Twelve People Charged in $10 Million Home Daycare Fraud Schemes

SAN DIEGO – Twelve people are facing federal fraud charges after an investigation revealed that more than $10 million intended to help low-income families pay for childcare was instead funneled to bogus daycare providers.

In a coordinated takedown early Thursday morning, more than 250 federal, state and local law enforcement officials arrested all 12 defendants and executed 12 search warrants at homes in San Diego purported to be used as daycare facilities. 

“These charges underscore a simple truth: anyone who steals from programs meant to support children will face swift and uncompromising accountability, said Assistant Attorney General Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division. “Fraud against these programs is an attack on vulnerable families, and law enforcement will continue to dismantle schemes that exploit them. I want to thank the prosecutors and agents in the Southern District of California whose relentless work exposed this scheme and ensured that those responsible are being held accountable.” 

“Today is a bad day for home daycare fraud,” said U.S. Attorney Adam Gordon, “These are the first charges alleging this type of fraud since the formation of the National Fraud Enforcement Division. These fraudsters may have criminally gamed the system before. But today, the game is over.”

“Programs that help families access childcare are intended to support children and working parents, not to enrich fraudsters,” said Homeland Security Investigations Assistant Director Michael Krol. “HSI is proud to stand with our federal, state, and local partners to identify and disrupt schemes that steal taxpayer-funded benefits from the communities they are meant to serve. These arrests reflect our commitment to protecting public programs, safeguarding children, and holding accountable those who exploit systems designed to help vulnerable families.”

“Today’s takedown exposes a sprawling fraud scheme that siphoned more than $10 million from programs designed to help low-income families who depend on subsidized childcare. By following the money, IRS Criminal Investigation uncovered patterns of deceit that revealed twelve ghost daycare operations billing for children who were never present. This was not a victimless crime. It deprived working parents of critical support and eroded trust in programs meant to protect the most vulnerable in our communities. We remain steadfast in our commitment to safeguarding federal funds and ensuring that those who exploit public programs for personal gain are held fully accountable,” said IRS Criminal Investigation Chief Jarod Koopman.

“Shameless attempts to steal taxpayer‑funded childcare funds for personal gain endanger support for some of our nation’s most vulnerable children,” said Special Agent in Charge Robb R. Breeden of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “Working alongside our law enforcement partners, HHS‑OIG will continue to pursue these schemes relentlessly to protect these funds and the families who depend on them.”

The U.S. Department of Health and Human Services provides federal funding to California to help low-income families pay for childcare. In San Diego County, the County of San Diego, Child Development Associates (CDA), and the YMCA administer childcare subsidy programs.

When CDA or the YMCA determines that a family qualifies for subsidized childcare, the organizations pay the eligible childcare provider directly after the provider submits required monthly attendance records documenting the care provided. The records must be signed by both the provider and parent under penalty of perjury and include the dates and times children are in care.

California law also requires licensed childcare providers to be present and ensure that children are supervised at all times, except for limited temporary absences when a qualified substitute is present.

While the 12 federal complaints are unrelated, the scheme was essentially the same:  Defendants obtained a California license to operate a home childcare facility and registered with Child Development Associates (CDA) and the YMCA to provide subsidized childcare to eligible families. To receive government-funded payments, the defendants were required to submit monthly attendance records accurately documenting the dates and times they provided care to each child.

Instead, the defendants knowingly submitted false attendance records claiming they provided childcare on dates and at times when they did not. They also falsely certified, under penalty of perjury, that the information was true and correct. CDA and the YMCA relied on those fraudulent records and issued payments with federal funds intended to pay for childcare actually provided to low-income families.