Throughout 2026, federal investigations in blue states across America exposed a new scope of organized crime to which red states seem less vulnerable. Minority and immigrant groups allegedly mounted massive fraud campaigns to steal millions of taxpayer dollars, perhaps relying on the belief that their actions would never be challenged by politically sensitive municipal and state governments concerned about possible allegations of racial intolerance.
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In December 2025, reports initially led by online investigator Nick Shirley identified empty and inactive Minnesota childcare centers run by Somali immigrants misappropriating public funds to the tune of more than $250 million. Later investigations indicated Minnesota officials knew of the fraud and declined to pursue prosecution lest they be accused of racism or risk the loyalty of a supportive voting bloc. Gov. Tim Walz (D-MN), the Democrats’ 2024 vice presidential nominee, ended his bid for a third term as governor following the scandal.
In early 2026, federal authorities identified more than $267 million in hospice fraud based in Southern California, with an impossibly large number of care facilities falsely listed as based in a single San Fernando Valley office building. Some accounts controversially blamed the Russian or Armenian mafia for the scheme before federal and state prosecutors closed it down.
While similar federal fund scandals occurred in recent years in red states such as Mississippi, Oklahoma, and Kentucky, none of them survived long enough to rake in more than $19 million. Is it possible these highly coordinated criminal efforts know the traditional progressive states are more tolerant (and vulnerable) to what blue governments often consider “crimes of poverty?”
Emma Alves, an attorney at the Alves Law firm and a longtime political science student, believes the nature of state systems determines where and what types of fraud would-be criminals pursue.
“In connection with the fraud schemes of Minnesota’s daycares and California’s hospice system, we see the same scheme of events: The oversight agencies have been alerted and have been fully aware of the situation for years, but the federal authorities prefer to take action only when an issue becomes obvious,” Alves said.
Alves believes agencies steer clear of politically sensitive fraud cases because proceeding with prosecution brings about a risk of discrimination lawsuits, media scandal, and political pressure. Her personal experiences, as told to her by state auditors, say the easiest part of identifying such crimes is the paper trail.
“The hardest part is finding the political will to act upon it,” she added. “Also, fraud units often suffer from understaffing compared to the size of the programs they supervise.”
Stacy Kemp Ferrari is a Florida attorney who spent seven years as a court reporter before law school, observing firsthand the way accountability and the institution’s willingness to prosecute can dictate outcomes.
“Bad actors see when institutions signal that they are not going to fight back,” Ferrari said. “The fear of being tagged as discriminatory can cause a complete breakdown in oversight faster than a policy loophole.”
Ferrari’s experience litigating in Florida and Georgia teaches her that resolved cases result from the federal government overruling local policies entirely.
“The hospice fraud in California didn’t end because an action was taken by the state of California,” she said. “The action was taken by the federal government. In the 2024 fiscal year alone, the Department of Justice recovered more than $2.9 billion in False Claims Act enforcement.”
If such grand fraud schemes in blue states are to be stopped, Ferrari holds that the Californias and Minnesotas must develop a culture of enforcement whereby the political price of inaction will exceed the political price of confrontation.
Some states known for weak fraud enforcement
Leonard Sipes, owner of CrimeInAmerica.net, insists there are states with reputations for strong law enforcement and others where there are endless controversies about criminal justice practices and defunding the police.
“Crime shifts based on the perceptions of criminals,” Sipes said. “They choose methods (such as fraud and computer crimes) because it involves less risk and greater gain.”
Sipes cited FBI data showing bank robberies down about 85% from a 1992 peak because criminals increasingly have more attractive alternatives, such as romance scams and cryptocurrency fraud.
“If criminals shift methods toward greater rewards, it’s not uncommon to go where controversies and contention with law enforcement are well known,” Sipes added.
Citing a separate Pew Research Center study on police proactivity, Sipes indicated that public controversy creates an atmosphere in which police officers forgo proactivity. However, Sipes confirms that there is, as yet, no definitive national research on how red- or blue-state crime policies affect criminal behavior.
“You could make a case that violent crime is more prevalent in southern or red states per FBI data,” he explained. “But most violent crimes involve people who know each other. It’s interpersonal. It could be (and probably is) entirely different for fraud or other crimes where the issue is monetary gain, as with cargo theft or retail ‘smash and grabs.’”
C.L. Mike Schmidt, a lawyer and partner at Schmidt & Clark, LLP, specializes in “holding institutions accountable when they choose silence over action.” He claims the real story in these situations is not just complex fraud, but a systemic permission slip.
“Someone in authority signed off, and someone looked the other way,” Schmidt said. “Officials decided it was easier to remain silent than to intervene. Every scheme has an intermediary who had the power to halt it in its tracks but failed to act.”
Schmidt assigns almost as much blame to the officials who allow or encourage fraud as to the fraudsters themselves.
“Agencies rarely train their staff to identify fraud risks within high-concentration funding programs, leaving obvious red flags unaddressed,” he said. “Political excuses for silence vanish the moment formal legal discovery and court proceedings begin. When paper trails, documentation, and signatures are exposed in court, officials can no longer dodge accountability.”
Regardless of whether massive fraud occurs due to politics or law enforcement policies, every expert agreed that the most important priority is stopping it to save taxpayer money and redirect it to approved purposes.
Attorney Robert Tsigler represents corporations and individuals throughout state and federal courts in complex legal matters. He recommended a three-stage response to statewide criminal schemes.
“First, I recommend preventing program verification gaps because fraudulent schemes target government benefits issued faster than they can be verified,” Tsigler said. “Rampant payouts to contractors without checking documents allow dishonest claimants to continue the deception for years until officials catch on. Well-organized fraudsters time their billing to stay within acceptable limits so that their invoices do not trigger automatic scrutiny.”
Tsigler then recommends cross-agency oversight because successful auditing campaigns only emerge through such intelligence sharing. He points out that prosecutors usually collaborate with federal law enforcement counterparts when financial malfeasance involves cross-jurisdictional billing or unique funding sources.
“Finally, independent audit controls allow progressive jurisdictions all the legal tools needed to stop and reverse financial exploitation of the public,” he explained. “The creation of independent audit oversight councils helps depoliticize the process while ensuring consistent standards of accountability.”
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While such steps could very well close the loopholes through which millions of dollars flow, Sipes says it won’t matter without the political will to lock it all down.
“Any criminal with access to current events is going to go to those states where the crime and law enforcement topic creates controversy. Organized crime figured out a long time ago that there are states favorable to their activities. They will go to the places where risk is minimized, and gain is maximized.”
Wisconsin-based John Scott Lewinski (@johnlewinski) writes from Milwaukee.
