The fraud scandal that rattled Minnesota was staggering in its scale and brazenness.

Federal prosecutors charged dozens of people with felonies, accusing them of stealing hundreds of millions of dollars from a government program meant to keep children fed during the Covid-19 pandemic.

At first, many in the state saw the case as a one-off abuse during a health emergency. But as new schemes targeting the state’s generous safety net programs came to light, state and federal officials began to grapple with a jarring reality.

Over the last five years, law enforcement officials say, fraud took root in pockets of Minnesota’s Somali diaspora as scores of individuals made small fortunes by setting up companies that billed state agencies for millions of dollars’ worth of social services that were never provided.

Federal prosecutors say that 59 people have been convicted in those schemes so far, and that more than $1 billion in taxpayers’ money has been stolen in three plots they are investigating. That is more than Minnesota spends annually to run its Department of Corrections. Minnesota’s fraud scandal stood out even in the context of rampant theft during the pandemic, when Americans stole tens of billions through unemployment benefits, business loans and other forms of aid, according to federal auditors.

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The episode has raised broader questions for some residents about the sustainability of Minnesota’s Scandinavian-modeled system of robust safety net programs bankrolled by high taxes. That system helped create an environment that drew immigrants to the state over many decades, including tens of thousands of Somali refugees after their country descended into civil war in the 1990s.

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The first public sign of a major problem in the state’s social services system came in 2022, when federal prosecutors began charging defendants in connection to a program aimed at feeding hungry children. Merrick B. Garland, attorney general during the Biden administration, called it the country’s largest pandemic relief fraud scheme.

The prosecutors focused on a Minneapolis nonprofit organization called Feeding Our Future, which became a partner to dozens of local businesses that enrolled as feeding sites.

State agencies reimbursed the group and its partners for invoices claiming to have fed tens of thousands of children. In reality, federal prosecutors said, most of the meals were nonexistent, and business owners spent the funds on luxury cars, houses and even real estate projects abroad.

Behind the scenes, as federal investigators sifted through bank records and interviewed witnesses, they said they realized that the meals fraud was not an isolated incident. In September, prosecutors charged nine people in two new plots tied to public funds meant for those in need.

In one case, hundreds of providers were reimbursed for assistance they claimed to have provided to people at risk for homelessness, though federal authorities said services weren’t provided.

The program’s annual cost ballooned to more than $104 million last year, the authorities said, from a budgeted projection of $2.6 million when it began in 2020. Two of eight people charged in the scenario have pleaded guilty; six others have pleaded not guilty and are awaiting trial.

In another program, aimed to provide therapy for autistic children, prosecutors said providers recruited children in Minneapolis’s Somali community, falsely certifying them as qualifying for autism treatment and paying their parents kickbacks for their cooperation.

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A report by Minnesota’s nonpartisan Office of the Legislative Auditor about the lapses that enabled the meals fraud later found that the threat of litigation and of negative press affected how state officials used their regulatory power.

Kayseh Magan, a Somali American who formerly worked as a fraud investigator for the Minnesota attorney general’s office, said elected officials in the state — and particularly those who were part of the state’s Democratic-led administration — were reluctant to take more assertive action in response to allegations in the Somali community.

“There is a perception that forcefully tackling this issue might cause political backlash among the Somali community, which is a core voting bloc” for Democrats, said Mr. Magan, who is among the few prominent figures in the Somali community to speak about the fraud.

As a trial in the meals fraud case was coming to a close last summer, an attempt to bribe a juror included an explicit insinuation about racism, prosecutors said. Several defendants in the trial were found to have arranged to send a bag containing $120,000 to a juror along with a note that read, “Why, why, why is it always people of color and immigrants prosecuted for the fault of other people?”

Mr. Thompson, a career prosecutor who served as interim U.S. attorney for several months this year, and who declined to discuss his own political preferences, said he believed that race sensitivities had played a major role in the rise of fraud. As pandemic assistance was disbursed, the state was also reeling from the killing of George Floyd by a Minneapolis police officer in May 2020, he said.

“This was a huge part of the problem,” Mr. Thompson said during an interview in the summer. “Allegations of racism can be a reputation or career killer.”

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