before he finished asking.

Shirley’s video report made the rounds in every corner of Minnesota political life. Snippets went viral—a neighbor’s bewildered voice rising: “You say you have 102 children here, and you got $2.66 million this year? Can you explain?” The manager, holding the door half open, shot back, “And who are you?” Slam.

The real numbers are hard to digest. Federal investigators believe as much as $9 billion has evaporated, funneled not just through child care centers but shell health clinics and phony food programs, each with their own paperwork web. The initial shockwave? The U.S. government temporarily stopping more than $185 million in payments, putting countless local programs on hold overnight.

It’s not only the money, though it is an eye-watering sum. It’s the breach of trust that stings: money set aside for children and low-income families, vanished. Some people, especially those living nearby, had whispered about funny business for years; Shirley just shone a glaring light on it.

The politics got dark fast. Senator John Cornyn, a Texas Republican never shy about using direct language, called the case evidence of a “deep-rooted, morally bankrupt fraud empire.” Cornyn responded with the Stop Fraud by SOMALIA Act—not a name chosen by accident, given the community’s demographic makeup and the FBI’s suspicion that money was being routed overseas. Under his proposal, anyone convicted would have to pay every cent back, and states would be tasked with making sure these bad actors couldn’t just reopen under a fresh company logo. It would also shut the federal tap for anyone previously guilty of such fraud. For immigrants who break these rules, the Act would mean deportation and a hard bar on future residency.

There’s another layer to all this: the backlash against those who did the exposing. Shirley reports being heckled as a “white supremacist” or “far-right conspiracy theorist” by a handful of local leaders and national commentators alike. It’s the sort of accusation that can taint even the clearest evidence, and it hasn’t made the work any more comfortable. Despite this, more locals started sharing what they knew—quietly, sometimes late at night, sometimes with copies of paperwork passed under doorways.

In the Capitol, things got more heated. Governor Tim Walz announced he wouldn’t run for reelection. Republican lawmakers demanded a paper trail, hoping to trace every last dollar. Their frustration found its voice in pointed letters and public hearings; their eyes, it seemed, were set on accountability.

One of Shirley’s later clips revealed another $16 million in questionable payments. By now, the number had lost its ability to shock—at least among seasoned investigators. Regular folks, though, just looked on in disbelief, unsure who they could trust.

Amid the headlines, there’s a lingering worry about what’s next. Will tighter rules stop future fraud, or simply push it deeper underground? Congress is betting on oversight, with Cornyn’s bill aiming for serious change. Meanwhile, families and taxpayers in Minnesota are left with a bitter question: How could this scale of theft hide in plain sight for so long?

Ultimately, fixing the numbers might be easier than restoring public faith. In the end, all you’re left with are those empty rooms, the silence echoing where children’s laughter should have been, and a state reckoning with its own blind spots.

A few blocks off a busy Minneapolis avenue, there’s an old brick building with a hand-painted sign: Rainbow Learning Center. Or so the nameplate says, anyway. Step inside, and the humming energy one might expect from a place that claims to care for over a hundred kids is absent. Empty chairs, blank coloring pages, no lunchboxes in sight. Just the faint hum of fluorescent lights, and sometimes, a locked door.Nick Shirley, an unassuming figure with a quick step and a tendency to linger over details most would miss, started filming these places a couple of months ago. It was daytime, the hours kids are supposed to be running and laughing and making the kind of joyous noise that makes a classroom shake. Instead, Shirley found silence—over and over. He asked caretakers, “Where are the children? Why is a space meant for dozens of kids so…vacant?” He didn’t always get an answer. Sometimes the door shut before he finished asking.Shirley’s video report made the rounds in every corner of Minnesota political life. Snippets went viral—a neighbor’s bewildered voice rising: “You say you have 102 children here, and you got $2.66 million this year? Can you explain?” The manager, holding the door half open, shot back, “And who are you?” Slam.The real numbers are hard to digest. Federal investigators believe as much as $9 billion has evaporated, funneled not just through child care centers but shell health clinics and phony food programs, each with their own paperwork web. The initial shockwave? The U.S. government temporarily stopping more than $185 million in payments, putting countless local programs on hold overnight.It’s not only the money, though it is an eye-watering sum. It’s the breach of trust that stings: money set aside for children and low-income families, vanished. Some people, especially those living nearby, had whispered about funny business for years; Shirley just shone a glaring light on it.The politics got dark fast. Senator John Cornyn, a Texas Republican never shy about using direct language, called the case evidence of a “deep-rooted, morally bankrupt fraud empire.” Cornyn responded with the Stop Fraud by SOMALIA Act—not a name chosen by accident, given the community’s demographic makeup and the FBI’s suspicion that money was being routed overseas. Under his proposal, anyone convicted would have to pay every cent back, and states would be tasked with making sure these bad actors couldn’t just reopen under a fresh company logo. It would also shut the federal tap for anyone previously guilty of such fraud. For immigrants who break these rules, the Act would mean deportation and a hard bar on future residency.There’s another layer to all this: the backlash against those who did the exposing. Shirley reports being heckled as a “white supremacist” or “far-right conspiracy theorist” by a handful of local leaders and national commentators alike. It’s the sort of accusation that can taint even the clearest evidence, and it hasn’t made the work any more comfortable. Despite this, more locals started sharing what they knew—quietly, sometimes late at night, sometimes with copies of paperwork passed under doorways.In the Capitol, things got more heated. Governor Tim Walz announced he wouldn’t run for reelection. Republican lawmakers demanded a paper trail, hoping to trace every last dollar. Their frustration found its voice in pointed letters and public hearings; their eyes, it seemed, were set on accountability.One of Shirley’s later clips revealed another $16 million in questionable payments. By now, the number had lost its ability to shock—at least among seasoned investigators. Regular folks, though, just looked on in disbelief, unsure who they could trust.Amid the headlines, there’s a lingering worry about what’s next. Will tighter rules stop future fraud, or simply push it deeper underground? Congress is betting on oversight, with Cornyn’s bill aiming for serious change. Meanwhile, families and taxpayers in Minnesota are left with a bitter question: How could this scale of theft hide in plain sight for so long?Ultimately, fixing the numbers might be easier than restoring public faith. In the end, all you’re left with are those empty rooms, the silence echoing where children’s laughter should have been, and a state reckoning with its own blind spots.