Consumer Law

Food Stamp Fraud

Several years ago when food stamps were still issued as coupons, many drug dealers were caught with coupons. Addicts used the stamps as cash to buy drugs. Today people get what looks like a debit card, but fraud is still around.

Recently, three employees of a Detroit liquor store were found to be committing food stamp fraud. Their store gave out cash, alcohol, pornographic magazines and Viagra pills in exchange for food stamps. The store would supply food stamp receivers with these items and was reimbursed by the US Department of Agriculture (USDA).

The amount of fraud at the store totaled more than $130,000 over 2 1/2 years. Now, the liquor store is closed.

What are "Food Stamps"?

According to the USDA, more than 35 million Americans currently receive help, at a cost of $4.6 billion a month.

The Food Stamp Program is a form of public assistance and the main program in the nation's fight against hunger. The program was developed in the 1960's intending to improve the nutrition level and food purchasing power of low income people and families. It provides temporary assistance to anyone meeting its qualifications, regardless of age or race, who would otherwise go hungry.

Many stores and supermarkets accept food "stamps." Even stores such as Costco Wholesale accept the card.

From Coupons to Cards

The Food Stamp Program began by the use of stamps, or coupons, that people brought to stores instead of money to buy food. To help prevent fraud, coupons were eventually replaced with the electronic benefits transfer systems (EBT). The EBT eliminated the paper coupon system and replaced it with a benefit card that looks like a bank or credit card. Recipients use the card for their food purchases where they shop and the cost is deducted.

Are EBT Cards Better than Coupons?

Besides being less psychologically embarrassing to some recipients, an EBT card is a better measure against fraud. Compared with coupons, the card is less likely to be traded or sold because access to the benefits requires a personal identification number (PIN).

Also, recipients are less likely to trade the card because it provides an entire month's benefits. Lastly, EBT cards make it easier to detect trafficking by creating an electronic paper trail that allows better tracking of spending.

Fraud No Matter What

Since its passing, there have been two main fraudulent activities associated with the program. First, providing false information in order to be eligible to receive food stamps. The second is using program for other than its main purpose, called trafficking.

Recipients found guilty of providing false information attempting to use the program face penalties, including removal from the program and even criminal prosecution.

Because of its size and absurdity, the Detroit fraud stint that exchanged Viagra, pornography and alcohol for EBT funds, has been gaining much media attention, however. The truth is that fraud is still prevalent.

Government Response

Trafficking is a serious crime. It undermines the integrity of the program and diverts benefits from those who actually need help. The program has checks to prevent trafficking and strong penalties for those participate. Recipients and retailers engaging in these illegal activities are disqualified from the program and prosecuted.

In the Detroit scandal, three workers were arrested and pled guilty. This scandal has no doubt awakened many state officials and social workers to be more conscious of the misuse of fund, as well as the impact it has on those using them correctly.

Questions for Your Attorney

  • If my business accepts food stamps, what steps should I take to make sure that no employees engage in food stamp fraud? Will my efforts protect me from criminal charges and losing my qualification as a retailer if my employees find a way to commit fraud anyway?
  • If my personal information or EBT card is stolen and used for fraud, can I be found liable in any way, and could my eligibility for assistance be in jeopardy?
  • What should someone do if they suspect that a retailer or someone else is engaging in food stamp fraud?
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