36583220 - shopping with shopping cart in snack department of supermarket

Fraudsters are spoiled. They indulge in government funds intended to assist qualified beneficiaries like kids who can’t keep their hands out of the cookie jar. (They spend the “free” money on themselves in a variety of extravagant ways because one cookie is never enough.) A Davie, Florida company owner who participated in the Child Care Food Program (CCFP) as a contractor and a Miramar, Florida caterer conspired to commit food stamp fraud using federal subsidies intended for low-income kids across South Florida. Their half-baked scam spoiled when more than 140 preschool children were affected by a staph-induced foodborne illness outbreak.

Operated by the Florida Department of Health, the CCFP’s purpose is to provide nutritious meals and snacks for underprivileged, low-income children in Florida daycare centers. The program provides assistance to children classified at or below a certain family income level by providing nutritious daily meals and snacks. (For some kids, it’s the only meal they receive during the day.)

Daycare centers receive government subsidies by contracting with a sponsoring organization that processes and submits their program paperwork. The government pays a much higher reimbursement rate for kids who are classified as “free.” Actually, nine times more than for a child that is classified as “non-needy.” (So, you can see the incentive to defraud the program by inflating the “free” numbers.)

The focus of today’s fraud article is on the owner of a Miami-Dade company representing approximately 200 daycare centers from Key West to West Palm Beach and across Florida to the state’s West Coast and the owner of a Hialeah catering business. Read on to find out how the two conspired to steal $22 million from the program that was intended to feed underprivileged children.

Over five years, the catering company made about $14 million from contracts with the sponsoring company that submitted the CCFP paperwork for the 200 South Florida daycare centers. The sponsoring company took care of the details that allowed the centers to receive meals on a sliding-scale through the federal program. (The catering company owner paid $680,000 in kickbacks and $160,000 in bribes to the sponsoring company to maintain his business relationship as it was very lucrative.) In exchange, the sponsoring company rigged catering bids and food contracts subsidized by the CCFP. The sponsoring company owner protected the catering owner until parents complained multiple times to Florida Department of Health regulators about their children becoming sick from the caterer’s spoiled meals.

The two fraudsters falsified paperwork, participated in multiple kickback arrangements, manipulated the catering contract bid process with the government and inflated annual budgets to rake in millions of dollars they did not deserve. (These illegal actions caused the government to pay higher reimbursements to the sponsoring company, who then kept a larger fee to represent the 200 daycare centers.) The sponsoring company owner deposited fees she collected from the illegal arrangement into the bank account of her husband’s mobile car wash business and other accounts she controlled. The catering company owner failed to report $27 million income to the Internal Revenue Service (IRS). Additional research shows that he spent the money on visits to casinos, strip clubs, homes, cars and jewelry. (Talk about getting your hand caught in the cookie jar.)

The Floridian fraudsters pleaded guilty to food stamp fraud. They are both facing a maximum of 20 years behind bars. The caterer faces an additional sentence of 10 years for bribery. Another co-conspirator, a program coordinator who worked for the sponsoring organization, cooperated with prosecutors and received seven years behind bars. Congratulations to the IRS, Secret Service and the Department of Agriculture for spoiling this food stamp fraud scheme intended to rob vulnerable children of food they need to grow and prosper.

Today’s “Fraud of the Day” is based on an article entitled, “Hialeah businessman found guilty of food fraud at 200 child care centers,” published by The Miami Herald on April 2, 2019.  

Sandra Ruballo and Carlos Montoya had a good thing going with the federal government for years.

Her North Miami-Dade company represented about 200 daycare centers that received federal subsidies for food programs benefiting low-income kids. His Hialeah catering business provided the daily meals for them.

Previous articleMinimize
Next articleThings That Go Together
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.