SalemNews.com, Salem, MA

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April 20, 2012

53 targeted in in alleged food stamp fraud

BOSTON — Dozens of welfare recipients were swept up by police Thursday for allegedly selling their food stamps for cash, local and state investigators announced.

Fifty-three people were targeted as part of widespread investigation involving city, state and federal law enforcement agencies that resulted in the raid of a Quincy convenience store and several downtown Boston businesses, officials said.

Investigators include officials from the Boston Police Department, Attorney General Martha Coakley's office and the U.S. Department of Agriculture for taking part in a scheme that involved trading their EBT cards for cash, often forfeiting a fee to store owners in exchange for the money, officials said.

Misuse of Electronic Benefits Transfer funds, or EBT, has generated attention in recent weeks and has drawn the eye of state leaders pledging to crack down on the use of welfare funds at strip clubs, for bail and for other uses they deem inappropriate.

The results of the investigation were announced Thursday afternoon at a press conference at Boston Police Headquarters attended by Boston Police Commissioner Ed Davis, Auditor Suzanne Bump, Boston Police Lt. Chuck Wilson and Allie Alland, the director of special investigations in Bump's office who has been appointed as the lead prosecutor.

Attorney General Martha Coakley separately announced a sweep in Quincy involving similar charges.

"We know that there has been food stamp fraud and an uptick in food stamp fraud. It's a trend that's literally sweeping the nation," Bump told reporters, adding, "This is a complete tragedy and works to the detriment of all that are deserving, some now more than ever."

Though police said they were unable to immediately discuss the details or targets of the raids, Boston police were observed investigating several Chinatown businesses Thursday morning, including the Cmart on Washington Street, as part of the sting that led to the issuance of 18 arrest warrants and 13 summons from the Suffolk County District Attorney's office.

Boston Police Commission Ed Davis said all of the 31 individuals targeted by the Boston police investigation were "end users" of the food stamp cards, most often the intended beneficiary of the welfare benefits. Police said no store owners have been charged yet as part of the scheme, but Lt. Chuck Wilson said the year-long investigation is ongoing.

Wilson also said most of the individuals targeted were known to police with long histories of petty larceny and drug crimes in the downtown area. All 31 individuals will be charged with larceny over $250.

Coakley's office, in a separate, but intentionally timed raid, executed a search warrant with federal agents at Pat's Mini Mart in Quincy and arrested the store's owner Pat Lu. In addition, 6 arrest warrants and 15 summonses were issued for individuals accused of selling their food stamps for cash at various Massachusetts locations.

Lu, 48, of Quincy, pleaded not guilty at his arraignment in Quincy District Court on Thursday and was held on $100,000 bail. He is charged with larceny by continuous scheme, procurement fraud, and access device fraud.

"We allege that both the store owner and recipients engaged in a scheme to unlawfully exchange food stamps for cash," Coakley said in a statement. "This alleged scheme was a direct fraud on taxpayers, and our action today should make clear that we take this type of fraud seriously and it will be investigated."

Coakley alleges that Lu was processing about $70,000 a month in fraudulent food stamp sales, entering food receipts for groceries to a dedicated EBT terminal, but instead giving the customer cash and sometimes taking a cut of up to 50 percent for himself. Investigators allege that Pat's Mini Mart processed $700,000 in fraudulent food stamp transactions between August 2012 and March 2012.

Though Massachusetts uses the EBT card system for a variety of programs including cash assistance benefits, the fraud targeted Wednesday involved the federal Supplemental Nutrition Assistance Program (SNAP), known commonly as "food stamps." Those benefits are intended for the purchase of groceries and other necessities, and the program does not allow cash to be exchange in lieu of benefits.

Asked whether the investigation warrant a reform of the EBT system, Davis said, "There are people who take advantage of systems, so people can draw their own conclusions about how it's working."

Bump, who has started an audit of the EBT system in Massachusetts and aided the investigation, differentiated between the type of abuse targeted by Thursday's raid and welfare recipients using benefits for inappropriate purchases such as at nail salons.

The House budget slated for debate next week includes a section that adds to the list of establishments prohibited from accepting the welfare cards, and would create a criminal statute for trafficking in EBT cards that would prohibit the unauthorized use, transfer, acquisition, alteration or possession of an EBT card.

Bump said she had not yet reviewed the House language, but had been looking into the criminal statutes on her own to see if they should be updated.

Rep. Shaunna O'Connell, a Taunton Republicans and outspoken proponent of reforming the EBT system, immediately sought to spin the raid into a political advantage in advance of the House budget debate.

"I am not surprised at all. Right now the Department of Transitional Assistance replaces 20,000 EBT cards monthly. In comparison, only 16,000 drivers' licenses are replaced monthly. There are far more people who are licensed to drive in the Commonwealth than receive EBT benefits. Hence, it is easily concluded that the cards are being sold," O'Connell said in a statement.

After serving on an commission the reviewed the EBT program but stopped short of recommending the elimination of cash assistance for welfare card recipients, O'Connell has filed amendments to the House budget that would end cash withdrawals and impose a fee for replacement cards.

"I hope this latest problem will encourage more legislators to support my budget amendment and my legislation so we can finally stop the fraud that is plaguing the system," O'Connell said.

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