Twelve operators of allegedly fake daycare sites in the San Diego area were arrested last week on suspicion of stealing an estimated $10 million in government funding, the Justice Department announced Sept. 15.
Federal agents searched homes listed as child-care facilities on Thursday and arrested the 12 suspects, six men and six women. Each was charged with one federal count of wire fraud as part of what prosecutors called Operation Cradle to Grift. Some defendants also face money laundering charges. Wire fraud carries a maximum penalty of 20 years in federal prison and a $500,000 fine, as does money laundering.
Assistant Attorney General Colin McDonald of the Justice Department’s National Fraud Enforcement Division said during a news conference that there were no children and no daycares, that the sites were fake and that taxpayers were paying for all of it.
According to court records, nine of the 12 defendants entered the United States as refugees or asylum seekers from Syria, Somalia, Sudan, Afghanistan and Iraq. Eleven of the 12 have since become naturalized citizens, McDonald said.
How the alleged scheme worked
The defendants are alleged to have registered home addresses as licensed facilities and then collected government funding tied to those registrations without providing actual services. Federal and state subsidy programs distribute funding based on enrollment and attendance records, and the alleged scheme exploited those systems by submitting fraudulent documentation.
The Justice Department did not specify in the Sept. 15 announcement which government funding programs were the source of the $10 million in alleged losses. Federal childcare programs administered through the Department of Health and Human Services and California state subsidy programs both fund licensed providers.
The legal process
The defendants were charged, not convicted. Each faces a presumption of innocence until proven guilty in federal court. The Justice Department said the investigation is ongoing. The DOJ did not list all participating agencies in the Sept. 15 announcement.
