On Tuesday, September 16, federal prosecutors in Southern California charged 12 people with running “ghost” daycares: home childcare operations that billed the state’s subsidy program more than $10 million for children who, investigators say, were not there. In some cases, a lead prosecutor said, “there were no children” and “there were no daycares.” The paperwork was real. The kids were not.
Where This Stands Right Now
- Twelve defendants, twelve daycare operations, more than $10 million in alleged fraudulent billing to California’s childcare subsidy program.
- The charges came from the Justice Department with IRS Criminal Investigation, Homeland Security Investigations and the White House Fraud Task Force.
- U.S. Attorney Adam Gordon: “Today is a bad day for home daycare fraud.” These are the first charges of their kind since the National Fraud Enforcement Division was formed.
- The defendants are described by prosecutors as naturalized citizens and lawful permanent residents; the charges are allegations until proven in court.
How A Daycare With No Children Gets Paid
The subsidy program pays licensed home providers for the hours low-income working parents’ children attend. Prosecutors say the defendants filed attendance sheets and time records for children who never came, and in some cases for daycares that existed only on the license. The money flowed because the system pays first and checks later: paper sign-ins, delayed audits, and reviewers with too many files to visit a home and count heads. Once the scheme works for one provider, investigators say, it spreads by word of mouth to the next.
“This was not a victimless crime,” said IRS Criminal Investigation chief Jarod Koopman. “It deprived working parents of critical support.” Every subsidized slot billed for a ghost child was a slot a real family on the waiting list did not get.
Why Washington Made A Point Of This One
The case is the first brought under the Justice Department’s new National Fraud Enforcement Division, which the House voted the same day to write into law, and it was built with the White House Fraud Task Force at the table. That is not an accident. California has spent the year on the defensive over fraud in its benefit programs: a $270 million Medi-Cal drug-billing guilty plea in April, a hospice-fraud takedown announced by the state attorney general, and a governor who this week asked taxpayers for another $1 million to respond to federal fraud probes. State officials say the arrests prove they are fighting fraud, not hiding it. Federal prosecutors picked a case that says the fighting starts with them.
What Happens Next
Arraignments, and then the numbers: how many children were billed, over how many months, and how much of the $10 million can be recovered. Watch for whether state regulators suspend the licenses involved and whether the payment holds and unannounced inspections that every fraud case ends with a promise of actually get written into the program this time.
Sources:
pjmedia.com, kcra.com, foxla.com, nypost.com
