SCRIPPS HOWARD NEWS SERVICE

ING MP STA
AUD FR OUT
Uncovering rogue food stamp retailers

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About the Stamping Out Fraud special report

It was a proud moment for us when a member of Congress questioned a federal official and asked, How is it that Scripps found fraud that your people missed? The member of Congress was Rep. Darrell Issa, R-Calif., who had called a hearing of the House Committee on Oversight and Government Reform to grill federal officials about a Scripps investigation of nationwide food stamp fraud. The officials in charge of the food stamp program hemmed and hawed, but the members of Congress kept at it until the officials admitted we had found a unique way of rooting out fraud. Whats more, the government investigators asked how we did it, and we shared the methodology. Using the Freedom of Information Act to get the raw data, SHNS reporter Isaac Wolf figured out how to crossreference the files with other government records to expose merchants who had wormed their way back into the food stamp program after being kicked out for fraud. Working with reporters in two dozen cities where Scripps has newspapers and television stations, Wolf and the team confronted the storeowners with the evidence. Some confessed, others obfuscated. Some called their lawyers. Nobody said we were wrong. The government responded by launching civil and criminal investigations into the cases we flagged. As Rep. Issa said in a letter to the man in charge of the food stamp program, Clearly, there is a pressing need for decisive action. Some of the concrete results of the project so far: - The USDA initiated a criminal investigation of one storeowner identified by Scripps. - USDA removed or initiated removal proceedings of seven other stores identified by Scripps. - USDA officials acknowledged oversight gaps and promised to fix them by requiring more information about business ownership. Real-world results are one sign of a successful investigative project, and Im proud that Isaac Wolf and his editors at Scripps Howard News Service made a difference. For more information about this and other investigative projects, please go to www.scrippsnews.com. Sincerely, Peter Copeland Editor & General Manager Scripps Howard News Service

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Contents
About the Stamping Out Fraud special report Store owners, banned from taking food stamps, still do
An SHNS investigation has found records indicating that dozens of individuals who had been banned as food stamp merchants nonetheless remained in business in communities across the country. The federal government has opened investigations into alleged violators pinpointed by Scripps.

SHNS photo by Juan Dale Brown / Treasure Coast Newspapers

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Express Food Market was permanently disqualified from taking food stamps in April 2009, but the store in Florida has been re-admitted into the federal program.

USDA probing banned food stamp merchants IDd by Scripps

Contributors
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Reporter Isaac Wolf Editorial writer Dale McFeatters Lead editor Lisa Hoffman Editors Peter Copeland Carol Guensburg Bob Jones David Nielsen Photo editor Sheila Person Multimedia editor Danielle Alberti Multimedia reporter Kristin Volk

The U.S. Department of Agriculture says it wants to secure an unlocked backdoor identified by Scripps Howard News Service that allows merchants banned for engaging in food stamp fraud to slip unnoticed back into the federal program.

Issa calls for hearings on food stamp fraud, cites Scripps findings

The chairman of the U.S. Houses government oversight committee Tuesday directed U.S. Department of Agriculture officials to explain how they will prevent food stamp merchants banned for fraud from staying in the program.

A letter from Rep. Issa, chairman of the House Oversight Panel

Citing Scripps, Issa says govt should target bad food stamp merchants
At a House hearing, the Houses government oversight committee will probe why the U.S. Department of Agriculture is allowing banned merchants to remain in the food stamp program. The U.S. Department of Agriculture busts hundreds of storeowners for food stamp fraud or related violations each year, but never actually bans them, an internal audit shows. The head of the federal food stamp program on Thursday forcefully defended his agencys record of weeding out -- and keeping out -- store owners busted for engaging in fraud in the face of criticism that a news investigation had uncovered a scandal there.

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USDA delays banning store owners busted for food stamp fraud

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Food stamps chief defends program in face of charges of scandal 20

Contact
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202-408-1484 or stories@shns.com. Our website www.scrippsnews.com
Scripps Howard News Service is part of the E.W. Scripps Co.

