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  • 7/30/2019 Food Stamp Fraud



    Uncovering rogue food stamp retailers



  • 7/30/2019 Food Stamp Fraud



    It was a proud moment or us when a member o Congress questioned a ederal ocial and asked, How is it thatScripps ound raud that your people missed?

    Te member o Congress was Rep. Darrell Issa, R-Cali., who had called a hearing o the House Committee onOversight and Government Reorm to grill ederal ocials about a Scripps investigation o nationwide oodstamp raud.

    Te ocials in charge o the ood stamp program hemmed and hawed, but the members o Congress kept at ituntil the ocials admitted we had ound a unique way o rooting out raud. Whats more, the government inves-tigators asked how we did it, and we shared the methodology.

    Using the Freedom o Inormation Act to get the raw data, SHNS reporter Isaac Wol gured out how to cross-reerence the les with other government records to expose merchants who had wormed their way back into theood stamp program ater being kicked out or raud.

    Working with reporters in two dozen cities where Scripps has newspapers and television stations, Wol and theteam conronted the storeowners with the evidence. Some conessed, others obuscated. Some called their law-yers. Nobody said we were wrong.

    Te government responded by launching civil and criminal investigations into the cases we agged. As Rep. Issasaid in a letter to the man in charge o the ood stamp program, Clearly, there is a pressing need or decisive ac-


    Some o the concrete results o the project so ar:

    - Te USDA initiated a criminal investigation o one storeowner identied by Scripps.- USDA removed or initiated removal proceedings o seven other stores identied by Scripps.- USDA ocials acknowledged oversight gaps and promised to x them by requiring more inormation aboutbusiness ownership.

    Real-world results are one sign o a successul investigative project, and Im proud that Isaac Wol and his edi-tors at Scripps Howard News Service made a dierence. For more inormation about this and other investigative

    projects, please go to

    Sincerely, Peter Copeland

    Editor & General ManagerScripps Howard News Service

    About the Stamping Out Fraud special report

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    Isaac Wol

    Editorial writer

    Dale McFeatters

    Lead editorLisa Homan


    Peter CopelandCarol Guensburg

    Bob Jones

    David Nielsen

    Photo editor

    Sheila Person

    Multimedia editor

    Danielle Alberti

    Multimedia reporterKristin Volk


    or [email protected].


    Scripps Howard News

    Service is part o the

    E.W. Scripps Co.


    About the Stamping Out Fraud special report 2

    Store owners, banned rom taking ood stamps, still doAn SHNS investigation has ound records indicating that dozens oindividuals who had been banned as ood stamp merchants nonethelessremained in business in communities across the country. Te ederalgovernment has opened investigations into alleged violators pinpointed byScripps.


    USDA probing banned ood stamp merchants IDd by ScrippsTe U.S. Department o Agriculture says it wants to secure an unlockedbackdoor identied by Scripps Howard News Service that allows merchantsbanned or engaging in ood stamp raud to slip unnoticed back into the ederalprogram.


    Te chairman o the U.S. Houses government oversight committee uesdaydirected U.S. Department o Agriculture ofcials to explain how they will pre-vent ood stamp merchants banned or raud rom staying in the program.

    Issa calls or hearings on ood stamp raud, cites Scripps fndings 12

    A letter rom Rep. Issa, chairman o the House Oversight Panel 13

    Editorial: A new way o attacking ood stamp raudTe U.S. Department o Agriculture has had mixed luck in battling a persis-tent and resilient orm o ood stamp raud. A Scripps Howard News Servicereporter has ound a way to help.


    Express Food Market was

    permanently disqualifedrom taking ood stamps inApril 2009, but the store in

    Florida has been re-admittedinto the ederal program.

    SHNS photo by Juan Dale Brown / reasure Coast Newspapers

    At a House hearing, the Houses government oversight committee will probewhy the U.S. Department o Agriculture is allowing banned merchants to re-main in the ood stamp program.

    Citing Scripps, Issa says govt should target bad ood stamp merchants 16

    Te U.S. Department o Agriculture busts hundreds o storeowners or oodstamp raud or related violations each year, but never actually bans them, aninternal audit shows.

    USDA delays banning store owners busted or ood stamp raud 18

    Te head o the ederal ood stamp program on Tursday orceully deendedhis agencys record o weeding out -- and keeping out -- store owners bustedor engaging in raud in the ace o criticism that a news investigation had un-covered a scandal there.

