1 STATE OF MINNESOTA COUNTY OF HENNEPIN State of Minnesota, DISTRICT COURT FOURTH JUDICIAL DISTRICT COURT FILE NO. PROSECUTOR CASE NO. 16A03871 SILS ID SILS TRACKING CONTROLLING AGENCY. MNBCA0000 CONTROL NO Plaintiff, v. CRIMINAL COMPLAINT ABDIRIZAK AHMED GAYRE (DOB: 10/20/1964) Summons Warrant th Ave S Order of Detention Minneapolis, MN 55407, Defendant. Amended Tab Charge Previously Filed The Complainant, being duly sworn, makes complaint to the above-named Court and states that there is probable cause to believe that Defendant committed the following offense(s): Count I Charge: Theft-By Swindle (X) Minnesota Statute: (a)(4), with reference to: , , (1) Offense Level: Felony Maximum Sentence: 20 YEARS AND/OR $100,000 Offense Date (on or about): 12/01/2014 Charge Description: That on or about December 1, 2014 through May 31, 2015, in Minneapolis, Hennepin County, Minnesota, ABDIRAZIK AHMED GAYRE, acting alone or intentionally aiding, advising, hiring, counseling or conspiring with IBRAHIM AWGAB OSMAN, obtained property or services from the State of Minnesota Child Care Assistance Program by swindling the State of Minnesota using artifice, trick, device or other means, and the property or services had a value in excess of Thirty-Five Thousand Dollars ($35,000.00).
2 STATEMENT OF PROBABLE CAUSE The Complainant states that the following facts establish probable cause: THE DEFENDANT IN THIS CASE IS A CO-DEFENDANT IN A CASE CURRENTLY PENDING BEFORE JUDGE KARASOV, STATE V. MINNESOTA CHILD CARE SERVICES, MNCIS NUMBER: 27-CR Your complainant, Terri Vandergriff, is a Special Agent with the Minnesota Bureau of Criminal Apprehension ( BCA ), and is currently assigned to the Minnesota Department of Human Services ( DHS ) to investigate fraud within the Minnesota Child Care Assistance Program ( CCAP ). Working closely with a team of BCA Special Agents and DHS Investigators, Complainant has investigated the facts and circumstances of this case by reviewing records, conducting in-person and video surveillance of persons and locations, interviewing witnesses, and executing search warrants. The investigation has revealed facts that establish probable cause to believe that ABDIRAZIK AHMED GAYRE (DOB: 10/20/1964) and IBRAHIM AWGAB OSMAN (DOB: 01/01/1962) have committed the offense of theft by swindle as detailed below. ABDIRAZIK AHMED GAYRE was the owner and director of MINNESOTA CHILD CARE SERVICES ( MCCS ), located at 2500 Minnehaha Ave., Minneapolis, Hennepin County, Minnesota. IBRAHIM AWGAB OSMAN was the Assistant Director at MCCS. In their respective roles, Defendants GAYRE and OSMAN were jointly responsible for the day-to-day operation of the business, including hiring and firing all staff, accepting new children to the center, maintaining attendance records, managing the business s finances, and submitting CCAP bills to the State of Minnesota. This investigation has revealed that between December 1, 2014 and May 31, 2015, ABDIRAZIK AHMED GAYRE and IBRAHIM AWGAB OSMAN, aiding and abetting one another, repeatedly submitted fraudulent billing requests to receive CCAP funds. In total, as a result of the false statements that Defendants GAYRE and OSMAN knowingly and intentionally included in the bills they submitted, they tricked the State of Minnesota into giving MCCS at least $103, Background on CCAP MCCS became a licensed child care facility in April The vast majority, if not all, of the families whose children attended MCCS have the cost of the childcare paid for by the Minnesota Child Care Assistance Program ( CCAP ). CCAP is designed to make child care affordable for income-eligible families and is available while the qualifying parents work or attend school. After a family qualifies for CCAP assistance, they select a child care provider of their choosing. A parent can switch child care providers at any time and can use multiple child care providers at the same time. While it is the parent that chooses the child care provider, it is the provider who submits bills to the State of Minnesota to receive the CCAP funds. The State relies on the bills submitted by the provider and sends money directly to the provider. When submitting bills to the State, the person doing the billing for the provider must certify that the information submitted is true and must acknowledge that providing false information may result in criminal charges.
