Big Appetite

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The U.S. Department of Agriculture manages the Supplemental Nutrition Assistance Program (SNAP), providing about $61 billion in benefits to more than 20 million households as of 2018. A recent study on food stamp trafficking by the U.S. Government Accountability Office (GAO) estimates that $1 billion in food stamp fraud occurs annually, but a more accurate estimate may be up to $4.7 billion. (Chew on those large dollar amounts for a moment.) The GAO reports that among the stores that trafficked, 90 percent of the benefits were redeemed in small stores. Today’s culprit committed food stamp fraud in a big way through his association with a Massillon, Ohio food distribution business that is linked to a scheme that stole $8.5 million in SNAP benefits. (Why should small retailers get the biggest piece of the fraud pie?)

Today’s fraudster is the sixth out of seven defendants who have confessed that their appetite for food stamp fraud got the best of them. The scam involved a food distribution business that provided beef, poultry, pork and fish products to retail customers across several states including Ohio, Pennsylvania, Michigan and West Virginia. According to today’s fraud article, 93 percent of the food distribution company’s SNAP transactions were fraudulent. (The SNAP vendor was authorized to process commercial credit cards and SNAP Electronic Benefit Transfer (EBT) transactions.)

The company allegedly allowed SNAP customers to participate in “Eat Now, Pay Later” and “Split Payments” Programs that enabled the perpetrators to prolong the scheme over multiple months. The company encouraged bartering SNAP benefits for cash or other ineligible items like gift cards. Apparently, the distribution company’s sales reps were a bit aggressive when targeting some SNAP EBT customers, hoping to increase sales to large families with more benefits to spend. Federal law enforcement agents took a big bite out of this food stamp fraud scheme by posing as SNAP-eligible customers. They purchased up to $400 of meat products in several locations using $400 in SNAP benefits and gift cards.

The sixth person to plead guilty to food stamp fraud in the scam is a 33-year-old man who had two felony fraud counts modified as part of a plea deal. He is looking at a sentence of up to six months in prison. Four of the co-conspirators are waiting for sentencing, while one received three years of probation. The last person to go to trial is the owner of the food distribution company. (With six guilty pleas, I bet there is already quite a case built against her. I’m also guessing that she has lost her appetite for fraud.)

Today’s “Fraud of the Day” is based on an article, Six people in $8.5M food stamp fraud case plead guilty,” published by Dayton Daily News on April 10, 2019.  

The sixth of seven defendants in an estimated $8.5 million food stamp fraud case pleaded guilty Monday in Dayton’s U.S. District Court.

“It’s taxpayer money,” assistant U.S. attorney Dwight Keller said. “The federal government and the agencies that administer these programs are stewards of the federal taxpayers, so they have a responsibility … to take care of the public purse.”

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.