    Food stamps chie deends program in ace o charges o scandal 20

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    Scripps Howard News Service

    Feb. 20, 2012

    Store owners, banned rom takingood stamps, still do

    Te ederal government each year bans about1,000 retailers ound to have engaged in raud romever accepting ood stamps again.

    But scores o these retailers disobey the permanentprohibitions and continue to shortchange complicitcustomers and unwitting taxpayers.

    Public records suggest that these prohibited busi-nesspeople are brazen enough to reapply to deal inood stamps sometimes rom the same location at

    which they were caught committing raud.While the U.S. Department o Agriculture has

    won applause or its eorts to police the $75 billion-a-year ood stamp program that assists 46.2 millionAmericans, it has had diculty screening out rogueretailers.

    A Scripps Howard News Service investigation hasound records indicating that dozens o individuals

    who had been banned as ood stamp vendors none-theless remained in the business in New York; LosAngeles; Phoenix; San Diego; ulsa, Okla.; West PalmBeach, Fla.; Baltimore and other communities acrossthe country.

    Case in point: Te Foods Mart convenience storein Baltimores gritty Remington neighborhood. InDecember, Scripps identied one o the stores owners,using Maryland corporation records and city busi-

    ness lings, as Nasir Pervaiz who was permanentlybarred in January, 2011 by the USDA.

    Upon learning o Scripps discovery, the USDAopened an investigation and notied the storeownersthat they would ace a hearing, agency ocials said. Aso mid-February, the store was no longer taking oodstamps, a visit there showed.

    Te SHNS method o agging suspect merchants


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    A Bureau o Printing and Engraving employee

    examines a sheet o ood stamps or the U.S.

    Department o Agriculture or errors in May


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    Roughly 231,000 stores participate in the U.S. Department of Agricultures Supplemental NutritionAssistance Program, popularly known as food stamps. USDA permanently disqualies about 1000retailers or vendors a year, almost always for tracking:

    A store operating at a disqualied site can seek SNAP vendor authorization if it has been sold and thenew ownership excludes anyone involved in the earlier fraud, USDA says. A third of disqualied sitesget reapproved sometimes under false pretenses. Common ruses include:

    A vendor gives thecustomer cash orineligible merchan-dise (alcohol ortobacco) inexchange for anElectronic BenetsTransfer payment, ata rate greatlyfavoring the store.

    But the vendor gets fullreimbursement from

    the government.

    Such fraud costtaxpayers $330

    million in 2008, themost recent

    year for whichtheres data.


    Sources: USDA, court records, corporate lings and interviews

    Electronic BenetsTransfer payment


    Because corporate records dont necessarilyname owners, they create a cover of

    anonymity. Other sources of uncertainty:- Sometimes USDAsrecords dont matchthose led with acity or state.

    - Or, months after asite gets SNAPapproval, theprevious, disquali-ed vendor is listed

    as an owner in localor state businessrecords.


    A disqualied vendor recruits otherindividuals to pose, on paper only, as




    John Bruce/Scripps Newspapers

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    involved comparing data rom hundreds o currentliquor, ood and health licenses, state corporate lingsand city business records with a list o stores that theUSDA has permanently disqualied.

    USDA ocials said the agency has not ullyemployed that technique in the past. But, in responseto the Scripps investigation, the ocials said they willnow search more o the same records and will broadlyexpand the number o merchant applications that theyclosely review.

    In addition, the USDAs investigative arm, theinspector generals oce, says it has begun a criminalexamination o one o the suspect storeowners identi-ed by Scripps.

    And Kevin Concannon, USDA undersecretary othe Food and Nutrition Service, which oversees theood stamp program, said another merchant identied

    by Scripps is going to be taken out o the program.Concannon told Scripps in a written statement

    that his agency abhors raud: Rogue stores and theirowners should be punished out o the programpermanently and prosecuted criminally where pos-sible.

    A rough average o 125 storeowners are convictedo ood stamp tracking each year, according to datarom the USDAs Inspector Generals oce, whichinvestigates the crime. Punishment can include prisonsentences and nes, court records show.

    Te toll o tracking or taxpayers: $330 millionin 2008 alone, the most recent USDA accountingshows.