Editorial: A new way of attacking food stamp fraud

The U.S. Department of Agriculture has had mixed luck in battling a persistent and resilient form of food stamp fraud. A Scripps Howard News Service reporter has found a way to help.

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UD RA F
Store owners, banned from taking food stamps, still do
By ISAAC WOLF Scripps Howard News Service Feb. 20, 2012
Photo courtesy National Archives and Records Administration

The federal government each year bans about 1,000 retailers found to have engaged in fraud from ever accepting food stamps again. But scores of these retailers disobey the permanent prohibitions and continue to shortchange complicit customers and unwitting taxpayers. Public records suggest that these prohibited businesspeople are brazen enough to reapply to deal in food stamps sometimes from the same location at which they were caught committing fraud. While the U.S. Department of Agriculture has won applause for its efforts to police the $75 billiona-year food stamp program that assists 46.2 million Americans, it has had difficulty screening out rogue retailers. A Scripps Howard News Service investigation has found records indicating that dozens of individuals

who had been banned as food stamp vendors nonetheless remained in the business in New York; Los Angeles; Phoenix; San Diego; Tulsa, Okla.; West Palm Beach, Fla.; Baltimore and other communities across the country. Case in point: The Foods Mart convenience store in Baltimores gritty Remington neighborhood. In December, Scripps identified one of the stores owners, using Maryland corporation records and city business filings, as Nasir Pervaiz who was permanently barred in January, 2011 by the USDA. Upon learning of Scripps discovery, the USDA opened an investigation and notified the storeowners that they would face a hearing, agency officials said. As of mid-February, the store was no longer taking food stamps, a visit there showed. The SHNS method of flagging suspect merchants

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A Bureau of Printing and Engraving employee examines a sheet of food stamps for the U.S. Department of Agriculture for errors in May 1974.

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BEHIND FOOD-STAMP TRAFFICKING

Roughly 231,000 stores participate in the U.S. Department of Agricultures Supplemental Nutrition Assistance Program, popularly known as food stamps. USDA permanently disquali es about 1000 retailers or vendors a year, almost always for tra cking: A vendor gives the customer cash or ineligible merchandise (alcohol or tobacco) in exchange for an Electronic Bene ts Transfer payment, at a rate greatly favoring the store. Electronic Bene ts Transfer payment But the vendor gets full reimbursement from the government. Such fraud cost taxpayers $330 million in 2008, the most recent year for which theres data. Reimbursement A store operating at a disquali ed site can seek SNAP vendor authorization if it has been sold and the new ownership excludes anyone involved in the earlier fraud, USDA says. A third of disquali ed sites get reapproved sometimes under false pretenses. Common ruses include: SHELL GAME Because corporate records dont necessarily name owners, they create a cover of anonymity. Other sources of uncertainty:
- Sometimes USDAs

STRAW OWNERSHIP A disquali ed vendor recruits other individuals to pose, on paper only, as proprietor(s). Disquali ed vendor

records dont match those led with a city or state. - Or, months after a site gets SNAP approval, the previous, disqualied vendor is listed as an owner in local or state business records.

