USDA Ups Its Efforts Around Food Stamp Fraud

PROVIDENCE, R.I. -- The U.S. Department of Agriculture (USDA) is targeting smaller retail stores to cut down on food stamp trafficking, the illegal buying and selling of food stamps, which costs taxpayers as much as $330 million each year, according to an Associated Press report. As part of its efforts, the USDA granted a 10-year contract to information technology services and solutions consulting company, SRA International Inc., last month in order to improve fraud-combating technology.

Some retailers sneak a piece of the $64.7-billion food stamp program by giving customers cash for their stamps at less than face value, and then redeeming them for larger profits. However, because food stamp transactions are electronically recorded, such fraud is more easily detectable with the right technology, the report noted.

"It's misuse of the program," said Kevin Concannon, USDA Undersecretary for Food, Nutrition and Consumer Services. "It's a misuse of taxpayer dollars at a tough time. Not only the people who need the program are having a tough time, but the people who are paying for the program are having a tough time, too."

Concannon said food stamp fraud is almost always found at the 199,000 smaller stores that process 15 percent of the country's food stamp transactions. A total of 234,000 stores in the United States are authorized to accept food stamps, which come in the form of benefits loaded onto debit cards. In 2010, 931 stores were dismissed from the program due to trafficking, and 907 faced discipline for lesser violations.

Weapons in the USDA's fraud detection arsenal include computerized tools used to track illegal transactions; mathematical formulas to identify retailer fraud; and checking social media sites for evidence of fraud, the AP reported. Signs of fraud include steep increases in redemption at particular stores, or redemption of most of a month's benefits in one visit.

The USDA’s efforts are paying off, as misuse of benefits has dropped from four cents on every dollar to just a penny, according to Food and Nutrition Service spokesman Aaron Lavallee.

Some retailers may be engaging in fraud in an attempt keep their business healthy. Former 7-Eleven franchisee Syed Shah, of Providence, R.I., "believed that if they did not give customers cash for the food stamp benefits, then they would lose that business," said USDA Special Agent Christopher Robinson. After the fraud was discovered, Shah was stripped of his franchise.

The USDA has encouraged states to examine food stamp recipients who have shopped at stores where fraud has been identified. Retailers found to have committed food stamp trafficking may face penalties, ranging from removal from the program to criminal charges.