    At last count, 231,000 retailers nationwide wereapproved to participate in the Supplemental NutritionAssistance Program, the ood stamp programs ormalname. Over the past decade the USDA has expelledan average o 830 retailers or tracking each year,though the agency is picking up the pace. In scal year2011, it disqualied more than 1,200 stores, and is on

    track to bust 1,400 stores this scal year.In the tracking scheme, retailers encourage oodstamp recipients to trade their benets or cash or in-eligible merchandise particularly alcohol or tobacco at an exchange rate avoring the store.

    Recipients swipe their benets cards and punch ina PIN number, just as with a debit card. Te electronicdata is zapped to the government or a bank admin-

    istering the program on its behal. Te merchanttakes ull payment or the transactions stated priceand pockets the dierence which can add up toas much as $50,000 a month, according to the 2009ederal indictment o a south Florida ring.

    In many o the nations poorest neighborhoods,owners and employees o the plentiul mom-and-popconvenience and liquor stores say they ace constantpressure rom their clientele to game the system.

    Every next customer comes in and asks me to givethem cigarettes and cash using their ood stamps, saidYasmin Bibi, who said she manages the Foods Mart inBaltimore. When we say no, they yell at us.

    Te Scripps investigation centered on a USDA list,obtained through the Freedom o Inormation Act, othe 4,600 retailers rom January 2006 through last Julywho have been permanently disqualied rom accept-

    ing ood stamps.Once disqualied, a retailer is orever barred rom

    participating in the program, USDA spokeswomanSusan Acker wrote in an email.

    But nearly a third o those retail sites 1,492 continue to accept ood stamps, Scripps oundin comparing the disqualications with a list o allUSDA-approved SNAP vendors.

    Some o those retail sites have entirely new own-ers, making them eligible to re-enter the ood stampprogram. But Scripps ound many sites still operating

    with the same disqualied owners.For instance, ater the owner o Horseshoe Liquor

    & Market in the San Diego suburb o Spring Valley,Cali., was permanently disqualied last February,according to USDA records, a store at the same loca-tion got USDAs approval to take ood stamps, agencyrecords show.

    While the store itsel was allowed to remain, itsownership wasnt. But liquor records rom the Calior-nia Department o Alcoholic Beverage Control show

    that Aziz Audish has been the primary owner romJune 2010 to the present both beore and ater thedisqualication.

    Responding to questions about the stores owner-ship, the USDA said Scripps had identied anoma-lies. Audish conrmed to a reporter that he is theowner o the store, but said he is licensed to acceptood stamps because o an ownership change. He did

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    not deny the USDA had disqualied him.Te USDA would not disclose the names o any

    barred owners, citing their privacy rights. So Scrippsunearthed ownership and management stakes by cross-reerencing the addresses o disqualied retail sitesagainst state and local business records and alcohol

    licenses.Some sites have been busted or tracking repeat-edly. Scripps analysis identied 137 locations at whichmerchants had been disqualied as many as our times.

    One, a store in Miamis poor Overtown neighbor-hood, was approved and disqualied under ournames between 2003 and 2006 beore its operatorswere charged with stealing $1.2 million, a 2009 ederalindictment and the USDA data show.

    Likewise, our businesses run successively out o abodega in Hartord, Conn., were permanently disqual-ied while owned by the same illegal immigrant, whowas convicted o recruiting straw owners and making$1.6 million rom ood stamp tracking, the JusticeDepartment said in June.

    Despite that bust, uneven oversight continues.In ulsa, or example, Bills Quick Stop ownerNabeel Sheikh was busted or ood stamp trackingin 2008, the USDA said. Later, the USDA readmittedthe store to the program on the condition that Sheikhwouldnt be employed there, the USDA said.

    ulsa city records show the new owner o the storeis F & U Zakir, LLC. But city health departmentdocuments in November 2011 listed Sheikh as man-

    Disqualifedood stamp


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    ager. Reached at the store this month, Sheikh deniedowning the store or working there, and said he wasthere just lling in.

    Based on Scripps ndings, the USDA says it isinvestigating the store.

    In some cases, the actual ownership o a store,and its connection to a ormer owner who has beenbanned, can be obscured by layers o corporate lings.