Straw owners

Sources: USDA, court records, corporate lings and interviews

John Bruce/Scripps Newspapers

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involved comparing data from hundreds of current liquor, food and health licenses, state corporate filings and city business records with a list of stores that the USDA has permanently disqualified. USDA officials said the agency has not fully employed that technique in the past. But, in response to the Scripps investigation, the officials said they will now search more of the same records and will broadly expand the number of merchant applications that they closely review. In addition, the USDAs investigative arm, the inspector generals office, says it has begun a criminal examination of one of the suspect storeowners identified by Scripps. And Kevin Concannon, USDA undersecretary of the Food and Nutrition Service, which oversees the food stamp program, said another merchant identified by Scripps is going to be taken out of the program. Concannon told Scripps in a written statement that his agency abhors fraud: Rogue stores and their owners should be punished out of the program permanently and prosecuted criminally where possible. A rough average of 125 storeowners are convicted of food stamp trafficking each year, according to data from the USDAs Inspector Generals office, which investigates the crime. Punishment can include prison sentences and fines, court records show. The toll of trafficking for taxpayers: $330 million in 2008 alone, the most recent USDA accounting shows. At last count, 231,000 retailers nationwide were approved to participate in the Supplemental Nutrition Assistance Program, the food stamp programs formal name. Over the past decade the USDA has expelled an average of 830 retailers for trafficking each year, though the agency is picking up the pace. In fiscal year 2011, it disqualified more than 1,200 stores, and is on track to bust 1,400 stores this fiscal year. In the trafficking scheme, retailers encourage food stamp recipients to trade their benefits for cash or ineligible merchandise particularly alcohol or tobacco at an exchange rate favoring the store. Recipients swipe their benefits cards and punch in a PIN number, just as with a debit card. The electronic data is zapped to the government or a bank administering the program on its behalf. The merchant takes full payment for the transactions stated price and pockets the difference which can add up to as much as $50,000 a month, according to the 2009 federal indictment of a south Florida ring. In many of the nations poorest neighborhoods, owners and employees of the plentiful mom-and-pop convenience and liquor stores say they face constant pressure from their clientele to game the system. Every next customer comes in and asks me to give them cigarettes and cash using their food stamps, said Yasmin Bibi, who said she manages the Foods Mart in Baltimore. When we say no, they yell at us. The Scripps investigation centered on a USDA list, obtained through the Freedom of Information Act, of the 4,600 retailers from January 2006 through last July who have been permanently disqualified from accepting food stamps. Once disqualified, a retailer is forever barred from participating in the program, USDA spokeswoman Susan Acker wrote in an email. But nearly a third of those retail sites 1,492 continue to accept food stamps, Scripps found in comparing the disqualifications with a list of all USDA-approved SNAP vendors. Some of those retail sites have entirely new owners, making them eligible to re-enter the food stamp program. But Scripps found many sites still operating with the same disqualified owners. For instance, after the owner of Horseshoe Liquor & Market in the San Diego suburb of Spring Valley, Calif., was permanently disqualified last February, according to USDA records, a store at the same location got USDAs approval to take food stamps, agency records show. While the store itself was allowed to remain, its ownership wasnt. But liquor records from the California Department of Alcoholic Beverage Control show that Aziz Audish has been the primary owner from June 2010 to the present both before and after the disqualification. Responding to questions about the stores ownership, the USDA said Scripps had identified anomalies. Audish confirmed to a reporter that he is the owner of the store, but said he is licensed to accept food stamps because of an ownership change. He did

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not deny the USDA had disqualified him. The USDA would not disclose the names of any barred owners, citing their privacy rights. So Scripps unearthed ownership and management stakes by crossreferencing the addresses of disqualified retail sites against state and local business records and alcohol licenses. Some sites have been busted for trafficking repeatedly. Scripps analysis identified 137 locations at which merchants had been disqualified as many as four times. One, a store in Miamis poor Overtown neighborhood, was approved and disqualified under four names between 2003 and 2006 before its operators were charged with stealing $1.2 million, a 2009 federal indictment and the USDA data show. Likewise, four businesses run successively out of a bodega in Hartford, Conn., were permanently disqualified while owned by the same illegal immigrant, who was convicted of recruiting straw owners and making $1.6 million from food stamp trafficking, the Justice Department said in June. Despite that bust, uneven oversight continues. In Tulsa, for example, Bills Quick Stop owner Nabeel Sheikh was busted for food stamp trafficking in 2008, the USDA said. Later, the USDA readmitted the store to the program on the condition that Sheikh wouldnt be employed there, the USDA said. Tulsa city records show the new owner of the store is F & U Zakir, LLC. But city health department documents in November 2011 listed Sheikh as man-

