Childcare Subsidy Fraud Scheme
Federal Prosecutors Charge 12 San Diego Providers in $10 Million Childcare Fraud Scheme
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Federal prosecutors charged 12 San Diego-area home-based childcare providers with allegedly obtaining more than $10 million in taxpayer-funded subsidies by submitting false attendance records for children they often did not care for. Authorities say the defendants operated licensed facilities, registered with the YMCA of San Diego County and Child Development Associates, and certified claims under penalty of perjury, with alleged proceeds ranging from about $538,000 to $1.2 million per person. Investigators cited surveillance, inspection records and travel data, including allegations that one provider reported caring for more than 20 children despite footage showing children at the facility on only one day, while another submitted claims from outside the country. More than 250 federal, state and local officers arrested the defendants and executed 12 search warrants in a coordinated operation. The defendants, who are naturalized citizens or lawful permanent residents originally from Syria, Somalia, Sudan, Afghanistan and Iraq, face wire-fraud charges, and some also face money-laundering charges carrying potential prison terms of up to 20 years. Prosecutors said the investigation remains ongoing and that the alleged scheme diverted funds from a childcare subsidy program intended to help low-income families and already constrained by limited resources and waitlists.
Key Points
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Prosecutors said the defendants were not alleged to have coordinated with one another, even though the individual cases involved nearly identical accusations.
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Each wire-fraud charge carries a potential fine of up to $500,000 in addition to a maximum prison sentence of 20 years; most defendants had been released on bail by the time of the announcement.
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The charges were described as the first indictment of this type since the Justice Department’s National Fraud Enforcement Division was created in April. U.S. Attorney Adam Gordon called it “a bad day for home daycare fraud.”
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The subsidy system reimburses providers directly after eligible parents select them, while the programs lack sufficient funding to serve all eligible families; prosecutors said the alleged fraud contributed to pressure on programs with growing waitlists.
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Officials from Homeland Security Investigations, IRS Criminal Investigation and the Department of Health and Human Services’ inspector general’s office participated in announcing the case, underscoring the involvement of multiple federal investigative agencies.
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