    In Fort Pierce, Fla., or instance, USDA recordsshow the owner o Express Food Market was perma-nently disqualied rom accepting ood stamps inApril 2009. Even so, the store remains open and hasUSDA approval to take ood stamps.

    But, according to state alcohol licenses, the storewas owned rom 2007 to 2011 both beore and

    ater the disqualication by an entity called Ex-press Food Mart #555, Inc. Tat corporation wascontrolled by Manzoorul Haq, according to statecorporate records.

    In 2011, the liquor license was transerred to and continues to be held by akdir Grocery, Inc.,according to the Florida Department o Business andProessional Regulation lings. And the only corporateocer listed or akdir is Manzoorul Haq.

    Neither Haq, nor anyone else at the store, wouldspeak on-the-record to a reporter.

    When asked to comment on this case, USDA o-cials said they would require the stores owner to provethat ownership has actually changed.

    Source: USDA data

    SHNS graphic by Danielle Alberti

    A map shows all disqualifed ood stamp vendors in the United States.

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    Scripps Howard News Service

    Feb. 20, 2012

    USDA probing banned ood stampmerchants IDd by Scripps

    Te U.S. Department o Agriculture says it wantsto secure an unlocked backdoor that allows storesbanned or engaging in ood stamp raud to slip un-noticed back into the ederal program.

    Te agencys announcement came a ew weeks a-ter Scripps Howard News Service brought to the US-DAs attention that a reporter had discovered a way toidentiy blacklisted businesses that had sneaked backonto the rolls o approved vendors.

    Using the method, Scripps has ound evidence indozens o cases nationwide where stores were caughtand permanently disqualied rom taking oodstamps but continued to do business with customersusing the government ood benet.

    Tese same retailers used alse applications claiming that someone with a clean record now owned

    and ran the store to once again be allowed to ac-cept ood stamps. Scripps discovered this by compar-ing USDA disqualication records against hundredso local and state documents including businesslings, health inspection reports, liquor licenses, to-bacco sales permits and corporate certicates.

    Te Scripps reporting has spurred the USDA toinvestigate stores in Baltimore, San Diego, ulsa,Okla., and West Palm Beach, Fla., and has promptedat least one criminal probe.

    In interviews with Scripps, USDA ocials have

    said they dont always review these state and local re-cords to act-check ood stamp merchant applicationsrom stores that have previously been busted.

    But thats changing. In a Feb. 6 press release, theagency says it will conduct the same due diligenceScripps has perormed to help reduce the number odisqualied stores that return to the program by alsi-ying inormation in their applications.

    Previously, the USDA relied on the existence o anew business license as proo that a store had a newowner, said Kevin Concannon, USDA undersecretaryor the Food and Nutrition Service.

    But as the Scripps investigation showed, thathasnt been sucient and, Concannon said, on thebasis o urther review, were saying ... lets require allo those public licenses, as additional documentation

    Te crime is as widespread as it is simple: Storesaccept ood stamps but, instead o selling wholesomegroceries to customers, they provide the customersa small amount o cash typically 50 cents on theood stamp dollar. While taxpayers lose out themoney isnt going toward wholesome ood oodstamp recipients are receiving no-strings attachedcash and stores are taking a hety prot or serving as

    a moneychanger.Over 17,000 stores are estimated to have engaged

    in tracking, according to the USDAs most recentstudy, which examined activity rom 2006 to 2008and was released in March 2011. Te cost to taxpayerso that tracking is $330 million annually, accordingto the agency.

    A major constraint or the USDA is manpowerTe agency has 100 anti-raud investigators watchingover about 231,000 stores nationwide that accept oodstamps, ormally known as the Supplemental Nutri-

    tion Assistance Program.Michael anner, senior ellow at the libertarian

    Cato Institute think tank in Washington, says theUSDAs eorts to crack down on ood stamp raudamounts to little more than lip service.

    I its a real priority, you dont have a hundred in-spectors you have a thousand inspectors, annersaid. Believe their actions, not their words.

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    Te chairman o the U.S. Houses government over-sight committee uesday directed U.S. Department oAgriculture ocials to explain how they will prevent oodstamp merchants banned or raud rom staying in the pro-gram.

    Chairman Darrell Issa, R-Cali., citing E.W. Scrippsnewspaper and broadcast investigations o the barred retail-ers published Monday, said he also will hold hearings onthe alleged abuses uncovered by Scripps.

