Store Owner Arrested in Connection with Food Stamp Fraud Case

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Many of us have pretty good lives. We have a home, and are able pay our mortgage every month; we have kids, and are able to help provide for them as they pursue an education; and from time to time, we splurge on a nice dinner out. Whether we have the whole package or even some elements of it, we recognize that our hard work has paid off; and maybe even that we’ve been a bit lucky. Not everyone is as fortunate. There are some who live paycheck to paycheck, and still others who don’t have a paycheck. They are diligently looking for work and just find themselves going through a tough time. Things may be so hard that they scrape pennies together just to put food on the table. The Supplemental Nutrition Assistance Program (SNAP), also known as food stamps, exists to help these people buy food. Unfortunately, fraudsters take advantage of SNAP, and that’s what’s alleged in today’s fraud from Boston.com.

Before diving into the fraud, let’s start with a little background on SNAP. It works like this: individuals apply for benefits, and if found eligible for the program, they receive an Electronic Benefit Transfer (EBT) card. The card is loaded with funds that the individual can use to purchase food at the store. And, that’s key…beneficiaries must purchase food, as opposed to items like cigarettes and alcohol. Also, they cannot trade the card for cash (that’s one of the reasons it’s called food stamps not cash stamps). Beneficiaries are only part of the equation. Another key component is the store owners. They apply to participate in the program, so they can accept EBT cards and they know what beneficiaries can buy and that the card cannot be traded for cash. The last part of the equation is the American people – our taxes support SNAP benefits.

The article at the center of today’s fraud reports that a Quincy, Massachusetts store owner has been arrested in connection with a ”scheme to trade food stamp benefits for cash” and charged with larceny and fraud. Authorities say that the store owner or a clerk ”would swipe a customer’s food stamps card, giving back half of the sale amount in cash instead of groceries, before profiting off the rest.” They allege that the store owner committed up to $700,000 worth of food stamp fraud in under two years. ($700K in two years – that’s a lot of transactions.)

And, according to the article, the store owner may not be the only one in trouble. About 20 others face charges for allegedly selling their benefits to the store owner. (If the facts alleged are true, this makes sense: the owner would need the EBT card from the beneficiary to trade the card for cash. So, basically, they would be in on it together.)

The store owner pleaded not guilty to the charges, and it should be noted that he – like all defendants – is innocent until proven guilty. But the alleged facts offer a good example of how food stamp fraud can be perpetrated. So, here’s the key issue and our question of the day: now that we know how SNAP fraud is happening, what steps can states and the federal government take to prevent it?

Source: Today’s ”Fraud of the Day” is based on an article entitled, ”Store Owner Arrested in Alleged Food Stamp Fraud,” written by the Associated Press and published by Boston.com on April 19, 2012.

BOSTON—A Quincy store owner faces criminal charges after what authorities claim was a scheme to trade food stamp benefits for cash.

Authorities arrested Pat Lu, the 48-year-old owner of Pat’s Mini Mart, on charges including larceny and fraud.

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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.