Scott Stillman was the star witness Tuesday at a Senate committee hearing. He had an alarming story to tell. The state program that subsidizes Minnesota day care operators was rife with fraud, he said, and scams were far more widespread than lawmakers realized.

"I've heard it said that day care fraud is $100 million. I've heard the news media say it's a 50 percent fraud rate. I've had investigators tell me it's closer to [a] 70 to 80 percent fraud rate," said Stillman, a former Department of Human Services digital forensics lab supervisor.

Left unsaid during the hearing: Stillman's documented, past problem with false statements.

Stillman and DHS were sued in 2016 for defamation by Mark Lanterman, an independent Twin Cities forensics fraud investigator, after Lanterman learned that Stillman was spreading false rumors about him among local authorities.

Lanterman's Computer Forensic Services competed with Stillman's consulting business, which Stillman ran on the side while working for the state.

"He accused my employees of impersonating police officers," Lanterman told MPR News. "He indicated that I had been the target of an investigation by the Hennepin County Sheriff's Office and that my contract with the sheriff's office had been canceled because of it, and none of this was true."

Lanterman said the smears started after he and Stillman worked as opposing experts on a high-profile case involving Todd Hoffner, the football coach at Minnesota State University, Mankato who was cleared of child pornography charges in 2012.

Mark Lanterman at his office in Minnetonka, Minn., on Thursday, May 17, 2018. Matt Sepic | MPR News

Even after he was exonerated, the university fired Hoffner over the alleged misuse of its computers. The university hired Stillman to examine the machines. Hoffner hired Lanterman. The coach won his job back after an arbitrator ruled MSU had no cause to fire him.

Lanterman settled his lawsuit, and the state paid him $65,000.

He also received a letter in which Stillman apologized for making false statements. Stillman also admitted using his DHS email account to send those statements.

After the lawsuit, Stillman said the department took away his supervisory responsibilities, and he resigned shortly thereafter. On Tuesday, he told the committee he left DHS when warnings he sent his supervisors went unheeded.

Lanterman believes Stillman is still disgruntled with DHS and is simply not credible on his allegations of massive, widespread fraud.

"There is fraud and we should take steps to fight fraud," Lanterman said. "But I also think that we need to vet the messenger."

In an interview with MPR News Friday, Stillman declined to discuss the lawsuit, but praised Lanterman's investigative career and professionalism.

Stillman did not draw a line between his departure and the lawsuit, but said he felt he had to quit after pushing back against bosses who wanted him to do more low-level internal human resources investigations rather than fight fraud.

"Working an HR [human resources] case where somebody was spending two hours on the internet versus working a case that involved the safety of kids or the safety of people on Medicare. That was kind of a no-brainer for me," he said.

As for his claim that taxpayers are being fleeced to the tune of $100 million, Stillman said Friday that's an estimate he received from former DHS colleagues and an extrapolation based on cases they've worked.

Stillman said he hopes the legislative auditor's office will get to the bottom of it.

"I don't think anyone knows the full extent of this, and that's why I asked for an investigation. I think transparency and a review of this is in everyone's best interest, particularly the children."

The sensational nature of the allegations, however, triggered a wave of anger and outrage among some lawmakers.

Fox 9 News, citing unnamed government sources, suggested that up to $100 million in childcare subsidies was being illegally pocketed by operators of day care providers who were overbilling the state.

The station also reported about $100 million had left the Minneapolis-St. Paul International Airport in suitcases of cash destined for the Middle East and Somalia and suggesting that some of the cash may have ended up with al-Shabab.

Stillman was featured in one of those reports.

The Fox 9 broadcasts led Republicans to introduce legislation this week that would impose stiff penalties on anyone who sends fraudulently-obtained public assistance dollars to countries subject to travel restrictions. They're also calling for a new state agency to oversee DHS.

At a news conference ahead of Tuesday's hearing, state Rep. Nick Zerwas, R-Elk River, was quick to connect the dots between child care fraud and international terrorism.

"It's one thing for tax dollars to be used to train and educate the next generation of Minnesotans through child care assistance. But the thought that we're funding, potentially, the next generation of terrorists with our tax dollars is reprehensible."

Fraud in the child care business has been on the radar of Twin Cities law enforcement for several years.

In January, a federal judge sentenced Fozia Sheik Ali, 52, to two years in prison and ordered her to pay nearly $1.5 million in restitution.

Prosecutors alleged she overstated the number of kids at her day care and overbilled Minnesota's Child Care Assistance Program.

The federal indictment of Ali made no mention of terrorism, and the FBI wouldn't comment further on any potential connection between daycare fraud and terrorism. State DHS officials say they have not found evidence of it in their own fraud investigations.

The agency also says $100 million is not a credible figure because that's half the entire annual budget of the child-care assistance program.

On Thursday, Sen. Jim Abeler, R-Anoka, said the effort to target theft from the Child Care Assistance Program is not about Islamophobia; it's one of "fraud-o-phobia."

Somali-American leaders are pushing back. At a news conference Friday morning, Jaylani Hussein of the Council on American Islamic Relations said the Minnesota GOP is scapegoating Muslims and African immigrants.

"When legislators stand up here and grandstand on these issues without really understanding where the problems really lie, they are playing into the anti-Muslim movement in this country who continue to frame American Muslims as dangerous to this society."

Hussein says the much-vilified suitcases full of cash comprise the only legal way Somali immigrants can get money to relatives suffering from famine, drought, and poverty in east Africa. Hussein says lawmakers should sit down with the community, and craft a better solution.

Legislative auditor James Nobles said Friday he's opening an investigation into the child care fraud allegations will go wherever the evidence leads.

"Whatever the credibility, whatever the agenda of any particular whistleblower is," he said, "we will look for the facts of whether or not there is something inappropriate occurring."

MPR News reporters Laura Yuen and Martin Moylan contributed to this report.