3 CCAP polices allow providers to be reimbursed for absences and holidays, but there are rules and limits that apply. First, the provider must also charge non-ccap families for absences and holidays. Second, there are yearly limits on payments for absences and holidays. Each child has 25 absences and 10 holidays each year, and the yearly limits apply to the child, not the provider. In addition, for absences, a child may not be absent for more than 10 days in a row. Accordingly, it is vitally important that a provider truthfully bill when a child is absent or on holiday. Records obtained during the investigation revealed that MCCS observed 16 official holidays, 6 more than it was permitted to bill for under CCAP policies. Minnesota law requires that child care providers keep daily attendance records which include the date, name of child, and times when the child is dropped off and picked up. These attendance records must be completed daily. The provider must maintain these records for six years. In Hennepin County, providers submit CCAP bills via an electronic system called MEC2-Pro. In other counties, bills are submitted by paper. All CCAP bills must include the date that service was provided, the number of hours the child was in attendance, and if the child was present, absent, or on holiday. If the child did not attend the center, but the provider was seeking payment because the child was absent or on a holiday then the provider must record the scheduled hours and indicate that the child was absent or on holiday. Two people at MCCS submitted bills to obtain CCAP funds Defendants GAYRE and OSMAN and in Hennepin County they did so using their own personal log in credentials to the MEC2-Pro system. Operation of MCCS MCCS was located at 2500 Minnehaha Ave S., Minneapolis, Hennepin County, Minnesota. There were four doors to the center the main entrance and three emergency exits. The emergency exits were locked from the outside. The main entrance was unlocked, but opened into a secure lobby. A locked door separated the lobby from the child care area. This investigation revealed that in most instances children would enter the center through the main entrance. In the lobby area, the person dropping the child off would sign in on attendance sheets. During the investigation, some parents indicated in interviews with investigating officers that they occasionally used one of the emergency exits to enter the center. These parents indicated, however, that when they did so, they would proceed to the front desk in the main lobby area and sign the attendance sheets. Parents were also required to sign out when they left the center with their children. The attendance records at MCCS were organized by family, by month. After attendance records were signed by parents at drop-off and pick-up, MCCS employees would review the records. If an attendance sheet was not signed by a parent, MCCS employees, including M.E., would call parents and arrange for them to sign the attendance sheets after the fact. In some cases, MCCS even sent attendance records home with bus drivers who would obtain the parent signature and then bring the record back to MCCS. This practice of fixing attendance records calls into question the accuracy of the attendance records. Minnesota law requires attendance records to be completed daily, at the time of drop-off and pick-up, and fixing the attendance records after the fact clearly raises the risk of fraud. This is especially true in the case of MCCS, which has
4 been investigated for discrepancies in their attendance records in the past. In fact, in June and July 2012, Hennepin County Department of Human Services conducted a Fraud Prevention Investigation into MCCS s billing practices. The review revealed multiple instances of MCCS billing for children who were not on the attendance sheets and other problems with MCCS s attendance records (such as a child signed in but not out, no parent signature, or a complete lack of attendance records). The investigation resulted in MCCS having to provide attendance records alongside its billing records for a period of time. After the attendance records were reviewed and additional parent signatures were obtained, the records were given to Defendant GAYRE or Defendant OSMAN, who then submitted bills to the State of Minnesota to receive CCAP payments. Most bills at MCCS were submitted to Hennepin County, because most families whose children attended MCCS resided in Hennepin County, although some bills were submitted to other nearby counties. For both the electronic and paper submissions, Defendant OSMAN submitted the bills about 4/5 of the time. Defendant GAYRE submitted the bills the rest of the time. Admissions from Defendant OSMAN Defendant OSMAN was interviewed by the investigators during the course of the investigation. He admitted that he began working at MCCS in February He stated that he started as a teacher, but in approximately late 2014 he was promoted to Assistant Director. As Assistant Director, he was trained by Defendant GAYRE in all aspects of the business, including CCAP billing. Defendant OSMAN admitted that CCAP bills were submitted by either himself or Defendant GAYRE and he stated that no one other than himself and Defendant GAYRE submitted the CCAP bills. He stated that Defendant GAYRE was his boss and that Defendant GAYRE told him how to do the billing and that if Defendant GAYRE told him to bill for a specific child, he would submit the bill for that child. Defendant OSMAN