Scripps Investigation Unveils Food Stamp Fraud

10News Partnered With Scripps Howard News Service In Investigation Into 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.

» Rep. Darrell Issa Letter To USDAStory: Rep. Issa Responds To Scripps Food Stamp Fraud Probe» Story: Report: Businesses Illegally Profiting From Food Stamps» Story: Scripps Investigation Unveils Food Stamp Fraud» Sign Up For Breaking News Alerts» Like Us On Facebook

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 vendor 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 -- 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 with a list of all USDA-approved SNAP vendors.

Some of those retail sites have entirely new owners, making them eligible to re-enter the food-stamp program. But Scripps found many sites that had the same disqualified owners.

For instance, after Horseshoe Liquor & Market, in the San Diego suburb of Spring Valley, Calif., was permanently disqualified last February, a store at the same location got USDA's approval to take food stamps, agency records show.

But liquor records from the California Department of Alcoholic Beverage Control show that Aziz Audish has been the "primary owner" from June 2010 to the present.

Responding to questions about the store's ownership, the USDA said Scripps had identified "anomalies." Audish confirmed to a reporter that he is the owner of the store, but said he is licensed to accept food stamps because of an ownership change. He did not deny the USDA had disqualified him.

The USDA would not disclose the names of any barred owners, citing their privacy rights. So Scripps unearthed ownership and management stakes by cross-referencing the addresses of disqualified retail sites against state and local business records and alcohol licenses.

Some sites have been busted for trafficking repeatedly. Scripps' analysis identified 137 locations at which merchants had been disqualified as many as four times.

One, a store in Miami's poor Overtown neighborhood, was approved -- and disqualified -- under four names between 2003 and 2006 before its operators were charged with stealing $1.2 million, a 2009 federal indictment and the USDA data show.

Likewise, four businesses run successively out of a bodega in Hartford, Conn., were permanently disqualified while owned by the same illegal immigrant, who was convicted of recruiting "straw" owners and making $1.6 million from food stamp trafficking, the Justice Department said in June.

Despite that bust, uneven oversight continues.

In Tulsa, for example, Bill's Quick Stop owner Nabeel Sheikh was busted for food-stamp trafficking in 2008, the USDA said. Later, the USDA readmitted the store to the program on the condition that Sheikh wouldn't be employed there, the USDA said.

Tulsa city records show the new owner of the store is F & U Zakir, LLC. But city health department documents in November 2011 list Sheikh as "manager." Reached at the store this month, Sheikh denied owning the store or working there, and said he was there "just filling in."

Based on Scripps' findings, the USDA says it is investigating the store.

In some cases, the actual ownership of a store -- and its connection to a former owner who has been banned -- can be obscured by layers of corporate filings.

In Fort Pierce, Fla., for instance, USDA records show the owner of Express Food Market was permanently disqualified from accepting food stamps in April 2009. Even so, the store remains open and has USDA approval to take food stamps.

But, according to state alcohol licenses, the store was owned from 2007 to 2011 -- both before and after the disqualification -- by an entity called "Express Food Mart #555, Inc." That corporation was controlled by Manzoorul Haq, according to state corporate records.

In 2011, the liquor license was transferred to -- and continues to be held by -- "Takdir Grocery, Inc.," according to the Florida Department of Business and Professional Regulation filings. And the only corporate officer listed for Takdir is Manzoorul Haq.

Neither Haq, nor anyone else at the store, would speak on-the-record to a reporter.

When asked to comment on this case, USDA officials said they would require the store’s owner to prove that ownership has actually changed.

(With reporting by Scripps reporters at KJRH in Tulsa, Okla.; KGTV in San Diego; KNXV in Phoenix; KMGH in Denver; WPTV in West Palm Beach, Fla.; WCPO in Cincinnati; and Scripps Treasure Coast (Fla.) Newspapers. SHNS researcher Pninit Cohen contributed to this story.)

Print this article Back to Top