4OYS investigation uncovers food stamp fraud

Posted at: 02/21/2013 9:50 PM
Updated at: 02/21/2013 10:44 PM
By: Gadi Schwartz and Shaun Griswold, KOB 4 On Your Side

A 4 On Your Side investigation has discovered the state’s food stamp program - meant to feed nearly half a million New Mexicans - is being abused by beneficiaries looking for cash in an underground black market.

The scam is simple.

A 4 On Your Side investigation revealed some individuals will trade food stamps for cash, often paying or accepting 50 percent of the remaining balance on a person’s state-issued EBT card.

“I know a guy who does it if you got a couple hundred to sell him,” a person in Albuquerque told 4OYS.

“A couple hundred on the card?” the 4OYS investigative team asked.

“Yeah, but he is only going to pay half,” the person said.

4OYS uncovered the scam, which is widely practiced in Downtown Albuquerque.

A solution, however, is difficult to find, New Mexico Human Services Secretary Sidonie Squier said. Squier’s department oversees the Supplemental Nutrition Assistance Program (SNAP), the state’s federally funded food subsidy program.

She said the biggest issue is people who sell their EBT card and report it lost or stolen. Out of the 138,927 cards issued to New Mexicans in 2012, more than 93,000 were replacement cards, Squier said. That’s about 70 percent.

“We know that there are some people who lose them four, six or eight times, and it's pretty suspicious, but you can't do anything about it based on the federal rules,” she said. “They want people to have the cards - they want the card replaced.”

SNAP distributes roughly $56 million a month to 198,314 families, or 442,753 individuals, according to data from the Human Services Department.

4OYS learned another common way for people to get cash in exchange for their food stamps is to stand outside a grocery store and offer a family the benefits, usually at 50 cents on the dollar - or half the available balance.

“You get $50 and that will cost you a $100 in food stamps, that’s like half and half man,” one person told 4OYS at an Albuquerque bus stop.

The 4OYS investigative team also found businesses that run cash for food stamp enterprises at the counter.

“If I'm really desperate there is that gas station,” a man told 4OYS. “They will make me like buy a bunch of sodas and bring them up there and they buy the sodas from me.”

4OYS visited one of the gas stations to see if the food stamp hustle worked. While undercover, 4OYS investigative reporter Gadi Schwartz asked the gas station clerk if he would trade roughly $200 in food stamps for cash.

“Go get me two liter coke, Pepsi two liter whatever and give me $100, $200,” the clerk told Schwartz. “I pay you half cash. Bring it to me, You give me the receipt, I pay you half what you pay. Cash. You understand? It's like you spend $200 I give you $100 in cash.”

The scam also extends to the internet.

4OYS contacted a person soliciting food stamps through a Craigslist advertisement. After several text messages were exchanged, the man asked the undercover investigative team to meet him at the downtown Albuquerque public library to complete the transaction.

The man showed a receipt as proof his EBT card had a $90 balance. He agreed to sell his card and pin number for $40, however, he immediately backtracked when confronted by Schwartz.

“So, what you just did is that you just offered to sell us your EBT card for money, right?” Schwartz asked. “For cash?”

“I've never done this before,” the man told Schwartz adding he needed cash for the card to pay his phone bill.

Despite reserved suspicions regarding food stamp fraud, the state must replace EBT cards when they are reported lost or stolen.

“You just have to replace the cards, and while I may have a suspicion or my investigators may have a suspicion that it’s not right, there is really not that much under the federal rules that you can do about it,” Squier said.

The state is working to put identification photos on EBT cards – much like banks do - in an effort to cut down on fraud.

People can also call a fraud hotline at 1-800-228-4802 or e-mail the state Human Services Department.