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Think fast. What do you think of when you hear the term? food stamps? Time’s up. Did you imagine someone down on his or her luck without a job and trying to feed a family? Or…did you picture expensive, luxury cars? Somehow, it seems like luxury cars and food stamps shouldn’t really go together, should they? Many times, fraud is involved. And, that’s the case in today’s Fraud of the Day from Yahoo! News.

The article focuses on two separate cases in which individuals defrauded the Supplemental Nutrition Assistance Program (SNAP), the federally funded food subsidy program also known as food stamps. In the first case out of Louisiana, ”the owner of two grocery stores was ordered to pay more than $1.7 million in restitution and was sentenced to five-and-a-half years in prison after trading food stamps for cash and other goods.’? Investigators seized two bank accounts and four luxury cars (pick your dream car, it was probably on the list) from the defendant.

The second case took place in Texas but had remarkably similar circumstances. In this case, ”a federal judge ordered a grocery store owner to pay $1.3 million in restitution for swapping food stamps for cash, alcohol and tobacco.’? There, the owner was sentenced to 33 months in prison. Investigators in this case said that ”some of the cash generated by the trafficking was spent on playing video poker machines in the store.’? (Oh, that counts as food.)

Just to be clear? SNAP benefits are to be used to buy food – not to buy alcohol or tobacco. Recipients also are not supposed to trade their SNAP electronic benefit transfer (EBT) cards for cash. Therefore, store owners shouldn’t have extra cash lying around to play video poker or buy expensive cars. When store owners trade SNAP benefits for cash, as the case in the two examples in this article, they often provide the EBT card holder with less money than the card is worth – and generally make a pretty nice profit in the process.

So, what have we learned? Here we have two cases in different parts of the country where fraudsters bilked the food stamps program for millions of dollars. They used the same method? exchanging EBT cards for cash. The only difference is how they spent your money. I think that’s what we learned? how easy it is for fraudsters to scam government programs and how important it is for the government to take steps to prevent this fraud.

Source: Today’s ”Fraud of the Day” is based on an article titled, ”Ferrari Seized in Food Stamp Fraud Case,” written by Reuters’ reporter, Charles Abbot, and published by Yahoo! News on September 26, 2012.

WASHINGTON (Reuters) – Federal investigators uncovered two grocery store owners who trafficked in more than $1 million in food stamps apiece and seized four luxury cars, including a Ferrari, from one of them, the Agriculture Department’s watchdog agency said on Wednesday.

In Lake Charles, Louisiana, the owner of two grocery stores was ordered to pay more than $1.7 million in restitution and was sentenced to five-and-a-half years in prison after trading food stamps for cash and other goods, the department’s inspector general said in a report.

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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.