    We expect to give the USDA a very short leash onbringing real reorm to this ailed policy, Issa said.

    In a letter uesday to USDA Undersecretary KevinConcannon, who heads the ood stamp program, Issaasked the agency to detail what the USDA does to keep thepermanently disqualied vendors rom quietly staying inthe business.

    ... the Scripps article ound pervasive weaknesses inUSDAs process or disqualiying and reauthorizing mer-chants to accept benets, Issas letter said.

    Issa, chairman o the House Committee on Oversightand Government Reorm, also raised the possibility thatoversight o the program might be moved to an indepen-

    dent agency, more dedicated to cleaning up the mess.Using records obtained under a Freedom o Inorma-

    tion Act and extensive data analysis, Scripps compared storeowners who had been banned with those currently permit-ted to accept ood stamps.

    By reviewing local business lings, liquor licenses,health inspection reports and state corporation lings,Scripps reporters ound evidence in dozens o cases in New

    York; Los Angeles; Phoenix; San Diego; ulsa, Okla.; WesPalm Beach, Fla.; Baltimore and other communities acrossthe country where the store ownership hadnt changed.

    Beore the Scripps reports were published, the USDAopened a criminal investigation o one suspect minimart,ejected a Baltimore convenience store rom the ood stampprogram, and opened administrative inquiries into severalother stores all identied by Scripps.

    USDA also announced it would tighten oversight ovendor applications by seeking more types o records, em-ploying the method used by the Scripps reporters.

    USDAs Concannon did not respond to a request orcomment uesday. But in the past, he has noted a long-term drop in ood stamp raud and the departmentsenergetic commitment to rooting it out.

    And in letters to the editors o Scripps newspapers ues-day, Concannon deended the integrity o the vast major-ity o people participating in the program, both as retailersand ood stamp recipients.

    Because ood stamps provide nutrition to 46 millionpeople each month, Concannons letter said, Te stakesare simply too high to let a ew bad actors compromise this

    vital program.But Issa is ar rom satised. In an interview with

    KGV, the Scripps-owned television station in San Diego,Issa called the discoveries the tip o the iceberg.

    He praised Scripps or uncovering the problem. Tismakes a dierence when we have watchdogs who havedone their homework, and allow us to do the rest o the jobor you.


    Scripps Howard News Service

    Feb. 21, 2012

    Issa calls or hearings on

    ood stamp raud, cites

    Scripps fndings

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    At a hearing next week, the Houses government over-sight committee will probe why the U.S. Department oAgriculture is allowing stores banned or ood stamp raudto continue participating in the government-benet pro-gram.

    Speaking Wednesday morning on Fox News, Chair-man Darrell Issa, R-Cali., cited E.W. Scripps newspaper

    and broadcast investigations published last week whichound that dozens o retailers kicked out o the program a-ter being caught engaging in ood stamp raud remain inthe business.

    Issa said the USDA not a media organization should have been scrutinizing the retailers to prevent thepermanently disqualied ones rom nding ways aroundthe ban. Te Scripps Howard organization, they didnt godo rocket science, Issa said. Tis is something that, at abasic level, government should do.

    Te Scripps investigation, Issa said, in eect perormed

    the oversight the USDA should have done. It was the gov-ernments own databases that they went to and discoveredthere was no enorcement under this administration, hesaid.

    Using records obtained under a Freedom o Inorma-tion Act and extensive data analysis, Scripps compared storeowners who had been banned with those currently accept-ing ood stamps. About 1,000 store owners each year are

    permanently disqualied ater getting busted exchangingood stamps or alcohol, tobacco or small amounts o cash.

    But some o these blacklisted business owners ndways to sidestep their exclusion. By reviewing local businesslings, liquor licenses, health inspection reports and statecorporations lings, Scripps reporters ound evidence indozens o cases in New York, Los Angeles, Phoenix, San

    Diego, ulsa, Okla., West Palm Beach, Fla., Baltimore andother communities across the country where the barredowners were still in the ood stamps trade.

    Ater Scripps identied specic owners and stores, theUSDA opened a criminal investigation o one suspect mini-mart, ejected a Baltimore convenience store rom the oodstamp program, and opened administrative inquiries intoseveral other stores.

