The "50% fraud" claim? It comes from one investigator (Swanson) using what the OLA explicitly calls "a higher level view, a view that does not require the kind of proof needed in a criminal or administrative proceeding." His methodology? If kids are poorly supervised, "running from room to room while adult employees spend hours in hallways chatting".... he counts the entire payment as fraud. That's not "billing for phantom children" it's "I don't like how this daycare is run."
The OLA's actual finding: "We did not find evidence to substantiate the allegation that the level of CCAP fraud in Minnesota is $100 million annually." Proven fraud over several years was $5-6 million.
Terrorism? "We were unable to substantiate the allegation that individuals in Minnesota sent CCAP fraud money to a foreign country where a terrorist organization obtained and used the money." They checked with the U.S. Attorney's Office.. none of Minnesota's terrorism cases involved CCAP money.
McKenzie writes "beyond intellectually serious dispute" about claims the primary source he cites explicitly could not substantiate.
Meanwhile the president is posting videos of the Obamas as apes and calling Somalis "garbage", having federal prosecutors throwing out arbitrary $9 billion estimates in press conferences.
See for yourself: https://www.auditor.leg.state.mn.us/sreview/ccap.pdf
Page 14 of PDF:
[The OLA] did not find evidence to substantiate Stillman’s allegation that there is $100 million in CCAP fraud annually. We did, on the other hand, find that the state’s CCAP fraud investigators generally agree with Stillman’s opinions about the level of CCAP fraud, as well as why it is so pervasive.
(Stillman is a line level investigator who gave a media statement which was explosive. Swanson, who authored in the internal memo, was his manager.)
I do mention that other officials only agreed to characterize as fraud fraud which had resulted in convictions. We now, years later, have nine figures just from the convictions (and guilty pleas). These officials pointedly refuse to put any number on fraud other than the number incident to convictions.
Moreover: you should be very clearly correct if you accuse someone of citing a document as making claims it does not say. That is a serious accusation. BAM's citation of this piece is "the state’s own investigators believed that, over the past several years, greater than fifty percent of all reimbursements to daycare centers were fraudulent." This is _absolutely true_ and _is in the report as claimed_.
Spent about 30 minutes consulting the report you mention, OP's post, and your reply, and there's clearly issues.
In the essay, you wrote that industrial-scale fraud is "beyond intellectually serious dispute," cited the OLA report, and presented the 50% figure as the finding that "staggers the imagination." (this should have been a tell)
When challenged, you retreat to: "My citation that investigators believed this is absolutely true."
Those are completely different claims. "An investigator believed X" is not "X is beyond intellectually serious dispute" — especially when the same report on the same pages says:
- The OLA itself: "We did not find evidence to substantiate the allegation" (p. 5)
- The DHS Inspector General: "I do not trust the allegation that 50 percent of CCAP money is being paid fraudulently" (p. 12)
- The investigators themselves had "varying levels of certainty — some thought it could be less, and some said they did not have enough experience to have an opinion" (p. 9)
- Swanson explicitly used "a view that does not require the kind of proof needed in a criminal or administrative proceeding" (p. 10), counting the entire payment to any center with poorly-supervised kids as "fraud"
That's not "beyond intellectually serious dispute." It is, literally, a documented dispute, inside the very report you cite as settling the matter.
And "nine figures from convictions"? That's Feeding Our Future, a federal food nutrition program. The OLA report is about CCAP, a state childcare program. Proven CCAP fraud remains at $5-6 million. You're retroactively validating a CCAP claim with convictions from a different program.
But, on the other hand, I suppose intellectually serious dispute requires both sides to be intellectually serious. One good step in that direction would be to arrange one's citations such that they are supporting the claims you are citing them for.
