EBT fraud steals millions in taxpayer dollars


http://www.news4jax.com/news/local/ebt-fraud-steals-millions-in-taxpayer-dollars

A retired Duval County law enforcement officer is talking publicly for the first time about rampant fraud that involves bilking the U.S. government out of millions of dollars meant to help poor families buy food. Instead, this money is lining the pockets of a few crooked convenience store clerks.

“The amount of money we’re talking about is hundred of thousands of dollars just every week,” said Robert Cook, who used to investigate food stamp fraud in Duval County.

The fraud (shown in a surveillance image recorded by investigators), involves convenience store clerks who agree to buy Electronic Benefit Transfer cards given to anyone who qualifies for government food assistance.

Most people know this as food-stamp money, but the program is now referred to as SNAP or the Supplemental Nutrition Assistance Program, and the actual stamps were replaced by EBT cards several years ago.

Like a debit card, the benefit amount the person qualifies for is deposited into an account linked to the EBT card each month. The average family receives up to about $500/month in SNAP benefits.

How the scheme works

Nearly 1,100 stores in Duval County are authorized to accept EBT cards. SNAP benefits are only supposed to be used to buy uncooked food. None of the food can be hot, so SNAP benefits are not to be accepted at any restaurants.  Cigarettes, gas and alcohol are also prohibited.

In order for convenience stores to be granted authorization to accept EBT cards, their clerks have to agree to training that teaches what foods are accepted under the program.

According to Cook (pictured, right), clerks know how to manipulate the EBT charges to trick the government into thinking EBT withdraws are made on authorized purchases, like bread, eggs, poultry and other food items.

For the scheme must have two willing participants:

  1. Someone who qualifies for SNAP benefits who is willing to sell their card for cash at a fraction of its value, and
  2. A clerk who is willing to buy the card.

Cook said the convenience store clerks participating in the scheme typically pay 50 cents on the dollar for access to an EBT card.

For example, if there is $500 dollars on the card, the clerk will buy the card and the PIN associated with for $250 cash.

The clerk can then use the card to buy food to stock the store’s shelves tax free, or will type in bogus grocery purchases which transfer money from the EBT card into the store’s bank account. All EBT purchases are tax free.

Why would the person needing government benefits sell the card?

“It’s free money,” said Cook. “It didn’t cost them anything to get it, so it doesn’t cost anything for them to lose it

Local clerks arrested

We;ve learned of two cases here in Duval County where clerks were buying  EBT cards.

Basel Khallaf Basel Khallaf arrested on EBT fraud charge involving University Food Mart, 2012.

In the first, University Food Mart in Arlington was shut down in 2012 when police said clerks Basel Khallaf (seen in booking photo, left) and George Saeed were caught committing fraud.

Court documents show that during a year-long investigation, the store was redeeming between $20,000-$30,000 per month in bogus SNAP purchases. Authorities say legitimate convenience stores average $3,000-$4,000 in monthly SNAP purchases.

Brothers Aghid and Amir Al Theeb (pictured, right)) were also charged with committing EBT fraud in 2012 at their stores Century 21 Food Mart and Century 21 Chicken and Seafood. SNAP purchases between $12,000-$20,000 were made in the stores, while other stores, similar in size and location, were redeeming just $2,900 in EBT card purchases.

In both cases the clerks were charged and ordered to pay back the money they took.

Prosecutors told me their main objective is to have clerks who commit this kind of fraud pay back the lost money, which is why few go to jail.  However, often times money in these cases is used to buy stolen merchandise, which can result in jail time.

EBT fraud statewide

According to the Florida Department of Public Assistance Fraud:

  • There were 1,579 case investigations of SNAP benefit trafficking totaling $1,055,313 statewide in 2013.
  • In Duval County, 67 case investigations were completed in 2013 totaling $20,749
  • So far in 2014, 534 investigations have been completed, totaling $529,641 statewide. Duval County accounts for 28 of those investigations, totaling $19,602 in SNAP benefits.

Retired investigator Robert Cook said these numbers are nowhere near a close representation of the actual fraud being committed, not only in Duval County, but also across the state.

“In the Duval County area, where I concentrated on, I found several individuals and stores that were redeeming sometimes up to $100,000 a month in food stamps — and that’s a month. If Duval County has that kind of fraud that I just found myself, I’m imagining that it’s more widespread than ever reported anywhere,” said Cook.

The Department of Financial Public Assistance Fraud said that as of July Duval County fraud numbers are statistically under-represented due to a loss of two experienced investigators in Jacksonville within the last 12 months, resulting in the remaining investigative staff being focused solely on eligibility fraud that is referred for investigation from Department of Children and Families Office of Early Learning.

Convenience store clerk admits to fraud

A store clerk spoke with us about how easy it is to commit this type of fraud.  He explained that he would buy EBT cards from 30-40 customers each month.  They would give him the PIN number, he would withdraw the money by making bogus food charges, and they would return a day or two later to retrieve their card.

Sometimes, EBT recipients, would just leave the card with the clerk who would withdraw the money each month, since the benefits are loaded onto the card at the same time each month.

“(I’d) sometimes make $40,000 to 50,000 a month. But not profit, that’s how much you accept, but sometimes you make profit of $20 (thousand) or $25 (thousand) a month,” said the clerk, who did not want to reveal his identity out of concern he would get in trouble.

The clerk said he knows other clerks who made so much money committing EBT card fraud that they were able to buy other stores with the profit.

Asked how much money he thinks is being stolen, he replied: “Millions of dollars here in Duval County.”

Not enough investigators to stop it

“The guy selling drugs on the corner, he’s worries because there’s a lot of narcotics officers working in Jacksonville. There’s one guy doing this food stamp fraud in Jacksonville and there’s a lot of convenience stores,” explained Cook when I asked him why EBT fraud is such a problem in Duval County.

Cook said many local agencies busy fighting more violent crimes often consider EBT fraud a federal problem.  The United States Food and Drug Administration is the federal agency tasked with oversight of fraud investigations.

“There are only two or three guys in the entire state investigating EBT fraud,” said Cook.

SNAP fraud punishment

If convicted of trafficking in food assistance benefits of $500 or more, a recipient will be permanently disqualified from receiving benefits from the program. If convicted of trafficking, depending on the severity, he or she may also be fined up to $250,000, put in prison for up to 20 years or both.

Who can qualify for SNAP benefits

The Department of Children and Families is the state agency that oversees SNAP applications and qualifications. An applicant is required to provide income proof of income, or lack thereof, to qualify. The amount of money he or she receives is based on the number of people in the household, including children. An applicant must re-certify every six months.

More than 270,000 Duval County residents receive SNAP benefits. Former law enforcement officer Robert Cook pointed out that many, many of them are people who rely on those benefits and do not abuse the program. 

According to the Department of Children and Families:

About 76 percent of SNAP households in the United States include a child, an elderly person or a disabled person. These vulnerable households receive about 83 percent of all SNAP benefits.

SNAP benefits don’t last most people the whole month. Statistics show 90 percent of benefits are redeemed by the third week of the month.

SNAP benefits are meant to be a temporary; they are not meant to replace income from work. The average length of time that a new participant stays on the program is eight to 10 months.

If you suspect EBT fraud you are urged to call 866-762-2237.  You can also report fraud online.

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