Food stamp program roars while fraud investigations whimper, data shows

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by CHRIS INGALLS / KING 5 News

NWCN.com

Posted on March 3, 2011 at 10:35 AM

Updated Thursday, Mar 3 at 11:47 AM

SEATTLE -- After years of investigation, federal agents still haven't been able to stop wide-spread food stamp fraud in a Seattle business district. The KING 5 Investigators have uncovered information that may explain why.

Our analysis of government data shows that federal investigations into food stamp fraud have not kept pace with the explosive growth of the food stamp program.

Last month, KING 5 recorded illegal transactions outside a Seattle supermarket. People were handing cards over to one of several people working outside the store. They are part of a ring that pays 50 cents on the dollar for food stamps, which are distributed monthly on debit cards.

KING 5 recorded the video with help from a man we'll call Peter. He’s a food stamp recipient who says addicts especially are eager to trade food-only benefits for half their value in cash.

“(They are) buying crack, booze, prostitutes,” says Peter.

 That angers a woman who has watched, from afar, our series of stories on food stamp fraud.

"This is blatant abuse of the taxpayer money and, as a taxpayer, I'm angered," says Rep.  Jean Schmidt, R-Ohio.

Schmidt is the new chairwoman of the congressional subcommittee that oversees the food stamp program.

"I can't imagine that most members of my committee aren't going to be as disgusted with this as I am," she said.

She’s upset because federal agents supposedly cleaned up the fraud around 12th Avenue S.  and S. Jackson Street, on the edge of Seattle's International District, during a three year investigation.

Agents accused two businesses they raided in October of redeeming $5 million in illicit food stamps from the federal government. Yet, a few months later, a half a block away, we found the fraud even more out in the open than before.

 “It was frightening,” says Schmidt, when asked about her reaction to the feds inability to stop the fraud. “I looked at it and I said what should we be doing legislatively to stop that?”

Schmidt now plans to question officials at the United States Department of Agriculture, the department that her congressional subcommittee oversees. The USDA runs the massive food stamp program and its Office of Inspector General investigates potential food stamp fraud.

The food stamp program (now called the Supplemental Nutrition Assistance Program or SNAP) started ballooning long before the economy crashed. It quadrupled in the past ten years and is expected to cost taxpayers $80 billion next year.

But the KING 5 Investigators found a surprising trend when looking at the data of USDA investigations of food stamp fraud. Nationwide, those investigations have declined since 2005. In Washington state, they fell sharply after 2005 and have risen only slightly since then.

We wanted to ask the USDA how it can manage a bigger program with fewer investigations, but the department refused multiple requests for an on-camera interview during our visit to Washington D.C. last month.

The USDA division that administers food stamps, the Food and Nutrition Services (FNS), was particularly tight-lipped. FNS spokesman Jack Currie refused to return phone calls from the KING 5 Investigators.

Food stamps used to be untraceable paper coupons that were easy to traffic and hard to monitor. The electronic cards, called Electronic Benefit Transfer or EBT cards, give USDA a powerful tool to monitor all food stamp transactions. They’ve allowed USDA agents to detect or deter untold millions in fraud.

 But criminals are catching on.

"I think there are people that are clearly figuring out new ways to traffic with the EBT system. We're seeing that," General Accountability Office program director Kay Brown said.

Her independent GAO auditors review the integrity of the food stamp program and report to Congress. She gives USDA high marks in some areas, but for years, GAO has been urging USDA investigators to do a better job of targeting problem stores, like those at 12th and Jackson in Seattle

That intersection has been the scene of many food stamps busts over the years, including a major sweep in 2000 in which several businesses were shut down in a widespread food stamp trafficking scheme. That bust happened in a parking lot right next to the one where we shot our video last month and right across the street from where federal agents were last October.

“When we did an analysis, we did find there were areas in larger cities that did have an accumulation of stores that were trafficking,” Brown said. “That's one of the things we hope they (the USDA) will pay more attention to as they improve their systems."

"How widespread is this? I really want to know,” says Rep. Schmidt. “Are you isolated in Seattle or have you cracked the tip of the iceberg? I would hope it's isolated, but my fear is you have cracked the tip of the iceberg."

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