also admitted that he was aware of the limits on absences and holidays and that Defendant GAYRE was the one who informed him of those limits. Defendant OSMAN stated that he did not know how many children actually attended the center or when they attended. Defendant OSMAN explained that when children arrived at the center they were signed-in at the reception desk at the front of the center. He explained the attendance records were brought from the front reception desk to another office where two MCCS employees reviewed the records. From there, the attendance records went to Defendants GAYRE and OSMAN who did the billing based on the attendance records. As is explained in more detail below, however, a comparison of the attendance records and the billing records show that Defendants GAYRE and OSMAN were in fact submitting bills which falsely claimed children were present when the attendance records showed they were absent. Video of Main Entrance Beginning in November 2014, a digital video camera was positioned outside of the main entrance to MCCS. The camera was positioned to capture all children who enter and exit the center via the main entrance. The camera ran 24 hours a day until May MCCS staff, parents and children were not aware of the camera. Following an established viewing protocol,
5 members of the taskforce investigating this case viewed entire days of video footage, counting the number of children who entered the center. Any question as to whether a person seen entering the center was a child was resolved in favor of the person being counted as a child. A child is counted as attending the center for the full day even if the video shows that the child was only in the center for a short period of time. The video shows a consistent pattern of MCCS billing for far more children than are seen entering the center through the main entrance. The numbers vary by day, but on average the video review showed that MCCS billed for 50 more children each day than are seen entering the center through the main entrance. MCCS also billed for days on which no children attended the center. MCCS submitted bills which stated that 34 children attended on December 26, 2014, when in fact the center was closed and no children attended that day. MCCS also falsely claimed that 16 children attended on January 19, 2015, and that 44 children attended on May 25, 2015, even though the center was closed on both of those days. Analysis of Attendance Records During the search warrant, MCCS attendance records were seized. A detailed analysis of the attendance records reached the same overall result as the video surveillance evidence that MCCS was consistently submitting bills that falsely claimed children were present when they were not though the scope of the fraud revealed by the attendance records analysis was smaller. Whereas the video evidence showed false billing of about 30%, the attendance records analysis showed false billing of about 7%. One explanations for this difference is that MCCS fixed its attendance records by having parents sign the attendance sheets after the fact. CCAP bills are typically submitted every two weeks and the attendance record analysis showed false billing in every two week billing period. The attendance record analysis shows that Defendants GAYRE and OSMAN, on 1673 occasions between December 1, 2014 and May 31, 2015, falsely claimed that children were in attendance at MCCS when the attendance records show that the children were actually absent or on holiday. On 301 of these occasions the false statement was made by Defendant GAYRE, via the MEC2- Pro system. On 1272 of these occasions, the false statement was made by Defendant OSMAN via the MEC2-Pro system. The other 100 occasions were submitted via paper, and signed by either GAYRE or OSMAN. As a result of these false statements, Defendants GAYRE and OSMAN tricked the State of Minnesota into sending $103, in CCAP funds to MCCS. MCCS s Finances MCCS s bank records from July 2014 through September 2015, show no receipt of payments from non-ccap families and reveal that nearly all funds coming into the company are CCAP payments. Defendant GAYRE is the owner and main signatory on all of MCCS s various bank accounts. Indeed, of the more than 4,100 checks and other transactions on MCCS s main operating account between July 2014 and September 2015, Defendant GAYRE is the only person who signed the checks or otherwise made the transaction. The records show that in that time period, Defendant GAYRE withdrew large sums of money from the company bank accounts on a regular basis. He did this by writing himself checks, in most cases including memo line entries designed to obfuscate the true purpose of the funds, and then going to