I will also remark, as others have, that it's odd to make a big deal about this particular fraud when there's a lot more fraud happening a lot more obviously in a lot more of the nation. This is not to question Minnesota officials who are, rightly and appropriately, investigating suspected fraud in their zone of investigation; but it is worth questioning voices who have, apropos of nothing I can discern, made decisions about what's important to talk about and what isn't, and further made decisions to misrepresent allegations in alignment with people who very aggressively lie for evil reasons. As others have pointed out, the essay's core is seemingly cromulent, and it doesn't need you to do that.
https://en.wikipedia.org/wiki/Russian_occupation_of_Crimea
I guess it's now being used as pejorative against groups of vaguely military style. Like the DHS agents conducting Metro Surge.
https://en.wikipedia.org/wiki/Little_green_men_(Russo-Ukrain...
> As a fraud investigator, you are allowed and encouraged to read Facebook at work.
I tend to believe this, but it would be a lot more compelling with links to a case where Facebook/TikTok posts were useful evidence.
In late 2024 there was the whole "Infinite money glitch" tiktok trend that was just check fraud.
https://www.youtube.com/watch?v=K0ck7hTsug8
"I just been swipin' for EDD
Go to the bank, get a stack at least
This ** here better than sellin' Ps
I made some racks that I couldn't believe
Ten cards, that's two-hunnid large"
(For context, "EDD" is California’s Employment Development Department.)
https://legalclarity.org/using-rap-lyrics-as-evidence-in-cri...
Dead Prez - Hell yeah: https://youtu.be/kGjSq4HqP9Y?si=_z6jb0Vfo7_PiITQ&t=82
Maxo Kream - 5200: https://www.youtube.com/watch?v=7kC9j6Zp-kg
Maxo was actually arrested for racketeering, though not due to this song specifically (I don't think).
Leaving this to the conclusion does the piece a disservice. One can quibble (and it would be good to here) the extent to which the government isn't pursuing the sorts of fraud discussed, but this as a thesis makes clearer the argument throughout for earlier and more aggressive pursuit.
> And I think journalism and civil society should do some genuine soul-searching on how we knew—knew—the state of that pond, but didn’t consider it particularly important or newsworthy until someone started fishing on camera.
In... the same section where he cites all of the evidence the government has put together against the fraudsters. What is the issue? That these investigations should have been more prominently featured in the mainstream news? Would that have helped or hurt investigations?
> Of course, as the New York Times very carefully wordsmithed recently:
>> Minnesota officials said in early January that the state conducted compliance checks at nine child-care centers after Mr. Shirley posted his video and found them “operating as expected,” although it had “ongoing investigations” at four of them. One of the centers, which Mr. Shirley singled out because it misspelled the word “Learning” on its sign, has since voluntarily closed.
> An inattentive reader might conclude from this paragraph that the Times disputes Shirley’s reporting.
The New York Times is literally quoting what the Minnesota officials said. What were they supposed to do, add on "but a kid on YouTube says differently"?
I don't think the serious response to Nick Shirley's "journalism" is that there was no fraud; rather, it's that he came into the situation with a thinly veiled agenda and fed his audience exactly what they wanted to hear. Did his video make it more or less likely that we'll be able to investigate and resolve the fraud situation in MN? I guess that depends on how serious you think the laughably corrupt Trump administration is, but the fact that they seized on this as an excuse to send in 3000 ICE agents is not exactly promising.
Yes, there were some investigations and convictions, but nothing to on a scale that would deal with problem, nor any systematic change to a level paying huge amounts of money to scammers.
But if you read the cited source of how Swanson came up with that number he said it wasn't just for over-billing (claiming more kids than the places actually had).
Instead, by his estimation, the employees working are not actually working because 'children are unsupervised, running from room to room while adult “employees” spend hours in hallways chatting with other adults' and so all of the funds to those providers are fraudulent. [1]
I think it's pretty easy to criticize the logic for that 50% fraud rate number without requiring criminal convictions.
[1] https://www.auditor.leg.state.mn.us/sreview/ccap.pdf#page=16
There was active prosecution ongoing literally right up until Shirly's video. That's taking the matter seriously.
[1] https://en.wikipedia.org/wiki/2020s_Minnesota_fraud_scandals
Second: I think one of the points Patrick misses is that fraud did indisputably occur, but that doesn't mean we need to treat Shirley as a neutral observer who simply cares about fiscal responsibility. (If I'm wrong, I eagerly away his next video on red state fraud.)
