Fraud expert exposes how hidden networks drove Minnesota fraud, other major scams: 'Criminal enterprise'

Criminals can turn stolen identities bought on the dark web into seemingly legitimate businesses — then use those companies to bill taxpayers for healthcare and other services that were never provided, according to a fraud expert who detailed the scheme to Fox News Digital.

The companies can hide in plain sight: Criminals create LLCs using information that may receive little scrutiny, pair them with stolen identities and submit fraudulent claims for everything from wheelchairs and diabetes treatments to childcare and autism services, according to Haywood Talcove, CEO of LexisNexis Risk Solutions Government.

But Talcove said the financial losses are only the beginning, warning the schemes can fuel "criminal enterprises." "They are using our money against us, whether it's in social media campaigns, whether it is for human trafficking, drugs, disrupting our economy," Talcove told Fox News Digital.

STOLEN IDS SOLD FOR ‘HAPPY MEAL’ PRICES FUEL BILLIONS IN US BENEFIT FRAUD "When you think about fraud, don't think about, 'It's great that we stopped a fraud ring that stole $5 million.' Think about that as a criminal enterprise that goes beyond just stealing out of a benefit program." Despite fraud schemes surfacing nationwide, Talcove said Minnesota was "particularly egregious" because the state had little incentive to stop the fraud.

"Minnesota was particularly egregious once they started looking because it was really easy to find," he said.

Talcove said one factor allowing the schemes to flourish in Minnesota and across the country is weak verification during the LLC registration process and reliance on "self-reported information." "In the case of Minnesota, you went and got your LLC, you opened up a child care facility, and then the next thing you knew you were billing CMS [Centers for Medicare & Medicaid Services] for child care or autism care , and nobody checked." The Trump administration launched an anti-fraud crackdown this year after Minnesota's Feeding Our Future scandal , creating a task force led by Vice President JD Vance.

The scheme allegedly stole $250 million from a federally funded child nutrition program during the pandemic, and many of those charged have since been convicted or sentenced to prison.

Without third-party audits, Talcove said many criminals slip through the cracks, racking up millions before they're caught.

"One of the fundamental problems with these programs that are literally spending trillions of taxpayer dollars, they have nobody doing investigations or such a small, tiny amount of people that it's not even possible to investigate," he said.

FRAUD EXPERT WARNS AI IS HELPING CRIMINALS OUTPACE THE GOVERNMENT: 'DON'T HAVE THE RIGHT TOOLS' But Talcove said when these schemes are investigated, they expose much more than fraud.