6 MCCS s bank and turning the checks into cash. From July 2014 through September 2015, excluding paychecks, Defendant GAYRE withdrew over $195,000 in this way. Bank records also show that Defendant OSMAN also withdrew large sums of money in this same manner. From July 2014 through September 2015, excluding paychecks, Defendant OSMAN withdrew over $81,000 in cash from MCCS s main operating account by cashing checks written to him by Defendant GAYRE. Defendants OSMAN and GAYRE were not the only staff person at MCCS who cashed checks in this way. For example, Defendant GAYRE s wife, N.Y., received over $110,000 in such checks, excluding paychecks. MCCS s bank records reveal that numerous other employees of MCCS cashed checks in this way. Some of the money that Defendants GAYRE and OSMAN obtained by turning checks into cash was used to make payments to parents of children who attended MCCS. These payments served multiple purposes. They were a means of ensuring that parents do not inform the State about the false billing submitted in regard to their children, and as a kick-back to the parent for sending their children to MCCS. Making the payments in cash also prevented the parent from having to report the income, which was important because the family s eligibility for CCAP funds depended on the income of the parent. During the execution of a search warrant at MCCS and at Defendant OSMAN s residence, lists were discovered which showed the names of parents and the amount that each parent was to receive in payments. In addition, a former employee of MCCS who is cooperating with investigators has stated that he or she was personally asked by Defendant OSMAN to cash checks and to give money to parents. This former employee states that Defendant OSMAN provided a list of parents and the amounts they were to receive. The former employee confirmed that the lists discovered during the search warrants are similar to the lists that Defendant OSMAN provided. The former employee states that he or she knew the money was a kick-back payment to the family given in exchange for the family sending their children to MCCS, and that he or she knew it was wrong to make the payments and took steps to hide his or her actions including handing the money to the parent in a location where there were no cameras. The former employee states that both Defendants GAYRE and OSMAN also gave cash to parents in this way, and also did so in areas of the center where there were no cameras to record their actions. Conclusion The attendance records establish that Defendants GAYRE and OSMAN personally, knowingly, and intentionally submitted bills in which they falsely claimed that 1673 children attended the center who did not. The evidence shows that Defendants GAYRE and OSMAN worked together in the commission of this crime, knew that the other was going to commit the crime, and intended that his actions would further the crime. The false statements that Defendants GAYRE and OSMAN included in the CCAP billing tricked and enticed the State of Minnesota to send CCAP funds to MCCS based on the false information. The total amount of CCAP funds provided to MCCS based on the false billing submitted by Defendants GAYRE and OSMAN is at least $103, Accordingly, Defendant GAYRE and Defendant OSMAN are each charged with one count of theft by swindle, aiding and abetting each other in the commission of that crime.
7 Defendant is not in custody.
8 Complainant requests that Defendant, subject to bail or conditions of release, be: (1) arrested or that other lawful steps be taken to obtain Defendant s appearance in court; or (2) detained, if already in custody, pending further proceedings; and that said Defendant otherwise be dealt with according to law. COMPLAINANT S NAME: COMPLAINANT S SIGNATURE: <Name> Subscribed and sworn to before the undersigned this day of, 20. NAME/TITLE: SIGNATURE: Being authorized to prosecute the offenses charged, I approve this complaint. Date: PROSECUTING ATTORNEY'S SIGNATURE: Name: Morgan Kunz Assistant County Attorney C2000 Government Center Minneapolis, MN Attorney Registration #
9 FINDING OF PROBABLE CAUSE From the above sworn facts, and any supporting affidavits or supplemental sworn testimony, I, the Issuing Officer, have determined that probable cause exists to support, subject to bail or conditions of release where applicable, Defendant s arrest or other lawful steps be taken to obtain Defendant s appearance in court, or Defendant s detention, if already in custody, pending further proceedings. Defendant is therefore charged with the above-stated offense. SUMMONS THEREFORE YOU, THE ABOVE-NAMED DEFENDANT, ARE HEREBY SUMMONED to appear on the day of, 20 at a.m./p.m. before the above-named court at to answer this complaint. IF YOU FAIL TO APPEAR in response to this SUMMONS, a WARRANT FOR YOUR ARREST shall be issued. WARRANT To the Sheriff of the above-named county; or other person authorized to execute this warrant: I hereby order, in the name of the State of Minnesota, that the above-named Defendant be apprehended and arrested without delay and brought promptly before the above-named court (if in session), and if not, before a Judge or Judicial Officer of such court without unnecessary delay, and in any event not later than 36 hours after the arrest or as soon as such Judge or Judicial Officer is available to be dealt with according to law. Execute in MN Only Execute Nationwide Execute in Border States ORDER OF DETENTION Since the above-named Defendant is already in custody, I hereby order, subject to bail or conditions of release, that the above-named Defendant continue to be detained pending further proceedings. Bail: $ Conditions of Release: This complaint, duly subscribed and sworn to, is issued by the undersigned Judicial Officer this day of, 20. JUDICIAL OFFICER: NAME: TITLE: SIGNATURE: Sworn testimony has been given before the Judicial Officer by the following witnesses: COUNTY OF HENNEPIN STATE OF MINNESOTA STATE OF MINNESOTA vs. Abdirizak Ahmed Gayre, Plaintiff, Defendant Clerk s Signature or File Stamp: RETURN OF SERVICE I hereby Certify and Return that I have served a copy of this COMPLAINT upon Defendant herein named. Signature of Authorized Service Agent: Form Revised August 2006 (ITD_SP_0339c) Page 9 of 9