Important points throughout the article include: relatively little prosecution or enforcement occurred despite the awareness of rampant fraud; officials were naive to the common wisdom in fraud-prevention circles that people committing fraud in the past correlates strongly with the same individuals committing fraud in the future; "pay-and-chase" policies don't preempt funding flows to individuals suspected of fraud until it's established and feel the need to account for every fraudulent dollar instead of just blacklisting known bad actors the way that actual financial institutions do. FTA in particular, all emphasis FTA:
> For example, the primary evidence of a child attending a day-care was a handwritten sign-in sheet of minimal probative value. Prosecutors referred to them as “almost comical” and “useless.” They were routinely fraudulently filled out by a 17 year old “signing” for dozens of parents sequentially in the same handwriting, excepting cases where they were simply empty.
> To refute this “evidence”, the state forced itself to do weeks of stakeouts, producing hundreds of hours of video recording, after which it laboriously reconstructed exact counts of children seen entering/exiting a facility, compared it with the billing records, and then invoiced the centers only for proven overbilling.
> On general industry knowledge, if you are selected for examination in e.g. your credit card processing account, and your submission of evidence is “Oh yeah, those transactions are ones we customarily paperwork with a 17 year old committing obvious fraud”, your account will be swiftly closed. The financial institution doesn’t have to reach a conclusion about every dollar which has ever flowed through your account. What actual purpose would there be in shutting the barn door after the horse has left? The only interesting question is what you’ll be doing tomorrow, and clearly what you intend to do tomorrow is fraud.
Moving on,
> I don't think the serious response to Nick Shirley's "journalism" is that there was no fraud; rather, it's that he came into the situation with a thinly veiled agenda and fed his audience exactly what they wanted to hear.
My take is that there's no good reason to suspect that, except for holding an opposed thinly veiled agenda. And there is no serious dispute of the fact that billions of dollars of fraud occurred.
> Did his video make it more or less likely that we'll be able to investigate and resolve the fraud situation in MN?
It clearly made it more likely, as demonstrated by federal senate hearings that have extensively referenced the video (I've seen a segment where a senator literally had a prop photo of the "Quality Learing Center").
> the fact that they seized on this as an excuse to send in 3000 ICE agents is not exactly promising.
Your premise is that a YouTube video published Dec 26, 2025 somehow motivated a federal law enforcement action that commenced on Dec 4, 2025. Also, this claim conflates ICE with CBP. Also, per Wikipedia, out of thousands of arrests, only 23 have been of Somalis; and it's been abundantly clear in all the press functions that the targets have overwhelmingly been Hispanic — because they're overwhelmingly represented among illegal immigrants in the US, including in MN.
The surge of ~2,000 officers only happened around Jan 5-6, 2026. And this happened after the video in question was reposted by J.D. Vance and referenced by Kash Patel.
It's true that Operation Metro Surge as a whole started a month earlier. But, zooming out from that specific video, the operation was from the start motivated by the fraud scandal, according to reliable sources [1]. Official statements around this time of the later surge also referenced the fraud scandal [2]. Meanwhile, Trump delivered several speeches during this time complaining in racist terms about Somalis in general.
It's also true that the actual activity of Operation Metro Surge is mostly unrelated to the fraud. But that's the whole point! The administration seized on the fraud, and later seized on that specific video, as an excuse to send in ICE and CBP agents to do something completely different. As the parent said, this probably did not "make it more [..] likely that we'll be able to investigate and resolve the fraud situation in MN". Or if it did, it did so very inefficiently compared to other possible approaches such as getting the FBI to focus on it (which also happened). The surge did focus public attention on the issue, which might encourage local officials to resolve it. But it also massively poisoned the well. How much you want to talk about the fraud issue is now a proxy for how much you _don't_ want to talk about what liberals see as the much larger issue of abuses by ICE/CBP.
