Walz bears 'full responsibility' for $1B fraud scandal, GOP challenger Demuth declares

As the House Oversight Committee opens an investigation into Gov. Tim Walz's role in what federal prosecutors have described as the largest COVID-19 fraud scheme in the country, Minnesota House Speaker Lisa Demuth told Fox News Digital it's just the "tip of the iceberg."

In a crowded Republican primary of candidates hoping to unseat Walz, one of Demuth's core campaign promises is to eliminate the fraud she said has "exploded" under Walz's administration. The governor bears "full responsibility" for the roughly $1 billion in fraud uncovered so far, Demuth said in an exclusive interview.

"This is probably the tip of the iceberg," Demuth said, adding: "This falls squarely on his shoulders. He's the governor of the state and needs to take full responsibility."

The scandal rocking the North Star State stems from allegations that a Minnesota nonprofit and its associates defrauded federal child-nutrition programs for hundreds of millions of dollars in COVID-19 aid - a failure Walz's Republican challengers have described as a breakdown in systemic oversight.

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"There has been that lack of accountability and lack of oversight that's been needed," Demuth said. "The governor has chosen the commissioners, put them into place, and there needed to be an accountability where he or his office were overseeing the work done by the commissioners in every agency."

"That is not what we're finding, to the best of my knowledge. Now, if that oversight was going on and this continued under his watch, knowing that it was going on, that's even more concerning," she added. 

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Federal prosecutors said about $300 million in taxpayer funds that were allocated to feed low-income children through COVID-era nutrition programs was diverted through the Minnesota nonprofit Feeding Our Future. As of late November, at least 78 defendants have been charged in what has widely been considered the largest pandemic relief fraud scheme in the U.S.

While the Feeding Our Future scandal spans the COVID-19 pandemic, Demuth said she heard concerns about fraud in the childcare assistance program in 2017 and 2018 before she even served in the legislature.

"This has been bubbling," Demuth said before adding, "When I think about someone leading the state, regardless of how it happened, the fact that it has continued on this far, and I don't think we're done yet. I think this is probably the tip of the iceberg, and I've heard others say that also."

House Oversight Chairman James Comer, R-Ky., has claimed that "because of Governor Walz's negligence, criminals - including Somali terrorists - stole nearly $1 billion from the program while children suffered." He is leading the probe into Walz's role in the Feeding Our Future scandal.

When asked about the accusations that Walz was more worried about losing political points than accountability against groups tied to Somali Minnesotans, Demuth told Fox News Digital: "Fraud in any way is wrong, no matter where it occurs, who is committing the acts of fraud. That is wrong. But to not handle the investigations or to not handle things and investigate things further because of a fear of some type of accusation is not leadership."

While Demuth cautioned against "[demonizing] an entire community," she said fraud in any community cannot be allowed to continue.

"To ignore things or not handle it because you are afraid of how that would be perceived, I think the worst thing is knowing that our tax dollars from the entire state have been wasted and lost in fraud. That is wrong for all Minnesotans," she said.

As Demuth vies for the Republican nomination to challenge Walz for his gubernatorial seat next year, she said her administration would immediately open an investigation, look into every agency, hold those responsible accountable and work to ensure it doesn't happen again.

According to Demuth's campaign website, as governor, she would commit to ending "the culture of fraud and corruption in state government and demand accountability from state workers responsible for managing the state programs that have been abused by fraudsters."

"I will work with the legislature to pass a non-partisan Office of Inspector General who will be empowered to root out fraud in all parts of government, and be a partner for my administration in stopping fraud before it starts instead of waiting until the fraudsters have walked out the door with your money," Demuth said on her website.

Walz's office did not immediately respond to Fox News Digital's request for comment. 

NBC's Kristen Welker on "Meet the Press" on Sunday asked Walz if he would take "responsibility" for failing to stop fraud in his state. 

"Well, certainly I take responsibility for putting people in jail," Walz said. "Governors don't get to just talk theoretically. We have to solve problems, and I will note, it's not just Somalis. Minnesota is a generous state, Minnesota is a prosperous state, a well-run state, we are AAA bond-rated, but that attracts criminals. Those people are going to jail, and we are doing everything we can, but to demonize an entire community on the actions of a few, it's lazy."

Demuth responded to those comments while speaking to Fox News Digital. 

"If we are a well-run state and prosperous and doing what we need to, this would be the last place criminals would come and try to do any type of criminal activity," she said. 

Fox News Digital's Michael Dorgan and Hanna Panreck contributed to this report.