Stamping our food stamp fraud

The federal government each year bans about 1,000 retailers found to have engaged in fraud from ever accepting food stamps again.
 
But scores of these retailers disobey the permanent prohibitions and continue to shortchange complicit customers and unwitting taxpayers.
    
Public records suggest that these prohibited businesspeople are brazen enough to reapply to deal in food stamps -- sometimes from the same location at which they were caught committing fraud.
    
While the U.S. Department of Agriculture has won applause for its efforts to police the $75 billion-a-year food-stamp program that assists 46.2 million Americans, it has had difficulty screening out rogue retailers.
    
A Scripps Howard News Service investigation has found records indicating that dozens of individuals who had been banned as food-stamp vendors nonetheless remained in the business in New York; Los Angeles; Phoenix; San Diego; Tulsa, Okla.; West Palm Beach, Fla.; Baltimore and other communities across the country.
    
Case in point: The Foods Mart convenience store in Baltimore’s gritty Remington neighborhood. In December, Scripps identified one of the store's owners, using Maryland corporation records and city business filings, as Nasir Pervaiz -- who was permanently barred in January, 2011 by the USDA.
    
Upon learning of Scripps' discovery, the USDA opened an investigation and notified the storeowners that they would face a hearing, agency officials said. As of mid-February, the store was no longer taking food stamps, a visit there showed.
    
The SHNS method of flagging suspect merchants involved comparing data from hundreds of current liquor, food and health licenses, state corporate filings and city business records with a list of stores that the USDA has permanently disqualified.
    
USDA officials said the agency has not fully employed that technique in the past. But, in response to the Scripps investigation, the officials said they will now search more of the same records and will broadly expand the number of merchant applications that they closely review.
    
In addition, the USDA's investigative arm, the inspector general's office, says it has begun a criminal examination of one of the suspect storeowners identified by Scripps.
    
And Kevin Concannon, USDA undersecretary of the Food and Nutrition Service, which oversees the food stamp program, said another merchant identified by Scripps is "going to be taken out of the program."
    
Concannon told Scripps in a written statement that his agency “abhors” fraud: “Rogue stores and their owners should be punished -- out of the program permanently -- and prosecuted criminally where possible.”
    
A rough average of 125 storeowners are convicted of food-stamp trafficking each year, according to data from the USDA's Inspector General's office, which investigates the crime. Punishment can include prison sentences and fines, court records show.
    
The toll of trafficking for taxpayers: $330 million in 2008 alone, the most recent USDA accounting shows.
    
At last count, 231,000 retailers nationwide were approved to participate in the Supplemental Nutrition Assistance Program, the food-stamp program’s formal name. Over the past decade the USDA has expelled an average of 830 retailers for trafficking each year, though the agency is picking up the pace. In fiscal year 2011, it disqualified more than 1,200 stores, and is on track to bust 1,400 stores this fiscal year.
    
In the trafficking scheme, retailers encourage food-stamp recipients to trade their benefits for cash or ineligible merchandise -- particularly alcohol or tobacco -- at an exchange rate favoring the store.
    
Recipients swipe their benefits cards and punch in a PIN number, just as with a debit card. The electronic data is zapped to the government or a bank administering the program on its behalf. The merchant takes full payment for the transaction’s stated price and pockets the difference -- which can add up to as much as $50,000 a month, according to the 2009 federal indictment of a south Florida ring.
    
In many of the nation's poorest neighborhoods, owners and employees of the plentiful mom-and-pop convenience and liquor stores say they face constant pressure from their clientele to game the system.
    
“Every next customer comes in and asks me to give them cigarettes and cash” using their food stamps, said Yasmin Bibi, who said she manages the Foods Mart in Baltimore. “When we say ‘no,’ they yell at us.”
    
The Scripps investigation centered on a USDA list, obtained through the Freedom of Information Act, of the 4,600 retailers from January 2006 through last July who have been permanently disqualified from accepting food stamps.
    
Once disqualified, a retailer “is forever barred from participating in the program,” USDA spokeswoman Susan Acker wrote in an email.
    
But nearly a third of those retail sites -- 1,492 -- continue to accept food stamps, Scripps found in comparing the disqualifications