Left Holding the Bag

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The U.S. Department of Agriculture’s (USDA) Food and Nutrition Service (FNS) reports that a majority of food stamp trafficking happens in smaller-sized retailers. That is the case for today’s “Fraud of the Day” article where the former owner of a Louisville, Kentucky specialty food store used his storefront to commit food stamp fraud by collecting more than half a million dollars in benefits meant for low-income individuals.

The owner of two stores that sold meat qualified as a Supplemental Nutrition Assistance Program (SNAP) retailer and accepted payment through Electronic Benefit Transfer (EBT) cards. But, he violated program rules by paying some of his customers 50 cents on the dollar for their benefits. (Then, they either took the cash and ran, or purchased ineligible items. That’s usually how it goes.)

FNS has a multitude of tools available to track fraud within the SNAP program. Today’s investigation included the use of video surveillance and statistics. (FNS tracked the number of food stamp redemptions made in the area where meat stores were located.)

The USDA and the Federal Bureau of Investigation (FBI) began an investigation into the meat stores’ SNAP redemption practices after discovering that the stores had significantly higher redemption rates compared to other similar retailers in the same area. In fact, their monthly SNAP redemptions in 2015 were about 20 times the average number of redemptions from similar stores. (Well, that answers the question as to where’s the beef?)

To prove their suspicions, the USDA and the FBI sent in two individuals to check out just how much beef was leaving the store. (Apparently, it was not filet mignon, ribeye, or chuck roast.)

The undercover agents attempted to sell SNAP benefits for cash in the meat store over nine months. Out of nine visits, they succeeded on eight occasions. (Apparently, individuals would present multiple SNAP EBT cards under different names during the undercover transactions and request cash from all the cards.)

During the four-day trial, jury members heard testimony from five customer witnesses and one former employee. They also saw surveillance video of one of the meat stores on four separate days and a comparison of transaction data from those same dates. (They were looking for individuals who spent $100 or more, but left the store holding only one bag. That’s very clever, eh?)

The Louisville, Kentucky meat store owner was sentenced to 33 months in prison, three years of supervised release and ordered to pay $545,000 in restitution for committing food stamp fraud. I guess you could say that in the end, the FNS butchered his fraud plan and now he is left holding the bag.

Today’s “Fraud of the Day” is based on a Department of Justice press release entitled, Louisville Business Owner Sentenced To 33 Months for Food Stamp Fraud,” released on Februay 13, 2018.

LOUISVILLE, Ky. – The former owner of a Louisville specialty food store was sentenced today in United States District Court, by Senior Judge Thomas B. Russell, to 33 months in prison, three years of supervised release, and ordered to pay $545,000 restitution for committing Food Stamp fraud, announced United States Attorney Russell M. Coleman. There is no parole in the federal system.

“Today’s nearly three year prison sentence and $545,000 returned to victims, underscores our commitment to investigating and prosecuting criminals who steal from federal programs,” stated United States Attorney Russell Coleman. “This is a crime against tax payers – we will seek to restore every stolen dime that was meant to help those in need.”

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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.