WASHINGTON, Dec. 16, 2015 - The number of retail stores being shut down because of food stamp fraud is on the rise, but officials say it’s not because of a spike in criminal activity. Instead, it’s a result of USDA and law enforcement’s increasing efforts to crack down on stores that are milking taxpayers for millions of dollars from the Supplemental Nutrition Assistance Program.

USDA’s Food and Nutrition Service (FNS) sanctioned or disqualified 2,693 stores from participating in SNAP in fiscal year 2015, a 21 percent increase from 2,230 in the previous year, according to USDA data provided to Agri-Pulse.

One common form of fraud is “trafficking,” a scam in which store owners ring up fake purchases, Under Secretary for Food, Nutrition and Consumer Services Kevin Concannon said. Here’s how it works:

When undercover agents from USDA’s Office of Inspector General walked into the KC Gas Mart in Kansas City, Kansas, and told the owner they’d be willing to allow him to ring up fake sales on their SNAP benefit cards in return for cash, Sajjad S. Chaudhry agreed. Now Chaudhry is in federal prison, serving a 57-month sentence. Chaudhry was convicted of stealing $227,000 in SNAP benefits. Officials say his story is not unusual and the amount of his fraud is actually low compared to the long list of storeowners ripping off taxpayers.

Take the case of Lamia Ali and Abass Hassan Amedi, for example. They were convicted on Dec. 3 of stealing $365,000 of SNAP funds through their store, Noor Al Huda in Fargo, North Dakota. And on Nov. 5, Cristian and Ramon Pena, owners of Bonao Market in Lawrence, Massachusetts, were convicted of taking $990,000. 

The list is long, but the crime is similar. A person with an Electronic Benefit Transfer Card walks into a store and hands it over, usually to the owner, who rings up $100 or so for groceries that may not even be stocked in the store, but are charged to SNAP. The EBT holder is then given a portion of the fake sale in cash, and the owner collects the full amount from the government. Sometimes the government is able to recover some of the stolen funds but not often and not much, said Robert Troester, an executive assistant for the U.S. Attorney, Western District of Oklahoma.

The Justice Department’s Asset Recovery Unit goes after the money, putting liens on the felon’s property and garnishing any future wages, Troester said. Still, “It’s often like trying to get blood from a turnip. We don’t get a lot back. By the time (the case) is fully investigated, they don’t have any money to pay the government back. There are times we get it, but often it’s just gone.”

So far, the Essex District Attorney’s Office in Massachusetts has recovered roughly $43,000 from Cristian and Ramon Pena by seizing the contents of a safe deposit box and three bank accounts, spokeswoman Carrie Kimball Monahan said.

Trafficking was on the rise for years, but now, thanks to new efforts by USDA and funding from Congress, the trend may be reversing, Concannon said.

The percentage of stores that commit trafficking is small – roughly 1.3 percent of SNAP purchases are fraudulent. But that’s still a lot of money coming out of the program that paid out $74 billion last year – USDA’s biggest budget item – and supports about 46 million low-income families across the country.

And the fraud – no matter how small – gives the program a very public black eye at a time when budget hawks in Congress are looking for savings.

The GOP-controlled House approved a $40 billion cut in SNAP spending in 2013 during a failed attempt to pass a new farm bill, but eventually had to reach a deal with Senate Democrats to just an $8 billion reduction. Some Republicans are still upset over the agreement. 

House Agriculture Committee Chairman Michael Conaway, R-Texas, a SNAP critic, is using his panel to conduct a “top-to-bottom review” of the program. The committee has already held eight hearings on different aspects of SNAP this year.

“We will conduct this review without preconceived notions and with a commitment to strengthening the program so it can serve as a tool to help individuals move up the economic ladder,” Conaway said in a hearing earlier this year.

The increasing number of trafficking convictions is a double-edged sword, Concannon said. While it’s necessary to put a stop to the crime, the cases become anecdotal embarrassments for a program that help millions in tough times. But USDA is still upping its game to shut down as many of the traffickers as possible, Concannon said.

The department is investing in crime-prevention technologies and monitoring for red flags that may point to illegal activity. For instance, if a person uses his or her benefit card far from their residence or late at night.

In the cases of KC Gas Mart in Kansas, the Noor Al Hooda market in North Dakota and the Bonao Market in Massachusetts, it was the unusual amount of SNAP benefits being spent at stores that don’t normally sell many groceries that tipped off FNS. That kind of monitoring is key to stopping fraud, said the spokeswoman for the Essex District Attorney’s Office in Massachusetts. The convictions of Cristian and Ramon Pena were made possible by information provided by FNS, she said.

And it’s almost always these types of small convenience stores that often don’t even stock the nutritious food that qualifies for the SNAP program that are involved in trafficking.

Only about 15 percent of all the food stamps used by shoppers in the U.S. are spent at small stores, but they are also the source of 85 percent of the fraud, according to a USDA report from 2009-2011. About $4 billion of SNAP benefits are spent at the roughly 150,000 convenience stores across the country.


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