    Praising the Scripps ndings, Issa said the USDAshould be doing the same thing. Tey used open sourceTey compared two lists the lists o those who were get-

    ting it (access to the ood stamp program), and the list othose who were denied it.

    Issa will probe the issue urther next Tursday at ahearing called Food Stamp Fraud as a Business ModelUSDAs Struggle to Police Store Owners. Witnesses areexpected to include Kevin Concannon, who as USDA un-dersecretary heads the ood stamp program, and USDA In-spector General Phyllis Fong.


    Scripps Howard News Service

    Feb. 29, 2012

    Citing Scripps, Issa says

    govt should target bad

    ood stamp merchants

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    Neither Fong nor Concannon responded to interviewrequests or this article.

    However, in the past, Concannon has emphasized along-term drop in the ood stamp raud rate. And in aneditorial published uesday in the Roll Call newspaper,Concannon reiterated that the USDA is taking new steps

    to keep disqualied storeowners rom once again being al-lowed into the Supplemental Nutrition Assistance Program,as the benet is ormally known.

    USDAs new measures include requiring more docu-mentation rom stores applying to accept ood stamps andconducting more due diligence on the applicants.

    We must stay vigilant to remain ahead o the curve inghting SNAP raud, Concannon wrote. While the vast

    majority o participants and retailers abide by the rules, aew bad actors are always looking or ways to exploit theprogram.

    In his Fox News remarks, Issa said that by letting thesebarred individuals slip back in, the eorts o the USDAs100 anti-raud investigators are going to waste.

    But an even worse consequence o the lax programoversight, Issa said, is the children who go hungry becausetheir parents misspend their ood stamps.

    Tis is about ood or amilies, he said. So when peo-ple walk in with $100 o ood stamps and they trade it oralcohol or they trade it or cash to go use illicitly, childrenare being denied the ood that we the American people putthis together or.

    Photo courtesy National Archives and Records Administration.

    Tis display represents some o the ood that could be bought with the blue (surplus) ood stamps in 1941.

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    Te U.S. Department o Agriculture is trumpeting along-term drop in the ood stamp raud rate as it claims tobe aggressively improving its investigations, increasing thenumber o stores it busts, and applying high-tech methodsto rein in the $330 million-a-year crime.

    But some store owners say they see no evidence o theseincreased eorts, and the agency is acing questions aboutwhy it is not making sure that permanently banned storeowners dont sneak back into the ood stamp program.

    As the USDA prepares to explain at a congressionalhearing Tursday how it allows those vendors to remain in

    the ood stamp trade, the agency aces a host o skeptics rom both inside and outside the Beltway.

    Te hearing, called by U.S. House Committee onOversight and Government Reorm Chairman Darrell Issa,R-Cali., comes in response to an ongoing Scripps HowardNews Service investigation into ood stamp raud.

    Scripps newspapers and V stations ound evidencein dozens o cases across the country that, even when storeowners are busted or swapping ood stamps or cash or li-quor and are permanently disqualied, they are able to side-step punishment and quietly re-enter the program.

    o conrm Scripps methodology, reporters checkedsamples o those cases with USDA ocials, who veriedthe approach and acknowledged some, but not all, o thendings. Moreover, Scripps also identied dozens o otherpotential cases that were not shared with the agency.

    A 2010 audit by the USDAs own internal watchdogsaid the USDAs oversight problems in some cases rundeeper. In hundreds o instances, store owners are convicted

    o ood stamp raud or other ood-assistance violations butnever banned rom exploiting other ederal programs, ac-cording to the USDA Inspector Generals Oce audit.

    And when the USDA does decide to blacklist a vendocaught engaging in raud, it can take years or the disquali-cation to take eect, Scripps ound. For example, it tookthe USDA more than three years to ocially ban the or-mer owner o the New Saigon Sooper Market in Denverater being caught engaging in raud, according to USDAocials and agency records. (Te store, under dierentownership, now accepts ood stamps, USDA records show)

    In act, when the USDA believes a store is engaging inood stamp tracking, it has the authority to disqualiy thevendor immediately, USDA spokeswoman Susan Ackersaid in an email.

    Why that didnt happen to the Denver store is unclearKevin Concannon, who oversees the ood stamp programas USDA undersecretary or the Food and Nutrition Ser-vice, declined to comment.

