State officials are seeking to claw back tens of thousands of dollars in the taxpayer-funded Minnesota Promise Act program after admitting that three grants — including two previously identified by 5 INVESTIGATES — should not have been awarded.
The development is a surprising admission after months of criticism from state officials who defended the $100 million small business grant program and controversial reports that questioned the vetting of recipients.
According to public records obtained by 5 INVESTEIGATES, a business with a post office address qualified for a grant.
The Minnesota Department of Employment and Economic Development (DEED) confirmed that two Twin Cities region grants highlighted by 5 INVESTIGATES were “in conflict with DEED guidelines.” In a statement, the agency appeared to blame the nonprofit Neighborhood Development Center (NDC), which is responsible for screening applicants in the metro.
“We are working with NDC to resolve the error and recover the funds,” the agency said in a statement.
The recognition comes months after Sen. Bobby Joe Champion, DFL-Minneapolis, one of the lead authors of the Minnesota Promise Act, defended the program following the initial investigation by 5 INVESTEIGATES.
Champion previously said there was “no fraud” in the show, called it “sensational television” and later criticized the coverage during a legislative hearing, saying KSTP “was wrong… and continues to be wrong.”
DEED now confirms that there were problems with the verification process.
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The grants
The two grants total approximately $27,500.
One of the grants, valued at $16,600, went to trucking company MSCADDE.
The company’s application does not answer the question of how the financing would help the company and benefit the surrounding community.
The request, obtained through a public records request, shows the two key questions were left blank. The company was still awarded the funds.
5 INVESTIGATIONS obtained the original request through a public records request.
The application also listed an operating address at 3033 27th Avenue South in Minneapolis. Google Street View shows the address as a vacant lot. It is now a brand new post office.
NDC did not respond to interview requests or questions about why the application was approved.
In an emailed statement, the nonprofit said it continues to “review and strengthen” its grant review process and has implemented “additional safeguards, including enhanced eligibility review procedures.”
Attorney Eric Rice, whose practice focuses on government accountability, said the motion raises concerns about the thoroughness of the review of the filings.
“If you ask the question, I think it’s fair to expect a substantive answer,” Rice said. “Otherwise, I wonder why they would even ask that if it is not part of the considerations they take when allocating these funds.”
The second grant, totaling $10,900, went to CCG Cargo, another company previously highlighted by 5 INVESTEIGATES.
The company said it operates from an address on Lake Street in Minneapolis. However, the property’s landlord told 5 INVESTEGATES that there was no record of the company operating there.
The oversight
DEED has not explained why CCG Cargo’s application was approved and has not released the original application despite public records requests.
5 INVESTIGATES requested all 1,007 approved Minnesota Promise Act grant applications in the Twin Cities. So far, the state has only released three.
The lack of disclosure has drawn criticism from lawmakers.
“Minnesotans work hard for their tax dollars and they expect their money to go where it needs to go,” said Sen. Jordan Rasmusson, R-Fergus Falls, who serves as assistant minority leader.
Rasmusson also criticized the state’s handling of public records requests and questioned why DEED delayed releasing documents while the program continues to be audited by the Office of the Legislative Auditor.
“We deserve to know how public money is being spent,” he said. “When it comes to requests from Minnesota media outlets that officials have sat on for months while the legislative auditor investigates, that is an unacceptable lack of transparency.”
The Office of the Legislative Auditor announced an audit of the Minnesota Promise Act following initial reporting by 5 INVESTIGATES.
DEED also announced a third ineligible grant, this one in Greater Minnesota valued at $25,000. Investigators determined that a fraudster was posing as a legitimate company and obtaining funds. This application was processed by another nonprofit organization.
Combined, the three problematic grants total nearly $53,000. DEED noted that this represents less than 1% of the funding awarded under the program.
In a statement, DEED said it will “continue to ensure rigorous oversight” and, if necessary, “prescribe corrective plans, implement process improvements and seek to recover misdirected funds.”
The Minnesota Promise Act, passed in 2023, created a $100 million grant program to help small businesses recover and grow. Twin Cities applications are reviewed by NDC before being submitted to DEED, which reviews approximately 10% of approved grants.
https://kstp.com/5-investigates/state-claws-back-grant-money-in-100-million-promise-act-program-after-reporting-from-5-investigates/