Disqualified food stamp vendors

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ager. Reached at the store this month, Sheikh denied owning the store or working there, and said he was there just filling in. Based on Scripps findings, the USDA says it is investigating the store. In some cases, the actual ownership of a store, and its connection to a former owner who has been banned, can be obscured by layers of corporate filings. In Fort Pierce, Fla., for instance, USDA records show the owner of Express Food Market was permanently disqualified from accepting food stamps in April 2009. Even so, the store remains open and has USDA approval to take food stamps. But, according to state alcohol licenses, the store was owned from 2007 to 2011 both before and after the disqualification by an entity called Express Food Mart #555, Inc. That corporation was controlled by Manzoorul Haq, according to state corporate records. In 2011, the liquor license was transferred to and continues to be held by Takdir Grocery, Inc., according to the Florida Department of Business and Professional Regulation filings. And the only corporate officer listed for Takdir is Manzoorul Haq. Neither Haq, nor anyone else at the store, would speak on-the-record to a reporter. When asked to comment on this case, USDA officials said they would require the stores owner to prove that ownership has actually changed.

Source: USDA data SHNS graphic by Danielle Alberti

A map shows all disqualified food stamp vendors in the United States.

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USDA probing banned food stamp merchants IDd by Scripps

BY ISAAC WOLF Scripps Howard News Service Feb. 20, 2012

The U.S. Department of Agriculture says it wants to secure an unlocked backdoor that allows stores banned for engaging in food stamp fraud to slip unnoticed back into the federal program. The agencys announcement came a few weeks after Scripps Howard News Service brought to the USDAs attention that a reporter had discovered a way to identify blacklisted businesses that had sneaked back onto the rolls of approved vendors. Using the method, Scripps has found evidence in dozens of cases nationwide where stores were caught and permanently disqualified from taking food stamps but continued to do business with customers using the government food benefit. These same retailers used false applications claiming that someone with a clean record now owned and ran the store to once again be allowed to accept food stamps. Scripps discovered this by comparing USDA disqualification records against hundreds of local and state documents including business filings, health inspection reports, liquor licenses, tobacco sales permits and corporate certificates. The Scripps reporting has spurred the USDA to investigate stores in Baltimore, San Diego, Tulsa, Okla., and West Palm Beach, Fla., and has prompted at least one criminal probe. In interviews with Scripps, USDA officials have said they dont always review these state and local records to fact-check food stamp merchant applications from stores that have previously been busted. But thats changing. In a Feb. 6 press release, the agency says it will conduct the same due diligence Scripps has performed to help reduce the number of disqualified stores that return to the program by falsifying information in their applications.

Previously, the USDA relied on the existence of a new business license as proof that a store had a new owner, said Kevin Concannon, USDA undersecretary for the Food and Nutrition Service. But as the Scripps investigation showed, that hasnt been sufficient and, Concannon said, on the basis of further review, were saying ... lets require all of those public licenses, as additional documentation. The crime is as widespread as it is simple: Stores accept food stamps but, instead of selling wholesome groceries to customers, they provide the customers a small amount of cash typically 50 cents on the food stamp dollar. While taxpayers lose out the money isnt going toward wholesome food food stamp recipients are receiving no-strings attached cash and stores are taking a hefty profit for serving as a moneychanger. Over 17,000 stores are estimated to have engaged in trafficking, according to the USDAs most recent study, which examined activity from 2006 to 2008 and was released in March 2011. The cost to taxpayers of that trafficking is $330 million annually, according to the agency. A major constraint for the USDA is manpower. The agency has 100 anti-fraud investigators watching over about 231,000 stores nationwide that accept food stamps, formally known as the Supplemental Nutrition Assistance Program. Michael Tanner, senior fellow at the libertarian Cato Institute think tank in Washington, says the USDAs efforts to crack down on food stamp fraud amounts to little more than lip service. If its a real priority, you dont have a hundred inspectors you have a thousand inspectors, Tanner said. Believe their actions, not their words.

