Time to Start Watching

36419238 - judge about to bang gavel on sounding block in the court room

I hate to see anyone become the victim of a scam, but it is especially hard to realize that people who perpetrate public assistance fraud are really scamming me – the taxpayer. And, not just me. No, they are also scamming my family, my friends and a lot of people I don’t know – not to mention any reader of this commentary who pays taxes. Most importantly, they are taking advantage of people who really need the government benefit. Fortunately, they don’t always get away with it. And, that’s the case in today’s Fraud of the Day from KWTX.com about an ex-businessman out of Waco, Texas who defrauded the Supplemental Nutrition Assistance Program (SNAP).

The article reports that the defendant – the owner of a pizza place – defrauded the SNAP program by selling items, such as gas, tobacco and alcohol to food stamp recipients. The problem is that the SNAP program doesn’t allow its recipients to buy these items using the food stamp benefits. And, he didn’t stop there. The defendant also traded SNAP benefits for cash – at half their value.


Now, you might think, ”What’s the big deal? It is just some gas and cigarettes.’? Here it is? investigators concluded that from November 2009 to June 2011, the store (a.k.a. the defendant) redeemed ”a total of $1,474,428 in SNAP benefits while reporting $218,178 in total sales to the Texas Comptroller’s Office.’? (That’s real money? And it’s your money!)


It gets better. The pizza place also contained video poker machines. Investigators found that customers would exchange their SNAP benefits for cash (at half the value, of course) and use the money to play video poker. (SNAP=food stamps. Last time I checked, you couldn’t eat a video poker machine.)


Fortunately, he was caught. He was recently sentenced to 33 months in federal prison, plus three years of supervised release and ordered to pay $1.3 million in restitution – and a $200 special assessment to the court. (Glad they added the $200 special assessment. That might pay for the bailiff for the day.)


Here’s the thing about fraud? it’s a deliberate act. Fraudsters succeed when they break the rules that everyone else is following while no one is watching. Well, we know how the fraud is being committed, and it’s time to start watching.


Source: Today’s ”Fraud of the Day” is based on the article titled ”Ex-Local Businessman Must Pay $1.3 Million in Food Stamp Fraud Case,” published by KWTX.com on August 22, 2012.

WACO (August 22, 2012)–A former Waco businessman was sentenced Wednesday to federal prison and ordered to pay more than $1.3 million in restitution for wire fraud in a food stamp fraud case.

U.S. District Judge Walter S. Smith sentenced Phillip Ferguson Haynes, Jr., the former owner of Swift P’s JKP Pizza at 1330 East Waco Drive, to 33 months in prison followed by three years supervised release, and ordered him to pay $1,318,952.10 in restitution and a $200 special assessment to the court.

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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.