Supporters of Mpls. Somali day cares say centers are innocent of fraud; Minn. agency and prosecutors disagree

It was about six in the evening and employees of Ummah Child Care Center filled the reception area as children's voices echoed throughout the building.

For Khadija Hassan, the center offers something she didn't have when she lived in Willmar, Minn., two years ago. She gets to earn a living while watching her young children at the same time.

Hassan, a mother of five children ages 6 months to 8 years old, says she was drawn to Ummah when she applied for the Child Care Assistance Program at Hennepin County. The name, Ummah, is an Arabic word for community.

But Ummah is one of several day care centers that closed after prosecutors opened up fraud investigations into their billing activities. Four months have passed since charges were filed against the corporations and prosecutors haven't charged the individual operators.

Minnesota Child Care Services, Children's Choice Center and Ummah Child Care Services in Minneapolis face theft by swindle charges for allegedly defrauding the state's Child Care Assistance Program a total of $1 million. Prosecutors say the centers overbilled the state without actually providing the service to the families eligible for county assistance. Investigators relied on video surveillance that counted children at the center and compared to billing records.

The lack of criminal charges against management has led members of the Somali community to believe they're being targeted and discriminated against without enough evidence to prove theft actually occurred.

Asha Abdi who works at a different Somali-run day care center, not involved in the case, said the whole community has been feeling the consequences of this investigation.

"It's unfair, it's unconstitutional to actually put people behind bars, finger print them, blast them on the news," she said, adding that one of the day care employees lost a second job. "A lot of things that come into play but without the state actually having all the facts."

The day care center operators are all Somali who incorporate their culture into daily activities with the children. They speak the language, serve Somali food and open extended hours to accommodate unconventional work schedules.

The centers closed about a week after the raid in September. Parents were forced to find alternative day care arrangements.

Seven people were arrested and released last fall. Three of them were arrested at the airport as they returned from a trip to Dubai.

Investigators searched homes and studied their bank account activities. Prosecutors froze about $180,000 from the operators, according to court documents.

The documents say one of the operators wrote himself checks from the Minnesota Child Care Center's account which he kept in a home safe.

But the day care centers' attorneys argue the state has not gathered enough evidence to prove operators earned the money illegally. They've asked prosecutors to return funds they've seized.

"Simple math shows this breaks down earnings draws averaging $1,350 per month," according to a petition filed by Minnesota Child Care Services attorney Laurie Quinn. "Nothing in these payments evidence fraud. All of these activities are within standard business practices."

At a court hearing Friday, Children's Choice attorney Thomas Kelly asked Hennepin County District Judge Fred Karasov to dismiss the case. He said state law allows providers to bill the Child Care Assistance Program for up to 25 absent days plus 10 holidays for each kid. He said investigators haven't proved their counts they did violated that law.

"Providers get paid regardless of whether a child was absent," he said. "It's a fixed cost for the provider whether the child is there or not."

The investigation, Operation Kids Count, counted children entering the day care centers compared with the number of children the centers billed for on those days. For example, in a two-week period in 2014, Minnesota Child Care Services claimed 2,183 children attended, but a third of them didn't, according to the criminal complaint.

Minnesota Child Care Services attorneys did their own analysis using attendance records and found the opposite. They concluded during the same time period, the center served 97 additional children without billing the state for them.

Abdi said the investigation has caused Somali-run day cares to believe they're being watched for no reason.

"Goodness, the state needs to back off," she said. "Come on, these child care centers actually provide employment for the majority of people inside the community whether they're Somalin, Asian, Hispanic."

Hennepin County prosecutor Morgan Kunz told Judge Karasov the state takes charges seriously and won't file charges against individuals without having all the evidence necessary to do so. But he said the felony theft by swindle charges against the corporations are appropriate. The centers took advantage of the system and violated the law by overbilling.

Minnesota Department of Human Services officials, who license all day care centers in the state and regularly inspect them, have said they noticed something was amiss during some onsite visits over the past two years.

Minnesota Department of Human Services Inspector General Jerry Kerber said the three day care providers deceive families eligible for the program by recruiting them, offering them phony jobs with pay stubs and encouraging them to enroll their kids there without actually attending.

"That whole scheme is victimizing and exploiting the young children as well as those families," he said. "And they're doing it at a time when we have 5,300 families on the waiting list who also then are being denied the opportunity to participate in this program."

The Child Care Assistance Program serves 30,000 children every month. It's unclear how much the day care centers fraud scheme totaled, but prosecutors say it surpassed $1 million. Karasov set future court hearings for March and a trial date for June.

DHS officials declined to say how many more centers or individual day care providers are under investigation, citing the ongoing investigation into day care fraud in Minnesota.