Newly unredacted portions of an investigative report lay out how Minneapolis Public Schools' top finance officer appears to have acted alone in quietly withholding nearly $3 million from the district's retiree health-care trust. This move helped trigger staff shakeups and a wave of outside consultant hires. The Greene Espel memo labels the series of transactions unauthorized and says the pattern "suggests an intent to deceive." Investigators say they could not definitively determine whether district funds were misused, and the district later restored the withheld sum to the trust along with the interest it would have earned.
The law firm Greene Espel's unredacted memo, obtained by Minnesota Reformer, names Aaron Gilbert as the decision-maker behind the withholding and says investigators found him "evasive" and not a credible witness. The report describes the transfers and subsequent transactions as highly unusual and says the way they were handled raises unresolved questions about who else, if anyone, signed off on the changes.
Public records and prior reporting show the district withheld 5% of monthly VEBA (employee health trust) contributions between November 2024 and August 2025, roughly $3 million in all, a practice that surfaced this spring and prompted MPS to place three finance officials on leave and hire outside investigators, according to the Star Tribune. The district says the withheld amount, plus the interest it would have generated, was ultimately transferred back into the trust.
How the withholding unfolded
The investigative file released under public-records laws shows that the reduced transfers were internally labeled "5% defer" in late 2024. Successive explanations for the practice, ranging from investing the funds to treating them as an administrative fee, were "inconsistent with the facts" and "contrary to the law governing trusts," reporting by the Sahan Journal found. Although the district replenished the VEBA account, investigators told reporters they could not rule out the possibility that the withheld money left district accounts at some point.
Poor controls, costly consequences
Greene Espel and outside auditors faulted Minneapolis Public Schools for a long-running failure to segregate key accounting duties, saying weak internal controls made it possible for a single staffer to implement the withholding without independent authorization or timely scrutiny. To help clean up the mess and rebuild its systems, the district has contracted with the Center for Effective School Operations at about $68,865 per month and paid roughly $120,000 to Greene Espel for the investigation, while also facing millions in IRS penalties, according to Minnesota Reformer.
Legal implications
Minneapolis Public Schools filed a police report on Jan. 5 alleging nearly $3 million in suspected wire fraud, although the report does not name any suspects and offers few details, the Sahan Journal reported. The district has stated that "the amount withheld, plus the interest that would have been earned by it, was transferred back to the trust," but officials also acknowledge they "cannot definitively say" the funds never left MPS accounts, according to the Star Tribune.
What comes next
School leaders are now trying to plug the holes in their financial controls while juggling a multi-million-dollar deficit. The board approved steep cuts in June, and the district says a CESO-led review is scheduled to begin this summer as part of the 2026-27 budget process, according to the Minneapolis Public Schools budget page. Officials say the review is intended to strengthen safeguards and improve transparency as final spending decisions that affect hundreds of school-based support staff are made.
