Oct. 20, 2006
 
COMMENTARY: Food Stamp Fraud Costs Taxpayers Hundreds of Millions of Dollars Every Year
 
By Jim Kouri
Special to Huntington News Network
 
Every year, food stamp recipients exchange hundreds of millions of dollars in benefits for cash instead of food with retailers across the country, a practice known as trafficking. From 2000 to 2005, the Food Stamp Program has grown from $15 billion to $29 billion in benefits.
 
During this period of time, the US Department of Agriculture's (USDA) Food and Nutrition Service (FNS) replaced paper food stamp coupons with electronic benefit transfer (EBT) cards that work much like a debit card at the grocery checkout counter.
 
FNS's estimates suggest trafficking declined between 1995 and 2005 from 3.8 cents per dollar of benefits redeemed to 1.0 cent, resulting in an estimated $241 million in food stamps trafficked in 2005. The rate of trafficking in small grocery and convenience stores is 7.6 cents per dollar, significantly higher than the rate for large stores, where it is estimated to be 0.2 cents per dollar.
 
In addition, the use of EBT cards has changed the way some benefits are trafficked, for example eliminating middlemen who used to collect and redeem large amounts of paper coupons from program participants willing to sell them. FNS has taken advantage of EBT data to improve its ability to detect and disqualify trafficking retailers, while law enforcement agencies have conducted a decreasing number of investigations.
 
Cases using only EBT transaction data now account for more than half of trafficking disqualifications, supplementing traditional, but more time-consuming, undercover investigations.
 
Other federal entities, such as the USDA's Inspector General and the US Secret Service, have reduced the number of traffickers they pursue in recent years and focused their efforts on high-impact cases. This has resulted in fewer cases referred for federal prosecution and fewer federal convictions for retailer trafficking.
 
Despite FNS progress, the program remains vulnerable because retailers can enter the program intending to traffic, often without fear of severe criminal penalties.
 
FNS authorizes some stores with limited food supplies so that low-income participants in areas with few supermarkets have access to food, but may not inspect these stores again for 5 years unless there is some indication of a problem. Oversight of early operations is important because newly authorized retailers can quickly ramp up the amount of benefits they traffic.
 
One location that FNS disqualified for trafficking redeemed almost $650,000 in 9 months. In addition, FNS has not conducted analyses to identify high risk areas and to target its limited compliance-monitoring resources.
 
Disqualification, FNS's most severe penalty, may not be a sufficient deterrent, and FNS must rely upon others for prosecution. Finally, states' failing to pursue trafficking recipients leaves a pool of recipients willing to traffic when a disqualified store reopens.
 
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Jim Kouri is fifth vice-president of the National Association of Chiefs of Police and he's a staff writer for the New Media Alliance (thenma.org). He's a former chief at a New York City housing project in Washington Heights nicknamed "Crack City" by reporters covering the drug war in the 1980s. In addition, he served as director of public safety at a New Jersey university and director of security for several major organizations. Kouri has appeared as on-air commentator for more than 100 TV and radio news and talk shows including Oprah, McLaughlin Report, CNN Headline News, MTV, Fox News, etc. Kouri's own website is http://jimkouri.U.S.