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Three defendants pleaded guilty Thursday in a massive food-aid fraud investigation, admitting that they inflated or completely lied about the number of meals they served needy children in order to receive federal money.
Bekam Merdassa, Hanna Marekegn, and Hadith Yusuf Ahmed pleaded guilty in federal court to one count each of wire fraud. The three, like most defendants in the case, are not in custody and will return to court at a future date to be sentenced. They face prison terms ranging from about two years to nearly five years; the maximum penalty for wire fraud is five years in prison and three years of supervised release.
They are the first defendants to plead guilty in the case.
A total of 49 defendants were charged in September with embezzling $250 million from federal food-aid programs that distribute money to local organizations to feed underprivileged children. Federal prosecutors said the case is the single biggest fraud committed against the government during the COVID-19 pandemic, and have hinted that more charges are possible.
Minnesota U.S. Attorney Andrew Luger and several defense attorneys for other suspects who were not scheduled to appear Thursday attended Bekam’s hearing. Many of the same defense attorneys also attended Hanna’s hearing.
Bekam, Hanna, and Hadith were charged on September 20 with wire fraud via “an information” charging document, which occurs when defendants are expected to plead guilty. They worked with or under Feeding Our Future, a sponsor organization that received federal food-aid funds through the state and then distributed that money to smaller organizations that were supposed to feed underprivileged children.
The money came from two federal programs used to feed children and adults in daycare and afterschool programs: the Child and Adult Care Program and the Summer Food Service Program. The alleged fraud was simple at its foundation: Some organizations along the money chain reported serving more meals than they actually did in order to receive more federal reimbursement dollars.
‘My client’s life is now being threatened’
Hadith, 33, answered questions affirmatively from a prosecutor and U.S. District Judge Nancy Brasel. Hadith worked for Feeding Our Future monitoring and supporting food sites enrolled in federal food-aid programs under Feeding Our Future’s sponsorship. He admitted to receiving more than $1 million in kickbacks from those food sites in exchange for enrolling them into federal food-aid programs.
Hadith also admitted to starting a shell company called Southwest Metro Youth that received $1.1 million in food-aid money by claiming to feed 2,000 children a day. When Brasel asked Hadith how many children Southwest Metro Youth actually fed, Hadith said he wasn’t sure.
“I don’t have the exact number of kids we served, but there was nowhere close to 2,000,” Hadith said.
Hadith agreed to a prison term between about four and five years. He also agreed to pay the government more than $1.3 million in restitution.
At one point, prosecutor Joe Thompson asked Hadith why he decided to plead guilty.
“I want to tell the truth, sir,” Hadith responded.
Hadith and his attorney, Richard Dansoh, declined to comment after the hearing. But in an interview Wednesday, Dansoh, a Miami-based attorney, told Sahan Journal that Hadith has faced threats.
Dansoh emphasized that he wants to clear up rumors that Hadith gave inside information to the FBI to help their investigation. Rather, federal investigators confronted Hadith with evidence, and Hadith decided to plead, Dansoh said.
“It’s not like he left the organization and he went to the feds and started complaining about it,” Dansoh said Wednesday. “We are on the receiving end just like everybody else.”
The rumors have been dangerous, Dansoh said.
“Frankly, they are creating a hazardous situation where my client’s life is now being threatened,” he said. “They think he is the origin.”
Hadith decided to plead because of a paper trail of evidence federal investigators compiled against him, Dansoh said.
“It’s only a fool who thinks you can block the sun by closing his eyes,” Dansoh said. “If you decide to live in a fool’s paradise and close your eyes, that’s fine. But if there’s a paper trail, how are you going to refute it?”
Defendant: ‘I made a mistake’
Hanna, 40, owner of Brava Cafe, cried in court when prosecutor Joe Thompson asked her why she was pleading guilty.
“I made a mistake,” she said, her head hanging low.
Giving brief answers to yes or no questions, Hanna told the court that Brava Cafe claimed to serve more than two million meals between September 2020 and January 2022, and received $7.1 million in federal food-aid money.
She admitted to giving more than $150,000 in kickbacks to Feeding Our Future employees in exchange for them enrolling Brava Cafe into the food-aid programs. She also said Feeding Our Future later asked for more kickbacks and that she refused; Feeding Our Future then stopped sponsoring her restaurant to receive food-aid money.
U.S. District Court Nancy Brasel asked Hanna how many meals her restaurant served. Hanna’s attorney, Andrew Irlbeck asked for a minute to speak with his client. Prosecutors have alleged that some defendants never served any of the meals they reported to the federal government.
“I have served food, but I don’t know how much,” Hanna then said.
Hanna agreed to a prison term between about three years and almost four years. She was ordered to pay $5 million in restitution, and will give up a Medina home she purchased with the food-aid money. She will also pay a fine between $15,000 and $150,000.
Hanna and Irlbeck declined to comment after her hearing.
Shell company never served a single meal
Bekam told the court Thursday that he co-ran Youth Inventors Lab, a shell company that used Feeding Our Future as its sponsor. He admitted that Youth Inventors Lab never served a single meal, but collected $3 million in federal food-aid money by claiming to have served 1.3 million meals between December 2020 and June 2021.
Bekam, 40, did not offer other statements beyond short answers to yes or no questions.
Bekam agreed to a prison sentence between two and two-and-a-half years. He will also pay $343,086 in restitution. He cannot travel outside of Minnesota without his probation officer’s approval, and can no longer vote or own a gun.
Bekam and his attorney, Joseph Dixon, declined to comment after his hearing.
Correction: Earlier versions of this article misspelled Hanna Marekegn’s last name and Youth Inventors Lab. The house Marekegn agreed to forfeit is in Medina, not Edina.