PROVIDENCE, R.I. (WPRI) – Fewer than two percent of all certified food stamp retailers in Rhode Island were disqualified by from accepting EBT cards in 2012, but a reform advocate says that figure is just the tip of the iceberg of a fraud problem that is costing taxpayers millions of dollars each year.
According to a Target 12 review of data provided through a federal Freedom of Information Act request, 17 stores in nine communities had their Supplemental Nutrition Assistance Program (SNAP) certifications pulled last year by the U.S. Department of Agriculture after investigators found them violating food stamp regulations.
Just over 1,000 stores in the state are authorized to accept SNAP cards according to figures from the USDA.
Records show seven shops in Providence, North Providence, Warwick and Westerly were sanctioned for trafficking, which involves a cash transaction for a recipient's EBT card. Another seven stores – including ones in Cumberland and Coventry – were cited for selling ineligible items such as cigarettes. Three others were suspended for abusing a special Women, Infants and Children (WIC) program that caters to families with small children.
The penalties ranged from disqualification from allowing EBT cards for a select period of time up to permanent disqualification from the program, a significant blow for stores that depend on food stamps to turn a profit.
Representatives from four of those stores told Target 12 they are again accepting food stamps and an employee at another shop said their store has reapplied and will soon be allowing EBT cards to purchase items.
Two of the stores that were permanently disqualified from accepting food stamps are once again accepting SNAP cards after they changed the name of the store, according to records reviewed by Target 12.
Ken Block, a former gubernatorial candidate who was hired by Gov. Lincoln Chafee to investigate waste and fraud in the state's food stamp and Medicaid programs, said the penalties amount to little more than a "slap on the wrist" because there aren't enough investigators on the federal level to monitor every store that is abusing the system.
"They reapply, they change one letter in their last name, they can have a relative pull the permit for the food stamps as opposed to the holder of the certificate when they lost it," Block told Target 12. "And it's common knowledge if you face an administrative penalty, where you lose your ability to collect food stamps, you can usually be back in business in 30 days."
In March, Block issued a 16-page report that detailed what he considered widespread abuse of the state's welfare programs, including prisoners and deceased people receiving food stamps; retailers purchasing EBT cards; and Section 8 housing recipients underreporting their benefits.
Block's report led Chafee to submit a legislative package aimed at minimizing potential fraud, including bills that would beef up the Office of Program Oversight within the Executive Office of Health And Human Services (EOHHS).
Beryl Kenyon, a spokesperson for EOHHS, said the office is designed to "explore and investigate incidents of fraud, waste and abuse occurring in relation to health and human services programs."
Other proposed bills would allow for better data sharing among state agencies and would require photo identification on all EBT cards.
Block has been also roundly criticized by SNAP advocates who said his findings were merely anecdotal and suggested he was attacking the poor to score political points. Dr. Kathleen Gorman, who heads up the Feinstein Center for a Hunger Free America at the University of Rhode Island, said she doesn't believe there is any data suggests that fraud is rampant in the state's food stamp program.
"I see a lot of bills being introduced that I don't think they get at anything that people really care about," Gorman told Target 12. "I don't think they are going to help low income people, I don't think they are going to help the state in the financial situation that we're in and I don't think they are really going to identify any kind of fraud or trafficking or whatever it is people are concerned about."
Approximately 180,000 Rhode Island residents – nearly one in five - use food stamps and the average household receives about $250 per month, according to the Department of Human Services. As of March 3, 1,014 stores were certified SNAP retailers.
Over the course of three months Target 12 went undercover at several locations that were rumored to purchase SNAP cards for pennies on the dollar. The surveillance occurred on the first of every month when the government distributes the benefits.
The investigation yielded one instance of potential abuse: a shop owner from a Pawtucket convenience store used food stamps to purchase a cart-full of sodas and assorted snacks from a wholesale food store. Undercover video then showed him stocking the shelves with those items.
"That wouldn't surprise me that you were able to observe something like that," Block said. "In my report we actually documented not just the use of a single card in that scenario but I think as many as ten cards where they were used on after the other after the other."
Gorman said while that activity is unacceptable, it's also rare and more harmful to the poor than the taxpayer.
"That market owner [may be] exploiting individuals who need help," Gorman said. "He is now going to make a lot more money on what he is now stocking his shelves with."
RI man's sentence for food stamp fraud
Nationally, the most recent federal data shows that approximately 8% of the nation's food stamp retailers engaged in trafficking between 2006 and 2008, costing taxpayers an estimated $330 million. During the 2011-12 fiscal year, the USDA reported that its investigations resulted in 342 convictions and approximately $57.7 million in "monetary results."
At least one of those convictions came in the Ocean State.
In Sept. 2012, Syed Shah, a Lincoln man who owned a Providence convenience store, was sentenced to six months home confinement and ordered to repay $648,000 for his role in a scheme that involved allowing customers to redeem their benefits for cash and other ineligible items. Shah admitted that he used the fraudulent money to lead an extravagant lifestyle, including paying nearly $77,000 in cash for a new Mercedes.
Block said he believes crimes like the one Shah was convicted of are taking place all over the state and across the country. He said it doesn't make sense to target individuals who might be selling their EBT cards for as little as 50 cents on the dollar because it won't deter storeowners from continuing to engage in illegal activity.
"It takes two sides to tango," Block said. "You can't have the individual cardholder fraud without having someone who helps them convert it into cash. They come hand in hand. Frankly, the only good way to approach the problem is on the retailer side."
Gorman agreed that retailer fraud is worth monitoring because the storeowners are preying on poor people who likely need more than help purchasing groceries. But she said she isn't sure throwing more money at investigating potential crimes is the best use of government funds.
"I guess some people would like us to spend our money that way, it's not where I would spend my dollars," Gorman said. "I don't think that's where I would put my emphasis. It's like looking for something that I'm not sure is there. I guess I just don't understand the motivation."
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