(The Epoch Times)—Kelly Loeffler, head of the U.S. Small Business Administration (SBA), announced she halted $5.5 million in federal payments to Minnesota on Dec. 23, citing the state’s fraud scandals, estimated to total $9 billion, and specific concerns that her agency uncovered.
SBA investigators found at least $2.5 million in pandemic-relief loans “granted to individuals indicted as part of the Somali fraud scheme,” she wrote in a letter to Minnesota Gov. Tim Walz. In addition, the agency found Minnesota doled out 13,600 pandemic-relief loans—worth $430 million—that are “suspected as fraudulent.” Prosecutors have stated that most of the defendants indicted in three major scandals in the state are of Somali origin.
“Minnesota cannot be trusted to administer federal tax dollars,” Loeffler wrote on X, separately linking to the letter she sent Walz. She described the withheld money as “funds to SBA resource partners.”
“The volume and concentration of potential fraud is staggering, matched in its egregiousness only by your response to those who attempted to stop it,” she wrote.
She accused state leaders of inaction when the allegations of fraud came to light. “When legislators and whistleblowers raised concerns about potential abuse during the pandemic, your Administration resisted oversight, refused accountability, and allowed the misconduct to metastasize,” she wrote.
The Epoch Times sought comment from Walz but received no reply prior to publication time.
Walz has repeatedly pushed back since late November, saying Minnesota attracts criminals because of its generosity.
The governor has also accused critics of “trying to demonize” Somalis.
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In a Dec. 15 news release, Walz outlined steps he has taken to combat fraud, responding to a flurry of national publicity over the burgeoning scandals.
State programs have “created additional checks and balances,” and hired investigators, auditors, and law enforcement, he said. In addition, he appointed a new anti-fraud czar, Tim O’Malley, a former FBI agent and superintendent of the Minnesota Bureau of Criminal Apprehension.
“O’Malley will work across state government to root out fraud and protect taxpayer dollars,” Walz said.
Loeffler, in her letter, opined that the fraud should have been squelched much faster or prevented altogether.
“What happened in Minnesota is the consequence of socialist policies deliberately designed to pump out welfare funding without oversight or accountability,” she wrote. “SBA will not further that agenda by continuing to send funds to a state that has demonstrated a reckless refusal to enforce the law.”
Given these circumstances, “SBA has an obligation and the authority to act,” she said.
Therefore, her agency was cutting off funding for six programs in Minnesota, “pending further review.”
The two biggest recipients of those funds, Small Business Development Centers and the SBA Microloan Program, received more than $2 million apiece annually; smaller amounts that are now frozen went to Women’s Business Centers, SCORE business mentoring, the Federal and State Technology Partnership Program, and the SBA Growth Accelerator Fund Competition.
She ended by telling Walz: “We will continue to do what you did not: protect federal dollars on behalf of the American people.”
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