The furor around Minnesota’s fraud scandal shows no sign of dying down. The U.S. Attorney’s Office for the District of Minnesota says $9 billion or more in taxpayer funds may have been stolen across 14 state welfare programs since 2018.
The Minnesota Department of Human Services is the state agency responsible for overseeing the programs at the heart of the scandal. Faye Bernstein has been a DHS employee for two decades, including stints working in contract management and as a compliance officer.
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During the early years of Governor Tim Walz’s administration, Bernstein says that she began raising concerns internally at DHS about concerning practices that exposed tax dollars to fraud. In response, Bernstein claims that her DHS supervisors retaliated against her.
In a recent interview with City Journal, Bernstein painted a picture of a toxic workplace culture at DHS that allowed Minnesota’s fraud scandal to metastasize. This interview has been edited for clarity and length.
City Journal: When did your concerns about fraud begin?
Faye Bernstein: In 2018 and 2019. I had just gotten a promotion to a lead position. That meant I saw everybody’s contracts from our work area [Behavioral Health Administration]. They all funneled through me. Over the years, I had often thought that DHS is sloppy. But 2018 and 2019 are when I saw, oh gosh, this is beyond normal. If we don’t have fraud today, we’re going to have fraud soon.
CJ: Can you give an example?
FB: I could give a contract to my sister for a million dollars because she has a different last name, pay out that contract, and nobody would notice. We did not monitor conflict of interest. It would have been easy to give a contract to a family member or to a nonexistent person. That’s when I realized, this sloppiness is way beyond normal. We really are at risk of fraud.
CJ: Can you give other examples of things you saw?
FB: The reason I can confidently say that I could give a contract of this sort to my sister was because I had come across a contract that DHS had given to a former employee who had left the department within the past year. I immediately recognized her name, so I went to the person who initiated that contract and said, “What’s the deal with this? I want to make sure everything’s okay, that we don’t have a conflict.”
The person immediately went to our deputy director, who then came to me and said, “Why are you asking these questions?”
And I said, “Well, gosh, this is just a perfectly normal question.”
“No, it’s not. You’re upsetting people. You’ve just made a lot of enemies by asking these questions.”
It made no sense to me. We were constantly getting into risky territory. And if you spoke about it, it was very clear what would happen. Even our human resources people would tell us, “If your supervisor tells you to do something, you must do it.” And when you didn’t, the word “insubordination” came up. They considered it insubordinate if you resisted an unlawful direction.
CJ: Did this culture at DHS help facilitate fraud?
FB: It definitely did. Where we are today is completely predictable from where we were in 2019. There was no other way for this to go. The handwriting was on the wall. Until only about a year ago, our whistleblower policy required us to report internally; that did not comply with the law. The only reason [DHS had that policy] was so that they could find out who was reporting. [Ed: DHS did not respond to a request for comment by deadline.]
For example, I reported something to the director of our internal audits, and he immediately went to the person that I had reported. I know he did that, because it was on email. He responded back to me, cc’ing the person I was reporting. He totally outed me.
CJ: Do you remember the details of that?
FB: A lot of people in DHS are state employees, but there are periods of time when those employees are paid by a federal grant. In those periods, we had to fill out two time sheets: our regular time sheet, to get paid by the State of Minnesota, and a second time sheet, which was how much of our salary was paid by the federal government under a particular grant. After I started speaking out too much, DHS removed all my job duties associated with this federal grant, but I was instructed to fill out that time sheet so that the federal government would continue to pay my salary.
CJ: Who instructed you to do that?
FB: The director of the Behavioral Health Division.
CJ: Is it fair to characterize what they were asking you to do as a form of fraud?
FB: I would say it was. At about that same time, our internal audits did a big review of everybody who was in my situation and had used these federal time sheets. It turns out many people were filling out the federal time sheet who had no federal duties. Some people didn’t even know why [they filled out the time sheets]. Every other week, they were told to do it. It clearly was a way to save money on salaries.
CJ: You made various efforts to have your concerns addressed. To what extent did you feel retaliated against in response?
FB: It was pretty quick. I had fewer and fewer job duties. In the summer of 2019, I had very little to occupy my time, because all my duties had been reassigned. They did not want me to see anything.
Then in 2020, I was told to take a call on a Saturday morning from HR. I was told that when I went back to work, I would have a new job. I said, “Do I have a choice?” Nope, I didn’t have a choice—either this job or I quit. That began my being shuffled from one job to another, making sure that I was never anywhere near compliance issues. I was really trying to be a problem solver, and they have completely kept me away from the one thing that I’m actually really good at.
CJ: You were a compliance officer, you were trying to do your job, and that was seen as unacceptable?
FB: I had supervisors tell me that I was doing my job poorly because I was too focused on compliance. It was so strange. You were highly discouraged from doing actual compliance.
CJ: What type of jobs have they shuffled you into since 2020?
FB: Right now, I’m doing redactions. I’m the person who puts the black mark through the private information on a media request. We have areas of DHS that are trying to deal with our latest OLA [Office of the Legislative Auditor] audit from a week ago, which was so embarrassingly bad.
CJ: That’s the OLA audit that alleged DHS employees are falsifying records?
FB: Yes.
CJ: Did that finding come as a surprise to you?
FB: I’m not at all surprised. Nothing has improved since 2020. Things seem to have gotten a lot worse. You would think, since that is my former work area [Behavioral Health Administration], that I would be the first person they would want to involve in finding a solution, but it’s the exact opposite. When I was a contracts attorney, starting in 2020, I was prohibited from seeing any contracts from my former area. But those are exactly the contracts I should have been working on, because I would have been able to recognize if something were out of line. I would have been quite successful in finding things, but I think that’s what they didn’t want.
CJ: The U.S. Attorney’s Office said we’re potentially looking at billions in fraud across 14 state welfare programs. Do you feel vindicated by this development?
FB: I do feel vindicated. I was aware that our contracting processes were leaving us completely open to fraud. But to realize the lack of guardrails was pretty shocking. As I said, I’m now doing redactions. I see email after email after email that had come into us, starting back in the fall of 2024, where we were getting constant contact from members of the public advising us of fraud in [Housing Stabilization Services]. I was really surprised at how much notification we had. Did we really ignore all those people writing in? Members of the public had advised us of this [alleged fraud] in email after email after email.
CJ: Do you worry about speaking out given your ongoing employment at DHS?
FB: Definitely, but I ended up going the loud-and-proud route, thinking that there might be some protection associated with being public. At the same time, I don’t begrudge people that are not willing to do that.
CJ: One question many people have is: Was this incompetence, or were there people involved who were complicit?
FB: About 90 percent of me says it’s incompetence, because I’ve seen incompetence by leadership, where I walk out of the office and think, “Wow, you got this job because you’re somebody’s friend.” It is so apparent. So about 90 percent of me says incompetence.
But then there is a small part of me, and it’s actually getting bigger, that wonders more each day, did somebody personally benefit? By that I mean, did somebody benefit by getting votes or by getting a bribe? I keep wondering how there could be that much incompetence. And then, of course, at what point does incompetence become, well, you’re responsible anyway?
CJ: Is there anything you’d like to add?
FB: This has become a partisan thing, so just for the record, I have only voted for Democrats. I consider myself a Democrat. This is definitely not something that the Republicans are making up. This is real.
Photo: Jack Rodgers / MediaNews Group / St. Paul Pioneer Press via Getty Images