[1] https://www.nytimes.com/2025/12/02/us/politics/ice-somali-mi...
I don't get this. What does the proportion of blue fish have to do with the total number of fish you catch?
Is there some stats knowledge I'm missing?
The point the article is making is that the "reporter" turned up and alledged to have found nine cases of daycare fraud. Nine sounds like a lot, right? But the article claims the state already knew 50% of the daycares claiming its aid were frauds (this is quite debatable, don't take it as fact). Presumably that's 50% of hundreds or maybe thousands of daycares.
If blue fish were much rarer in the pond, i.e. lower percentage of daycares defrauding the government, you'd be considered a savant for fishing once and pulling out nine blue fish... but if the pond has thousands of fish and 50% are blue, it looks a lot less impressive.
The politicization of the issue means that Democratic Party aligned people continually flag any reference to the scam on HN though. If anyone else said that someone broke in and stole all the records from a daycare days after it was accused of fraud it would be considered a bald-faced lie but because of the political alignment (this is VP candidate Walz’s state) everyone is forced to pretend there’s no scam.
¹ Paradoxically the one honest juror who reported the bribe was removed from the case. No others reported any bribe which obviously must mean they received none.
These statements are trivially found using https://hn.algolia.com.
1. The fraud is in fact being investigated, people are being charged and convicted. Despite this, rightwing media institutions are acting as if fraud is being ignored and maybe even covered up and encouraged because
2. This is just another example of the decades long project by those who have lots of money and don't want to see it go to takes to paint social programs as a money-pipe from good hardworking people to fraud and waste.
In the real world, this maybe makes page 3 of the "crime" section of the newspaper for a single day.
1. The fraud was not in fact being investigated seriously enough until this kid, even while lacking the basics of journalism as Patrick describes here, forced the issue.
2. This is just another example of the decades long trend where more and more bad patterns and outcomes can persist for far too long because the normal checks are fended off with spurious accusations of racism.
There's some variation on how "the right" would handle (2). The center-right wants to shore up our culture of color-blindness to patch these vulnerabilities. The far-right wants to do away with egalitarianism altogether, and just go back to plain old racism. If we can't figure out the former, we might well end up with the latter.
(My reading is that Patrick falls squarely in the "center-right" here, fwiw. Then again, it can be hard to decode his exact subtext from under all the polite circumlocutions. Reading his stuff is something of an acquired skill and/or taste.)
And as explained in TFA, this is inefficient and ineffective even in theory:
> So-called “pay-and-chase”, where we put the burden on the government to disallow payments for violations retrospectively, has been enormously expensive and ineffective. Civil liability bounces off of exists-only-to-defraud LLC. Criminal prosecutions, among the most expensive kinds of intervention the government is capable of doing short of kinetic war, result in only a ~20% reduction in fraudulent behavior. Rearchitecting the process to require prior authorization resulted in an “immediate and permanent” 68% reduction.
> Despite this, rightwing media institutions are acting as if fraud is being ignored and maybe even covered up and encouraged because
Which is a reasonable characterization of the situation given the scale of the fraud and the fact that it's still going on, in such a blatant manner.
We're talking about total fraud on the order of $10b, and some significant fraction of that money has presumably been sent back to Somalia. We're talking here about amounts that would represent a significant percentage of Somalia's entire GDP (https://en.wikipedia.org/wiki/Somalia#Economy).
> This is just another example of the decades long project by those who have lots of money and don't want to see it go to takes to paint social programs as a money-pipe from good hardworking people to fraud and waste.
"The left" clearly has a vested interest in that not happening; therefore, it is also in their interest to take appropriate actions against fraud as they might learn about from the financial industry.
Also, there are real dangers to blackpilling about fraud. "Everybody is doing it" is exactly what one says before doing fraud oneself. In reality, there are a lot of people out there doing the right thing every day.
There is literally nothing wrong with stating this, we ought not be political about this. There may also be conservatives being elevated from Fraud as well, all of it should be routed.
At this point it definitely warrants deep investigations, not more articles trying to destroy a 23 year old that went viral.