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Photo courtesy National Archives and Records Administration

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Issa calls for hearings on food stamp fraud, cites Scripps findings
By ISAAC WOLF Scripps Howard News Service Feb. 21, 2012

The chairman of the U.S. Houses government oversight committee Tuesday directed U.S. Department of Agriculture officials to explain how they will prevent food stamp merchants banned for fraud from staying in the program. Chairman Darrell Issa, R-Calif., citing E.W. Scripps newspaper and broadcast investigations of the barred retailers published Monday, said he also will hold hearings on the alleged abuses uncovered by Scripps. We expect to give the USDA a very short leash on bringing real reform to this failed policy, Issa said. In a letter Tuesday to USDA Undersecretary Kevin Concannon, who heads the food stamp program, Issa asked the agency to detail what the USDA does to keep the permanently disqualified vendors from quietly staying in the business. ... the Scripps article found pervasive weaknesses in USDAs process for disqualifying and reauthorizing merchants to accept benefits, Issas letter said. Issa, chairman of the House Committee on Oversight and Government Reform, also raised the possibility that oversight of the program might be moved to an independent agency, more dedicated to cleaning up the mess. Using records obtained under a Freedom of Information Act and extensive data analysis, Scripps compared store owners who had been banned with those currently permitted to accept food stamps. By reviewing local business filings, liquor licenses, health inspection reports and state corporation filings, Scripps reporters found evidence in dozens of cases in New

York; Los Angeles; Phoenix; San Diego; Tulsa, Okla.; West Palm Beach, Fla.; Baltimore and other communities across the country where the store ownership hadnt changed. Before the Scripps reports were published, the USDA opened a criminal investigation of one suspect minimart, ejected a Baltimore convenience store from the food stamp program, and opened administrative inquiries into several other stores all identified by Scripps. USDA also announced it would tighten oversight of vendor applications by seeking more types of records, employing the method used by the Scripps reporters. USDAs Concannon did not respond to a request for comment Tuesday. But in the past, he has noted a longterm drop in food stamp fraud and the departments energetic commitment to rooting it out. And in letters to the editors of Scripps newspapers Tuesday, Concannon defended the integrity of the vast majority of people participating in the program, both as retailers and food stamp recipients. Because food stamps provide nutrition to 46 million people each month, Concannons letter said, The stakes are simply too high to let a few bad actors compromise this vital program. But Issa is far from satisfied. In an interview with KGTV, the Scripps-owned television station in San Diego, Issa called the discoveries the tip of the iceberg. He praised Scripps for uncovering the problem. This makes a difference when we have watchdogs who have done their homework, and allow us to do the rest of the job for you.

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Citing Scripps, Issa says govt should target bad food stamp merchants
By ISAAC WOLF Scripps Howard News Service Feb. 29, 2012

At a hearing next week, the Houses government oversight committee will probe why the U.S. Department of Agriculture is allowing stores banned for food stamp fraud to continue participating in the government-benefit program. Speaking Wednesday morning on Fox News, Chairman Darrell Issa, R-Calif., cited E.W. Scripps newspaper and broadcast investigations published last week which found that dozens of retailers kicked out of the program after being caught engaging in food stamp fraud remain in the business. Issa said the USDA not a media organization should have been scrutinizing the retailers to prevent the permanently disqualified ones from finding ways around the ban. The Scripps Howard organization, they didnt go do rocket science, Issa said. This is something that, at a basic level, government should do. The Scripps investigation, Issa said, in effect performed the oversight the USDA should have done. It was the governments own databases that they went to and discovered there was no enforcement under this administration, he said. Using records obtained under a Freedom of Information Act and extensive data analysis, Scripps compared store owners who had been banned with those currently accepting food stamps. About 1,000 store owners each year are

permanently disqualified after getting busted exchanging food stamps for alcohol, tobacco or small amounts of cash. But some of these blacklisted business owners find ways to sidestep their exclusion. By reviewing local business filings, liquor licenses, health inspection reports and state corporations filings, Scripps reporters found evidence in dozens of cases in New York, Los Angeles, Phoenix, San Diego, Tulsa, Okla., West Palm Beach, Fla., Baltimore and other communities across the country where the barred owners were still in the food stamps trade. After Scripps identified specific owners and stores, the USDA opened a criminal investigation of one suspect minimart, ejected a Baltimore convenience store from the food stamp program, and opened administrative inquiries into several other stores. Praising the Scripps findings, Issa said the USDA should be doing the same thing. They used open source. They compared two lists the lists of those who were getting it (access to the food stamp program), and the list of those who were denied it. Issa will probe the issue further next Thursday at a hearing called Food Stamp Fraud as a Business Model: USDAs Struggle to Police Store Owners. Witnesses are expected to include Kevin Concannon, who as USDA undersecretary heads the food stamp program, and USDA Inspector General Phyllis Fong.

