There was recently an attempt by an independent journalist to expose fraud in a Minnesota social program. It was deeply frustrating; the journalist had notably poor epistemic standards, which secondary media seized upon to dismiss their result.
The class-based sniffing almost invariably noted that prestige media had already reported stories which rhymed with the core allegation, while sometimes implying that makes the allegations less likely to be true, through a logical pathway which is mysterious to me.
The journalism went quite viral anyway, in part because of sensationalized framing, in part because of signal boosting by an aligned media ecosystem and aligned politicians, and in part because the journalism develops one bit of evidence that has a viscerality that paperwork dives often lack: these purported childcare operations routinely have no children in them.
Fraud has become quite politicized in the United States the last few years. We had a poorly-calibrated federal initiative led by a charismatic tech entrepreneur which believed it would unearth trillions of dollars of fraud that focused substantial effort on large programs which are comparatively fraud-resistant. Across the aisle, we have reflexive dismissal that fraud happens in social programs, which functions as air cover for scaled criminal operations which loot many varied social programs [0] and are sometimes run out of geopolitical adversaries of the U.S. including by ambiguously-retired members of their clandestine services.
I worked in the financial industry for a few years. We do not have the luxury of pretending that fraud is something invented by our rivals to besmirch our good name. It hits the P&L every quarter and will eat you alive if you’re not at least minimally competent in dealing with it. Conversely, it is well-understood in industry that the optimal amount of fraud is not zero.
The financial industry has paid at least tens of billions of dollars in tuition here. Overwhelmingly, one learns about fraud in it through an apprenticeship model, with different firms having different internal levels of understanding on the shape of the elephant. The industrial organization presumes small numbers of people architecting anti-fraud systems and relatively larger numbers of investigators and analysts operating those systems on a day-to-day basis.
There does exist some informal knowledge sharing between firms. If you work in payments, try getting invited to the Chatham House rule sessions held by… oh yeah, can’t say. Despite that social technology being originally developed for the benefit of government and press actors, it is my general impression that U.S. benefits programs don’t yet see themselves as sufficiently yoked by adversarial attention to benefit from their own Chatham House series. Perhaps that should change.
And so, for the benefit of fraud investigators with badges, press cards, or GoPros, some observations from a community of practice with an extensive (and mostly nonpublic) body of work. But first a tiny bit of throat clearing.
In which we briefly return to Minnesota
Minnesota has suffered a decade-long campaign of industrial-scale fraud against several social programs. This is beyond intellectually serious dispute. The 2019 report from the Office of the Legislative Auditor (a non-partisan government body) makes for gripping reading. The scale of fraud documented and separately alleged in it staggers the imagination: the state’s own investigators believed that, over the past several years, greater than fifty percent of all reimbursements to daycare centers were fraudulent. (Separate officials took the… novel position that they were only required to recognize fraud had happened after securing a criminal conviction for it. Since they had only secured a few criminal convictions, there was no way that fraud was that high. Asked to put a number on it, repeatedly, they declined.)
... continue reading