What’s the Message Getting Through?

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 Because Guam – a Micronesian island located in the Pacific Ocean – is a territory of the United States, its citizens are eligible to participate in the U.S. Department of Agriculture’s (USDA) Supplemental Nutrition Assistance Program (SNAP). USDA’s Food and Nutrition Service (FNS), which administers the program, is explicit in defining what qualified recipients can and cannot use their monthly benefits to purchase. A Guam businessman had other ideas about how he thought food stamps could be used. He committed SNAP fraud by allowing food stamp recipients to trade their benefits for cash and car rentals. (While trading food stamps for cash is common, using the benefits for car rentals is a new one for sure.)

The businessman at the center of today’s fraud article was crafty. He had five aliases and operated his fraud scheme through two businesses including a rental car company in Upper Tumon and a restaurant at an outlet mall. Over approximately a year-and-a-half, the entrepreneur conducted illegal SNAP transactions after paying the rightful electronic benefit transfer (EBT) card owners cash for their benefits. (He probably paid 50 cents on the dollar like most food stamp fraudsters tend to do.)

Next, the businessman from Guam used the EBT cards to buy groceries from stores, sometimes for his restaurant. (Look at that – he paid for food with government money, then used the ingredients at his restaurant to make a profit.) He also kept some of the cards and PINs, using them to make payments toward their rental car. (That is definitely not on the approved list of things that can be purchased with food stamps.)

The shady Guam businessman pleaded guilty to food stamp fraud, but fortunately for him, he did not receive any jail time, just two years of probation. (Now, you have to ask the question, “What message does that send to others considering committing the same crime?” Some might interpret the outcome of this case as a slap on the wrist.) Perhaps the $10,000 fine he was ordered to pay and forfeiture of $4,235 may be a deterrent. Just so you know, the other five food stamp recipients who were co-conspirators in this case had to pay back a total of $3,200 – the amount of money the SNAP program lost. Court documents show that the fraudster could have gotten up to a year in prison, but because the first-time offender cooperated with the government, he avoided jail time.

The food stamp program on Guam paid out $106 million in benefits to many zero- to low-income households in 2016. The victims in this case are not only the members of a household who lose access to food because a household member sold the benefits, but also the American taxpayer who pays for these benefits.

Today’s “Fraud of the Day” is based on an article entitled, “Businessman gets no jail in food stamp fraud case, could be deported,” published by Pacific Daily News on November 14, 2018.

A businessman who admitted to scheming with food stamp recipients to trade their benefits for cash or car rentals was sentenced on Wednesday to two years probation.

Zhizhong Zheng, pleaded guilty in 2015 in the District Court of Guam to unauthorized use or possession of food stamp benefits.

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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.