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Photo courtesy National Archives and Records Administration.

This display represents some of the food that could be bought with the blue (surplus) food stamps in 1941.

Neither Fong nor Concannon responded to interview requests for this article. However, in the past, Concannon has emphasized a long-term drop in the food stamp fraud rate. And in an editorial published Tuesday in the Roll Call newspaper, Concannon reiterated that the USDA is taking new steps to keep disqualified storeowners from once again being allowed into the Supplemental Nutrition Assistance Program, as the benefit is formally known. USDAs new measures include requiring more documentation from stores applying to accept food stamps and conducting more due diligence on the applicants. We must stay vigilant to remain ahead of the curve in fighting SNAP fraud, Concannon wrote. While the vast

majority of participants and retailers abide by the rules, a few bad actors are always looking for ways to exploit the program. In his Fox News remarks, Issa said that by letting these barred individuals slip back in, the efforts of the USDAs 100 anti-fraud investigators are going to waste. But an even worse consequence of the lax program oversight, Issa said, is the children who go hungry because their parents misspend their food stamps. This is about food for families, he said. So when people walk in with $100 of food stamps and they trade it for alcohol or they trade it for cash to go use illicitly, children are being denied the food that we the American people put this together for.

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USDA delays banning store owners busted for food stamp fraud
By ISAAC WOLF Scripps Howard News Service March 7, 2012

The U.S. Department of Agriculture is trumpeting a long-term drop in the food stamp fraud rate as it claims to be aggressively improving its investigations, increasing the number of stores it busts, and applying high-tech methods to rein in the $330 million-a-year crime. But some store owners say they see no evidence of these increased efforts, and the agency is facing questions about why it is not making sure that permanently banned store owners dont sneak back into the food stamp program. As the USDA prepares to explain at a congressional hearing Thursday how it allows those vendors to remain in the food stamp trade, the agency faces a host of skeptics from both inside and outside the Beltway. The hearing, called by U.S. House Committee on Oversight and Government Reform Chairman Darrell Issa, R-Calif., comes in response to an ongoing Scripps Howard News Service investigation into food stamp fraud. Scripps newspapers and TV stations found evidence in dozens of cases across the country that, even when store owners are busted for swapping food stamps for cash or liquor and are permanently disqualified, they are able to sidestep punishment and quietly re-enter the program. To confirm Scripps methodology, reporters checked samples of those cases with USDA officials, who verified the approach and acknowledged some, but not all, of the findings. Moreover, Scripps also identified dozens of other potential cases that were not shared with the agency. A 2010 audit by the USDAs own internal watchdog said the USDAs oversight problems in some cases run deeper. In hundreds of instances, store owners are convicted

of food stamp fraud or other food-assistance violations but never banned from exploiting other federal programs, according to the USDA Inspector Generals Office audit. And when the USDA does decide to blacklist a vendor caught engaging in fraud, it can take years for the disqualification to take effect, Scripps found. For example, it took the USDA more than three years to officially ban the former owner of the New Saigon Sooper Market in Denver after being caught engaging in fraud, according to USDA officials and agency records. (The store, under different ownership, now accepts food stamps, USDA records show). In fact, when the USDA believes a store is engaging in food stamp trafficking, it has the authority to disqualify the vendor immediately, USDA spokeswoman Susan Acker said in an email. Why that didnt happen to the Denver store is unclear. Kevin Concannon, who oversees the food stamp program as USDA undersecretary for the Food and Nutrition Service, declined to comment. Some critics say the reason is that food stamp trafficking isnt a high enough priority. If the USDA wanted, it could increase efforts in suspension and debarment, according to an official in the USDA Inspector Generals office who requested anonymity. While the USDA wants the public and lawmakers to believe its doing all it can to stop fraud, the official said, that isnt the case. Christy Paek agrees. As owner of Christys Market in Baltimores Franklin Square neighborhood, she said its clear to her that the USDA isnt searching for fraud. If of-