    Some critics say the reason is that ood stamp track-ing isnt a high enough priority. I the USDA wanted, itcould increase eorts in suspension and debarment, ac-

    cording to an ocial in the USDA Inspector Generals o-ce who requested anonymity.

    While the USDA wants the public and lawmakers tobelieve its doing all it can to stop raud, the ocial said,that isnt the case.

    Christy Paek agrees. As owner o Christys Market inBaltimores Franklin Square neighborhood, she said itsclear to her that the USDA isnt searching or raud. I o-


    Scripps Howard News Service

    March 7, 2012

    USDA delays banning

    store owners busted orood stamp raud

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    cials did, she said, theyd nd plenty.No way theyre looking into it, Paek said. I they

    were, there would be a lot o store owners scared. But theyrenot doing anything.

    Paek said she turns away 50 or 60 ood stamp recipi-ents each month who walk into her store saying 10 or20. Tat is street parlance or wanting to swap $20 in oodstamp benets or $10 cash.

    But, Paek said, other nearby stores do these deals, andood stamp recipients oten rub it in her ace by comingback to her store and showing her receipts rom the bogustransactions, she said. Paek said she thinks the vast majorityo stores in her neighborhood pad their income by track-ing in ood stamps.

    She said shes willing to tell authorities which stores shethinks are engaging in raud but she isnt sure whom toalert.

    Who can I go to? Paek said. Who can I report this

    to?In act, the USDA has a hotline 1-800-424-9121

    and a new website or the public to report alleged

    But even when raud is reported to the USDA, theagency doesnt necessarily take action to ensure the raud-sters dont strike again.

    More than 600 wholesalers and retailers were convictedo Food and Nutrition Service violations rom scal years2004 to 2007, according to the Inspector Generalss audit.As o the reports publication in 2010, none o those oend-ers had been placed on a government-wide blacklist, the au-dit ound.

    In general, we ound that USDA agencies did not usesuspension and debarment to protect other USDA and Fed-eral agencies, reads the audit. Tey cited as reasons ortheir inaction their limited resources and interest only in

    their assigned programs.

    Photo courtesy National Archives and Records Administration.

    A shopper uses ood stamps at a Giant grocery store in March 1970.

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    Te head o the ederal ood stamp program on Turs-day orceully deended his agencys record o weeding out and keeping out store owners busted or engaging inraud.

    At a U.S. House Committee on Oversight and Gov-ernment Reorm hearing, Kevin Concannon, undersecre-

    tary o the U.S. Department o Agricultures Food and Nu-trition Service, listed his agencys eorts at reducing oodstamp raud, while also noting the long-term decline in theraud rate since the 1990s rom 4 cents on the dollar to1 cent.

    Te hearing, called by House oversight panel Chair-man Darrell Issa, R-Cali., came in response to a ScrippsHoward News Service investigation into ood stamp raud.

    Last month, Scripps newspaper and V-station report-ers ound evidence in dozens o cases across the countrythat, even when store owners are caught swapping ood

    stamps or cash or liquor and are permanently disqualied,they have been able to sidestep punishment and quietly re-enter the program, ocially known as the SupplementalNutrition Assistance Program (SNAP).

    At the hearing, Issa described what Scripps uncoveredas a scandal, and said that stores caught engaging in raudmust actually be punished permanent needs to meanpermanent.

    Describing Scripps as a citizen watchdog and its re-porters as whistleblowers, Issa also said the USDAs teamo 100 raud investigators should be using Scripps methodsto recalibrate their eorts.

    One o those 100 (investigators) assigned to do whatwhistleblowers have done or us, in act, could have prevent

    ed many o these stores rom being back in business, Issasaid. Its that simple.

    Concannon told lawmakers that Scripps investigationhas already resulted in the discipline or investigation o theowners o eight stores that accept ood stamps.

    He said authorities are criminally investigating onestore owner identied by Scripps, and, at ve additional lo-cations, merchants are being charged with alsiying recordsor have already been booted rom the ood stamp programor that crime. A seventh has been charged with trackingand the USDA has pulled another owners ood stamp ac-

    creditation or inactivity.Despite these results and even though the USDA

    has never sought a correction or clarication rom Scripps Concannon attempted to discredit the investigation bysaying it had some critical deciencies. He said that themajority o store owners Scripps brought to the USDAs at-tention did not turn out to show wrongdoing.

