Food Stamp Fraud - A Watchdog Investigation - WSPA.com

Food Stamp Fraud - A Watchdog Investigation

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Food stamp fraud costs taxpayers hundreds of millions of dollars a year. Food stamp fraud costs taxpayers hundreds of millions of dollars a year.
SPARTANBURG, S.C. - It’s worth billions of dollars nationally and for millions of hungry families it’s a critical lifeline but the federally funded SNAP program, more commonly known as “food stamps” can be an easy target for under the table deals and a valuable currency for black market transactions.

Federal estimates show $858 million in illegally trafficked benefits between 2009 and 2011 and there has been a steady increase in fraud since 2002.  In South Carolina, the program is administered by the Department of Social Services.

“This is something that we know goes on and we’re trying to curb,” said Karama Bailey, SC DSS Director of County Operations.

Finding that fraud and stopping it can be very different matters.

Most benefit trafficking involves the exchange of SNAP benefits for cash, usually with a 100% markup.  That means $100 in food stamps will sell for about $50 in cash.

7 On Your Side asked dozens of food stamp recipients about those transactions, nearly all were familiar with the process and with the “50 cents on the dollar” price. 

"It's usually half and half," said one.

“People sell them for any type of prices out here these days. They'll do anything to get some money," said another.

7 On Your Side did not ask the names of people commenting for this story because the people answering questions risk losing benefits for admitting to trafficking.

“Sometimes it’s hard for them to get money and they think, I got these food stamps it's just like a bank card."

In Cherokee County, the sheriff said he has video evidence showing how the “bank card” works.

Hidden camera video, taken by several undercover informants, shows a man named Mickey Allison on his front porch with what looks like the ATM scanner you’d see at any cash register.

In the video, Allison is seen on his front porch, next door to his produce stand.  The Sheriff said Allison was scanning SNAP cards and exchanging cash from his own pocket in exchange for the taxpayer money deposited into the store’s bank account.

At one point, food stamp recipients were lined up to exchange their benefits for cash at the same 50% rate common on the street.

Paula Sprouse, who did give her real name, said she sold $40 of benefits to Allison.

“Yeah I've got $20 from him before. I hit a hard spot myself and I knew he done that and I needed $20 and I went over there, Sprouse said.

Deputies said the red flag that helped them crack the case was in the unusual transactions.  Allison’s Produce was largely abandoned.  At the time the undercover video was shot, the store was only stocked with Christmas trees.  Still, deputies found food stamp transactions for hundreds of dollars.

DSS investigators said that’s a common trigger for retail investigations, big transactions at specialty stores.  They’re also using data analysis for other red flags, like transactions that take place after hours or big sales that frequently happen many miles from a card holders home address.

The USDA gave 7 On Your Side a list of South Carolina stores that have been sanctioned after food stamp investigations in 2012 and 2013. The complete list is provided below.

There are several from the Upstate :

Sanction

Store Name

Street Name

City

Hardship Civil Money Penalty

86 SHELL

Bessie Rd

Piedmont

Hardship Civil Money Penalty

Asian Supermarket

Orchard Park Dr

Greenville

Permanent Disqualification

Boyce Fruits & Vegetables

Broad River Rd

Columbia

Disqualified for Term

Corner Stop 57

N Harper St

Laurens

Permanent Disqualification

EDISTO GROCERY

Salley Rd

North

Permanent Disqualification

Grab-n-go

E Main St

Timmonsville

Hardship Civil Money Penalty

Guatemex NC

Cedar Lane Rd

Greenville

Permanent Disqualification

Hanover Corner

Columbus St

Charleston

Permanent Disqualification

Hi-Cotton Convenience Store

Saluda Rd

Rock Hill

Permanent Disqualification

Horizon Mart

S York Ave

Rock Hill

Disqualified for Term

LA ESTRELLITA LLC 1

Wade Hampton Blvd

Greenville

Hardship Civil Money Penalty

LOS HERMANOS

S Murray Ave

Anderson

Permanent Disqualification

Main 1 Stop

N Main St

Columbia

Permanent Disqualification

Main St. Grill

Main St

Columbia

Permanent Disqualification

Main Street Grocery

N Main St

Columbia

Permanent Disqualification

Pavan Food Store

Bypass 72 NW

Greenwood

Permanent Disqualification

PAVAN FOOD STORE 102

S Main St

Greenwood

Permanent Disqualification

Pavan Food Store 105

N Harper St

Laurens

Permanent Disqualification

Pavan Food Store 106

N Harper St

Laurens

Hardship Civil Money Penalty

PHIL'S SEAFOOD

Trotter Rd

Columbia

Permanent Disqualification

President Market

President St

Charleston

Permanent Disqualification

Rawan Market

King St

Charleston

Permanent Disqualification

Rincon La Pino

Remount Rd

North Charleston

Permanent Disqualification

SAM'S QUICK STOP 1

E Main St

Kingstree

Disqualified for Term

San Pedro Supermarket

E North St

Greenville

Hardship Civil Money Penalty

Sandy Flat Grocery

Mountain View Rd

Taylors

Permanent Disqualification

Stop-N-Go

Dorchester Rd

North Charleston


Four of the stores on the list, “Pavan Food Store” locations in Greenwood and Laurens Counties, are owned by Kal Patel.

Patel said some of his stores were flagged because of individual transactions of more than $800.

He blamed the permanent USDA ban on a, now fired, employee. 

According to an internal USDA report called “The Extent of Trafficking in the Supplemental Nutrition Assistance Program” small groceries and convenience stores account for a fairly small percentage of overall transactions but a very large percentage of fraud.

According to the report, small grocery stores account for about 9% of all food stamp purchases.  Nearly 18% of them are identified as “trafficking stores”.  Convenience stores have a similar percentage of “violators” and account for about 40% of all sales.

“It goes on all the time," Bailey said.

7 On Your Side found a great deal of apparent trafficking online.  One Craigslist ad, posted in Greenville, offered to buy food stamps for a premium “60 cents on the dollar”.

A twitter search for “buy food stamps” near “South Carolina” yielded hundreds of results like “I’m glad I found somebody to buy food stamps from! Thank you Jesus”.

All of that was right out in the open. 

DSS said they had no idea that was happening online.  They said they’d never used twitter.

“Do you guys think you need to catch up a bit on the social media front?" Community Watchdog Gordon Dill asked.

“Based on what you said today, I put that as one of my notes and we will be using twitter," Bailey said.

It isn’t always high tech.  Sometimes you can find underground deals by simply asking.

“Sometimes if I get a food stamp card, I sell the food stamp card," said one person who didn’t provide his name.
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