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ficials did, she said, theyd find plenty. No way theyre looking into it, Paek said. If they were, there would be a lot of store owners scared. But theyre not doing anything. Paek said she turns away 50 or 60 food stamp recipients each month who walk into her store saying 10 for 20. That is street parlance for wanting to swap $20 in food stamp benefits for $10 cash. But, Paek said, other nearby stores do these deals, and food stamp recipients often rub it in her face by coming back to her store and showing her receipts from the bogus transactions, she said. Paek said she thinks the vast majority of stores in her neighborhood pad their income by trafficking in food stamps. She said shes willing to tell authorities which stores she thinks are engaging in fraud but she isnt sure whom to alert. Who can I go to? Paek said. Who can I report this to?

In fact, the USDA has a hotline 1-800-424-9121 and a new website for the public to report alleged fraud: www.fns.usda.gov/fightingsnapfraud But even when fraud is reported to the USDA, the agency doesnt necessarily take action to ensure the fraudsters dont strike again. More than 600 wholesalers and retailers were convicted of Food and Nutrition Service violations from fiscal years 2004 to 2007, according to the Inspector Generalss audit. As of the reports publication in 2010, none of those offenders had been placed on a government-wide blacklist, the audit found. In general, we found that USDA agencies did not use suspension and debarment to protect other USDA and Federal agencies, reads the audit. They cited as reasons for their inaction their limited resources and interest only in their assigned programs.

Photo courtesy National Archives and Records Administration.

A shopper uses food stamps at a Giant grocery store in March 1970.

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Food stamps chief defends program in face of charges of scandal

By ISAAC WOLF Scripps Howard News Service March 8, 2012

The head of the federal food stamp program on Thursday forcefully defended his agencys record of weeding out and keeping out store owners busted for engaging in fraud. At a U.S. House Committee on Oversight and Government Reform hearing, Kevin Concannon, undersecretary of the U.S. Department of Agricultures Food and Nutrition Service, listed his agencys efforts at reducing food stamp fraud, while also noting the long-term decline in the fraud rate since the 1990s from 4 cents on the dollar to 1 cent. The hearing, called by House oversight panel Chairman Darrell Issa, R-Calif., came in response to a Scripps Howard News Service investigation into food stamp fraud. Last month, Scripps newspaper and TV-station reporters found evidence in dozens of cases across the country that, even when store owners are caught swapping food stamps for cash or liquor and are permanently disqualified, they have been able to sidestep punishment and quietly reenter the program, officially known as the Supplemental Nutrition Assistance Program (SNAP). At the hearing, Issa described what Scripps uncovered as a scandal, and said that stores caught engaging in fraud must actually be punished permanent needs to mean permanent.

Describing Scripps as a citizen watchdog and its reporters as whistleblowers, Issa also said the USDAs team of 100 fraud investigators should be using Scripps methods to recalibrate their efforts. One of those 100 (investigators) assigned to do what whistleblowers have done for us, in fact, could have prevented many of these stores from being back in business, Issa said. Its that simple. Concannon told lawmakers that Scripps investigation has already resulted in the discipline or investigation of the owners of eight stores that accept food stamps. He said authorities are criminally investigating one store owner identified by Scripps, and, at five additional locations, merchants are being charged with falsifying records or have already been booted from the food stamp program for that crime. A seventh has been charged with trafficking, and the USDA has pulled another owners food stamp accreditation for inactivity. Despite these results and even though the USDA has never sought a correction or clarification from Scripps Concannon attempted to discredit the investigation by saying it had some critical deficiencies. He said that the majority of store owners Scripps brought to the USDAs attention did not turn out to show wrongdoing. In fact, Scripps reporters around the nation checked

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SHNS photo by Danielle Cohen

Kevin Concannon, undersecretary of the U.S. Department of Agriculture, testified Thursday before the U.S. House Committee on Oversight and Government Reform. Committee chairman Darrell Issa, R-Calif., called the hearing in response to a Scripps Howard News Service investigation.