What it lacks is any concrete suggestion as to what should change, beyond some vague allusions that perhaps racial/ethnic profiling should make a comeback.
The real problem here though is that the entire article ignores the duty[1] the government owes its citizens.
It's "fine"[2] if stripe or visa or whoever flips a coin and if it's tails they decide this person isn't allowed to be a customer of their company. The company loses any profit they might have made and life goes on.
It's considerably more problematic when the government refuses to serve a citizen (or even worse, levies an accusation).
There's some famous quotes about how many innocent people are appropriate to harm in the pursuit of the guilty but I'll leave those up to the reader.
[1] duty feels like too weak of a word here. Obligation? Requirement? The only reason the government even exists is to benefit the citizens.
[2] it becomes rapidly less fine when the company essentially has a monopoly over a system requires to participate in modern life, but that's a different topic...
If you've been reading the news then you can decode these paraphrases, but they do make his articles significantly harder to read.
I'm tempted to ask an LLM to replace them with more straightforward references.
It suggests nothing of the sort, and in fact explicitly attempts to establish that none of this is intrinsic to any affinity group. The point isn't that the fraudsters in this case were of a particular ethnicity; it's that they shared an ethnicity, which enables the kind of internal social trust that fraud rings require.
Further, it suggests many clear heuristics that are nothing to do with ethnicity. The suggestions are clear and explicit; they just happen to involve occasionally denying services without proof of already-committed fraud, which you apparently consider unacceptable. But here is an experienced person telling you from expertise, with abundant citations and evidence, that nothing else really works, and furthermore that this is common knowledge in a well established industry specifically devoted to the problem.
The reason why risk departments all inevitably reinvent Maoism is because the only effective enforcement mechanism they have is to refuse service. Fraudsters are fundamentally illegible to businesses of this size. And as the article stated, recidivism rates in fraud are high enough that someone caught doing fraud should never be given the time of day ever again. So the easiest strategy is to pick some heuristics that catch recidivist fraudsters and keep them a jealously guarded secret.
This calculus falls apart for the government. If someone rips the government off, they can arrest them, compel the production of documents from every third party they've interacted with, and throw them in jail where they won't be able to rip anyone else off for decades. Obviously, if we gave the Risk Department Maoists these same permissions, we'd be living under tyranny.
Well, more tyranny than we already live under.
But at the same time, the fact that we have these legal powers makes Risk Maoism largely obsolete. We don't need to repeatedly reinvestigate the same people for the same crime "just in case".
How is it Maoist to refuse service???
> This calculus falls apart for the government.
It really doesn't. The judicial process is expensive and jail time isn't at all proportional to the amount defrauded (especially not when there is no political appetite for locking up a disproportionately "racialized" set of culprits, never mind the facts); nor does it solve the problem of recovering those funds. Further, the projections on the amount of fraud uncovered make it seem rather likely that a high percentage of those responsible are going free.
> We don't need to repeatedly reinvestigate the same people for the same crime "just in case".
The entire point of the system you're calling "Risk Maoism" is that it does not involve reinvestigation; it involves a presumption that reinvestigation would be a waste of time.
Right now we have either some form of fine, and while this can be incredibly painful, usually is not, then we go straight to like multiyear prison sentences, with perhaps a few suspended sentences in between there.
I dunno, maybe a world where "you did a small bank fraud so now you have some kind of antifraud system attached to you" is genuinely worse than the one we live in now, but the idea of being able to target more specific aspects of someone rather than just prison/not prison seems interesting.
I guess we have stuff like "not allowed to use a computer for 5 years" (thanks hackers movie!), dunno how effective or practical that is.
That's the real thing here. Concentrated power is scary-- whether it's the federal government, Visa/Mastercard, Google, etc.
At least power concentrated under the control of a government might be held accountable to the people. With private, concentrated power: fat chance.
Does Patrick want to address the fact that this happened during school break and that Nick Shirley didn't prove much of anything?
What if this article is just the rationalist version of the Nick Shirley hit piece?
