Food stamps used to buy home, missiles, fraud probe finds

December 12, 1990|By San Francisco Chronicle

More than 20 years after food stamps became the cornerstone of America's social welfare system, they are being used in a rising number of large-scale crimes to purchase everything from sex and drugs to stolen cars and combat weapons.

Fraud investigators have documented cases in which food stamps were used to pay for a funeral in Florida, a house in Nevada and two surface-to-air missiles in New Mexico.

The use of food stamps as street currency in major crime goes far beyond the relatively small-time fraud that has beset the welfare system in the past.

"We go in looking for food stamp fraud and we find drugs, guns and counterfeit green cards," said Constant Chevalier, inspector general for the U.S. Department of Agriculture's Midwestern Region Office in Chicago.

Although the Agriculture Department, which administers the program, estimates that fraud will cost about $140 million this year, other government analysts say the total will be several times that amount and is rising.

About 19.9 million people receive food stamps, or one in 12 Americans. The maximum food stamp benefit is $105 a month for an individual with no income and $352 for a family of four.

In cities across the country, black-market racketeers are "preying on poor people and raping American taxpayers in an underground economy in food stamps," said Floyd Cotton, inspector general for the Agriculture Department's Western Region Office in San Francisco.

The most common scam works like this: The stamps are acquired illegally by buyers who pay cash -- usually 50 cents on the dollar -- to recipients waiting outside stamp distribution centers.

The stamps are then sold to retailers, usually small grocery stores, which redeem cash from the government for the stamps even though they were not used to purchase food.

"You can buy anything with food stamps that you can buy for cash," Mr. Cotton said.

In one of the biggest fraud cases, Drug Enforcement Administration agents raided two PCP labs in Los Angeles that manufactured $3 million worth of the drug in 1988.

"Agents were led to the labs by following the trail of a dealer who bought 32 ounces of the drug with $10,000 in food stamps," said DEA spokesman Ralph Lochridge in Los Angeles.

The owner of the single store running the largest scam found so far is Jose Napoleon Gonzalez, who was convicted last year of laundering $1.6 million in food stamps through his Los Angeles grocery store.

Gonzalez was freed while his case was appealed and fled before paying any fines.

Federal agents last year cracked a ring that used two stores in Columbus, Ohio, to illegally redeem $2.1 million from the government.

In addition, Mr. Chevalier said prostitutes with ties to crooked shopkeepers will commonly accept food stamps for sex.

In 1990, the Agriculture Department has launched 806 investigations, resulting in 428 convictions and the recovery of $7.1 million.

But this represents only a small part of the problem because, other than the Agriculture Department's investigations arm, law enforcement agencies seldom probe such fraud.

Some social welfare advocates challenge assertions that food stamp fraud is widespread.

"We believe it's very much exaggerated," said David Super, a policy analyst for the non-profit Food Research and Action Center in Washington.

"People who receive stamps are too poor not to spend the stamps because the allotments aren't large enough to cover all their food needs. Most of the time they still have to use their own money to feed a family."

Mr. Super estimated that actual fraud amounts to one-half of 1 percent, or about $70 million, in a program that will have issued $13.9 billion in stamps by the end of this year.

"In light of the size of the program, these problems are remarkably rare," he said.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.