samples of the dozens of cases it found with USDA officials, who acknowledged problems with some, but not all, of the store owners. Moreover, Scripps used state and local records to redflag additional cases not identified to the USDA. And, despite his criticism of the reporting, Concannon said his agency has now adopted Scripps method of digging out the fraud. Some Democrats at the hearing echoed Concannons point, while also charging that Republicans true interest is in cutting food stamp benefits. Ranking committee member Elijah Cummings, D-Md., for example, said in his written testimony that this press account has significant problems, that the USDA has acted quickly to address bad actors, and that the SNAP program continues to be an extremely well-run program. But not everyone shared Cummings view. USDA Inspector General Phyllis Fong said Agriculture Department officials should be blacklisting convicted retail-

ers, which would keep them from landing other government contracts. We feel very strongly that the USDA as a whole needs to do a better job at suspension and debarment, Fong said. Concannon countered that this would entail a whole extended process one he deemed unnecessary. But nonetheless, he also said the USDA is working with another branch of the federal government, the General Services Administration, to allow the USDA to blacklist those convicted of food stamp fraud. Rep. Jackie Speier, D-Calif., while generally supportive of the USDA, rejected Concannons rationale that such a broad ban shouldnt be imposed because its cumbersome and costly. You know, democracy is costly. I dont think we should use the argument that its costly, Speier said. If we have evidence of convictions and these retailers have violated the laws and we dont debar them, then shame on us.

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Knoxville News Sentinel Knoxville, Tenn.

Making news across America

Evansville Courier & Press Evansville, Ind. Ventura County Star Ventura, Calif.

Naples (Fla.) Daily News

The Stuart News Stuart, Fla.

The Commercial Appeal Memphis, Tenn.

Corpus Christi Caller-Times Corpus Christi, Texas

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Times Record News Wichita Falls, Texas National Public Radio Politico Washington, DC

C-SPAN

WNYC New York

FOX News Star Tribune Minneapolis, Minn.

KNXV Phoenix

WMAR Baltimore

KGTV San Diego

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Editorial: A new way of attacking food stamp fraud

By DALE MCFEATTERS Scripps Howard News Service Feb. 20, 2012

The federal food stamp program, administered by the U.S. Department of Agriculture, is perhaps the nations most important nutrition program. At an annual cost of $75 billion, food stamps help feed 46.2 million Americans a year. Unfortunately, the program is afflicted by a persistent and resilient form of fraud that undercuts its intent and credibility with the broader public. Crooked retailers encourage food stamp recipients to trade their benefits for cash or ineligible merchandise like liquor and tobacco, at a substantial markup. The recipient swipes the USDA benefit card and punches in a PIN number, as with a debit card. The government or a participating bank reimburses the retailer for the full price of what has been represented as legal merchandise. Food stamp recipients get their liquor, cigarettes or cash and the store owner pockets the mark up as much as $50,000 a month, in the case of one South Florida ring. The most recent USDA figures, for 2008, show that fraudulent trafficking accounted for $330 million in losses. With 231,000 retailers nationwide approved to participate, the USDA estimates 17,000 retailers illegally trafficked in food stamps. The agency struggles

to expel more than 1,000 retailers a year for fraudulent operations. Once nabbed for food stamp fraud, the storeowners are supposedly barred from the program permanently, but they have a way of returning under new names or straw owners. Scripps Howard News Service reporter Isaac Wolf, in a computer-assisted investigation, obtained a USDA list of 4,600 permanently disqualified vendors under the Freedom of Information Act. He compared it against a USDA list of all the stores accepting food stamps, finding that about a third 1,492 of the banned stores continue to take them. Some of these may represent a legitimate change of ownership, but Wolf found dozens of cases where state and local records indicate that the owners are the same. Impressed by Wolf s investigation, the USDA is now incorporating his methods to search the same records and expand the number of vendor applications marked for closer review. And it is doing follow-up investigations of locations Wolf identified as participating in the food stamp program under false pretenses. We wish the USDA investigators good hunting. Its too beneficial a program to be so coarsely tarnished.

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