    In act, Scripps reporters around the nation checked


    Scripps Howard News Service

    March 8, 2012

    Food stamps chiedeends program in ace

    o charges o scandal

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    samples o the dozens o cases it ound with USDA ocials,who acknowledged problems with some, but not all, o thestore owners.

    Moreover, Scripps used state and local records to red-ag additional cases not identied to the USDA. And,despite his criticism o the reporting, Concannon said hisagency has now adopted Scripps method o digging out theraud.

    Some Democrats at the hearing echoed Concannonspoint, while also charging that Republicans true interest isin cutting ood stamp benets.

    Ranking committee member Elijah Cummings,D-Md., or example, said in his written testimony that thispress account has signicant problems, that the USDA hasacted quickly to address bad actors, and that the SNAPprogram continues to be an extremely well-run program.

    But not everyone shared Cummings view.USDA Inspector General Phyllis Fong said Agriculture

    Department ocials should be blacklisting convicted retail-

    ers, which would keep them rom landing other govern-ment contracts.

    We eel very strongly that the USDA as a whole needsto do a better job at suspension and debarment, Fong said.

    Concannon countered that this would entail a wholeextended process one he deemed unnecessary. Butnonetheless, he also said the USDA is working with anotherbranch o the ederal government, the General Services Ad-ministration, to allow the USDA to blacklist those convict-ed o ood stamp raud.

    Rep. Jackie Speier, D-Cali., while generally supportive

    o the USDA, rejected Concannons rationale that such abroad ban shouldnt be imposed because its cumbersomeand costly.

    You know, democracy is costly. I dont think we shoulduse the argument that its costly, Speier said. I we haveevidence o convictions and these retailers have violated thelaws and we dont debar them, then shame on us.

    Kevin Concannon, undersecretary o the U.S. Department o Agriculture, testifed Tursday beore the U.S. House

    Committee on Oversight and Government Reorm. Committee chairman Darrell Issa, R-Cali., called the hearingin response to a Scripps Howard News Service investigation.

    SHNS photo by Danielle Cohen

  • 7/30/2019 Food Stamp Fraud



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    Te ederal ood stamp program, administered bythe U.S. Department o Agriculture, is perhaps the na-tions most important nutrition program.

    At an annual cost o $75 billion, ood stamps helpeed 46.2 million Americans a year.

    Unortunately, the program is aficted by a per-

    sistent and resilient orm o raud that undercuts itsintent and credibility with the broader public.

    Crooked retailers encourage ood stamp recipientsto trade their benets or cash or ineligible merchan-dise like liquor and tobacco, at a substantial markup.Te recipient swipes the USDA benet card andpunches in a PIN number, as with a debit card. Tegovernment or a participating bank reimburses theretailer or the ull price o what has been representedas legal merchandise.

    Food stamp recipients get their liquor, cigarettes

    or cash and the store owner pockets the mark up asmuch as $50,000 a month, in the case o one SouthFlorida ring. Te most recent USDA gures, or 2008,show that raudulent tracking accounted or $330million in losses.

    With 231,000 retailers nationwide approved toparticipate, the USDA estimates 17,000 retailers il-legally tracked in ood stamps. Te agency struggles

    to expel more than 1,000 retailers a year or raudulentoperations.

    Once nabbed or ood stamp raud, the storeown-ers are supposedly barred rom the program perma-nently, but they have a way o returning under newnames or straw owners.

    Scripps Howard News Service reporter Isaac Wol,in a computer-assisted investigation, obtained a USDAlist o 4,600 permanently disqualied vendors underthe Freedom o Inormation Act. He compared itagainst a USDA list o all the stores accepting oodstamps, nding that about a third 1,492 o thebanned stores continue to take them. Some o thesemay represent a legitimate change o ownership, butWol ound dozens o cases where state and local re-cords indicate that the owners are the same.

    Impressed by Wol s investigation, the USDA is

    now incorporating his methods to search the samerecords and expand the number o vendor applicationsmarked or closer review. And it is doing ollow-up in-vestigations o locations Wol identied as participat-ing in the ood stamp program under alse pretenses.

    We wish the USDA investigators good hunting.Its too benecial a program to be so coarsely tar-nished.


    Scripps Howard News Service

    Feb. 20, 2012

    Editorial: A new way o attackingood stamp raud