12 charged in $10 million childcare fraud scheme

Nine of the 12 people charged came to the U.S. seeking refugee status, officials said, and all but one of them are now U.S. citizens.SAN DIEGO (CN) — Twelve people in San Diego County face fraud charges after federal prosecutors say they stole more than $10 million that was intended for low-income families to pay for childcare, officials announced Tuesday.Federal, state and local law enforcement officials arrested the defendants Sept. 10 after executing 12 search warrants at homes in San Diego County that were linked to what officials described as “ghost daycares.”“These charges underscore a simple truth,” Assistant U.S. Attorney General Colin McDonald of the Justice Department’s National Fraud Enforcement Division said in a release. “Anyone who steals from programs meant to support children will face swift and uncompromising accountability. Fraud against these programs is an attack on vulnerable families, and law enforcement will continue to dismantle schemes that exploit them.”Agents began investigating the suspected fraud this past February as part of an operation dubbed Cradle to Grift, McDonald told reporters.The defendants, six men and six women between the ages of 25 and 63, are charged with a combination of wire fraud and money laundering.Each of the fraud cases was separate but generally involved the same scheme, the officials said. After receiving a license to operate a home childcare facility, the accused would register their home to provide care to eligible families, officials said.Part of this process included submitting monthly attendance records and documenting the dates on which they provided childcare. But these records were blatant lies, officials said.Investigations into these registered childcare services revealed that no children, or very few children, ever came to the addresses, officials said. Investigations also showed the defendants were sometimes not even in the United States when they claimed to be providing childcare.In one example, officials said defendant Abdulrahman Alawad submitted attendance records that claimed to provide care for 23 children in March 2026 and 25 children in April 2026. But surveillance recordings of Alawad’s address only showed children at the location on one occasion during this time frame, which coincided with an unannounced state inspection.Awad received $300,000 in payments in 2025 from San Diego County, the YMCA, and Child Development Associates, prosecutors detail in an indictment. Other defendants received between $538,000 and $1.2 million during different time periods, the release said.Among the 12 arrested, nine came to the United States seeking refugee status. All but one of the 12 are U.S. citizens, McDonald told reporters.“The arrests here in San Diego last week demonstrate the complete disregard for the rule of law by these fraudsters,” Homeland Security Investigations Assistant Director Michael Krol said. “Entering our country as refugees, they took advantage of our generosity and our values, siphoning millions of dollars in illicit gains from childcare programs through the fabrication of phantom services and phantom clients.”U.S. Attorney for the District of Arizona Timothy Courchaine, also present at Tuesday’s press conference, said his office also secured an indictment against a man he says received $33 million from the American Indian Health Program after enrolling fake tribal members into services that he purported to provide. Defendant Maurice Williams faces charges of fraud and money laundering.U.S. Attorney for the Southern District of California Adam Gordon said the childcare-related fraud charges were the first of their kind since the creation of the National Fraud Enforcement Division this year.“According to the allegations, these were made-up, fake daycares that, day after day, month after month, year after year, billed the taxpayer for allegedly taking care of children,” McDonald told reporters. “But there were no children. There were no daycares. These daycares were fake, and the taxpayers were paying for all of it.”Attorneys who are listed for the defendants did not respond to requests for comment.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads