Six months ago, the Hennepin County Board set aside $2 million for its “Small Business Recovery Fund.” “Many small businesses in Hennepin County, including immigrant-owned businesses and those that anchor our most vibrant cultural corridors, experienced significant financial and operational hardship because of the recent federal immigration enforcement surge,” the board noted:
The Hennepin County Housing and Redevelopment Authority (HCHRA) made funding available in the form of grants to help businesses impacted by the surge overcome short-term financial hurdles, enabling them to remain in business in their communities and to prevent widespread blight in Hennepin County.
Eligible small businesses applied for one-time grants between $3,000 and $10,000 to help cover two months’ business rent or commercial mortgage payments as they navigated reduced foot traffic, temporary closures due to safety concerns, workforce disruptions, and other impacts due to immigration enforcement actions.
This week, it was announced that the fund is shutting down after the county flagged nearly two-thirds of the applications for fraud.
“The program received some 300 applications seeking a portion of the $2 million commissioners approved for the program in March, the Star Tribune reports.
Officials ended up distributing only about $500,000 to 82 applicants, they said.
The county would not say exactly how many applications were not legitimate. But Hennepin County Commissioner Jeffrey Lunde said attempts at fraud became “pronounced” soon after the program launched.
“The whole fraud statewide just makes me want to vomit,” said Lunde, who called fraudsters “the lowest scum on the earth.”
And so say all of us.
“The county hired a local nonprofit, NextStage, to administer the grant program,” the Star Tribune continues.
Applicants were required to show their expenses and loss of income, Lunde said, and as the nonprofit’s staff started their reviews they noticed troubling patterns like repeated paragraphs across applications.
Staff then did more research, including site visits, which uncovered several types of fraud, Lunde said. Some business didn’t exist. Other businesses were real, but their owners hadn’t applied for the program — someone else had.
Other applications were submitted by real businesses that had real expenses, but companies had inflated them. Many appeared to be generated by artificial intelligence, Lunde said.
The Star Tribune claims that this is “something of a success story” because “A county spokeswoman said tight controls prevented the county from losing any money to fraud.” But these controls were costly themselves.
The nonprofit’s fraud prevention efforts worked but were labor-intensive and costly, a county spokeswoman said. Lunde expects administrative costs will be higher for future grant programs too, but said they are worth it.
The Star Tribune also say that “The episode shows just how difficult it can be for government leaders to distribute taxpayer-funded benefits securely at a time when public programs in Minnesota — especially at the state level — have been under attack,” though it doesn’t say who they have been under attack by. The fraudsters?
The paper also reports that “state lawmakers fruitlessly fought all session over whether to approve a statewide $100 million business relief program.” Indeed, the Senate DFL “approved $100 million in loans aimed at helping small businesses recover from the effects of the months long immigration crackdown in the state,” but the proposal went nowhere in the House where the DFL does not have a majority. Given Hennepin County’s experience, Minnesota’s taxpayers can be thankful that was so. If it prevented a fraud riddled program being passed into law, the legislative fight was not so ‘fruitless’ after all.
What this episode also shows is that large scale attempts to defraud Minnesota’s taxpayers are ongoing. “The fact that people, after all this fraud, felt that they could apply and get away with it, I think it’s a problem because clearly there’s no fear out there,” Lunde Kare 11.
Commissioner Lunde draws a broad conclusion which ought to act as a wakeup call to all those who have traditionally supported Minnesota’s model of high taxes in support of generous welfare programs. “We as a state, at every city, county, state, have got to wake up and realize this ain’t Mayberry anymore,” he said.
