Three years ago, Fox News host Greg Gutfeld warned viewers that 87,000 new IRS agents would create a “police state.” Today, armed ICE agents are going door-to-door in Minneapolis without warrants, investigating financial fraud. In other words, doing the work accountants would normally do with spreadsheets and calculators.
“We’ve replaced armed IRS agents with armed ICE agents doing work for the IRS,” says David Leary, co-host of The Accounting Podcast, still trying to process this turn of events. “I’ve lost sleep over this.”
In their latest episode, David and co-host Blake Oliver connect the dots between the 2022 fight over IRS funding and today’s reality in Minnesota, where billions in fraud have led to what they call a predictable but devastating outcome.
Minnesota’s Billion-Dollar Fraud Problem
The numbers coming out of Minnesota are staggering. On December 19th, prosecutors announced charges against more than 90 people across multiple public assistance programs. The fraud schemes read like a criminal playbook: daycares that collected $110 million through fake claims, the Feeding Our Future scandal that stole nearly $250 million in pandemic food aid, autism services billing for work never performed, using unqualified staff, and housing stabilization fraud.
A federal warrant has flagged 14 Medicare programs with significant fraud problems. The potential losses are in the billions.
“This is fraud that has taken place over many years,” David explains. The investigation has been ongoing for a while, but the political fallout came fast. Trump accused Somali immigrants of widespread fraud. A YouTuber documentary filmmaker went to Minnesota and started visiting these daycares, creating viral content that painted Minnesota as corrupt on all fronts.
In response, Trump sent 2,000 ICE agents to carry out what he called “the largest immigration operation ever.”
But here’s where it gets interesting for accountants. As Department of Homeland Security Assistant Secretary Tricia McLaughlin explained on a radio show, “Right now, on the ground in Minneapolis, Homeland Security investigators are going door to door to these suspected fraud sites. It’s daycare centers or healthcare centers and businesses around them as well.”
No warrants. Just agents showing up at doors.
Compare that to what happened just 30 days earlier at Taco Giro in Tucson. ICE and IRS Criminal Investigation spent years building a case, got proper warrants, then executed 16 search warrants as part of their investigation into immigration and tax violations. That’s how law enforcement used to work: investigation, evidence, warrants, then action.
“Raids have replaced audits and guns have replaced spreadsheets,” David observes.
The Time Machine: Back to 2022
To understand how we got here, Blake and David take listeners back to April 18, 2022. As explained in episode 292 of what was then called the Cloud Accounting Podcast, that’s when the IRS was set to receive $80 billion through the Inflation Reduction Act, including funding for 87,000 new enforcement agents.
The political response was fierce. They replay a segment featuring enrolled agent Adam Markowitz, whose tweet went viral and got him attacked on Fox News. Markowitz wrote, “All of my GOP friends who are worried about the 87,000 IRS enforcement agents coming after the little guy. How about just don’t cheat on tax returns?”
Gutfeld’s response on Fox was brutal, calling Markowitz a “schmuck” and warning viewers, “If you have an IQ higher than an artichoke, you must see that by now, this country is heading towards a police state.”
“The police state still happened,” David points out. “We didn’t avoid it.”
The hosts then shared a detail most people missed. In November 2024, a federal judge blocked the IRS from further record sharing with ICE. But the court documents revealed the IRS had already handed over tens of thousands of taxpayer records to ICE, including home addresses. ICE had requested more than one million records from the IRS.
“This might be the reason Billy Long is out,” David speculates about the departed IRS commissioner nominee. “He might have been pushing back on this.”
Following the Money (Or Not)
The pattern is clear to anyone who understands accounting controls. Over the past decade, Congress repeatedly cut the IRS budget while increasing funding for ICE. They shifted from investigation and fines to enforcement.
“Taxes dictate social policies,” David notes. “Budgets also do that. What you fund and budget is what the government is going to do.”
The result is less nonprofit oversight, slower detection of payroll and benefits fraud, and fewer audits. The absence of all those controls that seemed expensive created billions in fraud.
“We’re in the golden age of fraud,” David warns. “Maybe the new Enron is not one company; it’s just billions and billions and billions of small frauds because we’ve cut all of the controls that might catch it.”
Blake connects this to broader economic concerns. According to a Harris poll, 45% of Americans believe their financial security is worsening. Even 45% of Republicans think the economy is in a recession, despite GDP growth of 4.3% in Q3.
“If you’re the president and you don’t want people paying attention to the economy, what do you do?” Blake asks. “You start foreign conflicts or you create internal conflict.”
The Profession’s Own Control Problems
The accounting profession has its own control problem. The AICPA recently proposed major ethics rule changes for firms backed by private equity, worried that outside money could compromise auditor independence.
Under the new rules, firms can’t escape independence requirements by simply creating separate legal entities. If a CPA firm depends on a non-CPA entity for staff and infrastructure, they’re treated as one unit for independence purposes. PE-backed firms also can’t audit portfolio companies in the same fund.
“As CPAs, we stand for independence, objectivity, ethics,” Blake emphasizes. “Nobody else can do audits.”
But existing controls don’t always have teeth. The hosts discuss WH Smith, the historic British retailer. Their audit firm, PwC, missed profit misstatements that cost shareholders 600 million pounds. Yet the board recommended keeping PwC as their auditor.
“An auditor can cost a company half a billion dollars and they keep their contract,” David says, incredulous. “If anyone else failed that badly, you would fire them.”
The Lesson for Accountants
“Everything’s an accounting story,” David insists, and this one hits close to home.
The Minnesota fraud crisis shows what happens when you defund financial oversight. The 2022 IRS debate shows how fear of government overreach led to the exact outcome critics wanted to avoid. The profession’s own struggles with independence and accountability show these patterns repeat everywhere.
“If you have underfunded controls and you don’t have preventive measures, it always shows up as a very big expense,” David explains. “One time it was Enron. Now the expense is humans getting shot.”
Accountants talking to clients about taxes can do their part by explaining where that money goes and why controls matter. Because the alternative—as Minnesota shows—is much worse.
Blake and David dig deeper into these connections in the full episode, including their take on California’s proposed billionaire tax, why wars boost economies, and what Excel championship winners can teach us about efficiency. Listen to the complete discussion above or wherever you get your podcasts.