EBT cards probably have done little to reduce benefits (welfare) fraud!

Several years ago, one of the reasons plastic electronic benefit transfer (EBT) cards were introduced was to reduce benefits (welfare) fraud.

Apparently, criminals preying on government entitlement systems have figured out how to keep right on scamming the system using this form of "plastic."

Dan Cortex of the Free Detroit Press reports:

An intricately coordinated raid 18 months in the making resulted in the arrests Tuesday of more than two dozen business owners and employees involved in a fraud that costs the state about $55 million annually.

At least 25 people were arrested when about 200 state, federal and local officials descended on the stores, mostly in Dearborn and Detroit.

Interestingly enough, the manner in which this was accomplished wasn't very sophisticated:

Instead of using the cards to buy food, State Police said some card owners collaborated with store owners to trade them in for cash at the stores -- often at half the value of the cards. The stores, in turn, collected the full amount on the debit cards from the state.

Before EBT cards the same thing used to occur using the paper food stamps issued to government assistance recipients. With the use of electronic payment systems, converting the benefits to cash is probably less labor intensive than it used to be for the criminals involved in this activity.

The article also mentions that bank accounts and passports were seized. Do passports being seized mean that some of these people aren't even citizens?

Because of this, I decided to dig a little further. I was able to find a little more information on the Michigan Attorney General's site.

Here is what they are being charged with:

The defendants are charged with a felony violation of the food stamp act for which the maximum penalties are 10 years imprisonment and/or $250,000 in penalties. In addition, the stores and its owners and employees are charged with conducting a continuing criminal enterprise (punishable by up to 20 years imprisonment and/or $100,000 and criminal forfeiture of proceeds), conspiracy (up to 5 years imprisonment and/or $10,000 fine), electronic benefit transfer (EBT) card fraud (4 years imprisonment and/or $4,000 fine), and money laundering (10 year imprisonment and/or $100,000 in fines).

Considering how easily this was done, I'm guessing that it might be happening in other places, also. Maybe other States should look into this matter like the great State of Michigan has? Given how easily this was accomplished, I doubt Michigan is the only place with a problem.

One thing is for certain - I don't think plastic has stopped very much of this particular type of fraud. The true victims in this are the people probably going hungry at the expense of these criminals. In reality, they are doing nothing more than stealing food from the mouths of children!

The insane thing is how did we ever think that electronic payment cards would reduce fraud? All anyone would have had to do is take a look at how easily debit and credit cards are compromised.

Also not mentioned in the mainstream media were the names of the alleged defendants. Given that passports were seized, I'm guessing that some of the alleged defendants might be considered a flight risk:

Citgo
8351 Woodward Detroit, Michigan

Nabil Shamel, owner

Jamal Chami, employee

Waad Fawazi, employee

Livernois Gasoline
7645 Livernois Detroit, Michigan

Hafaid Musleh-Mohmood Alkahif, owner

Abdul Fattah-Mohmood Alkahif, employee

Dheyab M. Alquhaif, employee

Ammar Mahmood Gobah, employee

Mustafa Mohamen-Ahmed Alqohaif, employee

Yousef Mohamed-Ahmed Alqohaif, employee

U&I Petro
8820 Wyoming Detroit, Michigan

Saleh Algathaithi, owner

Saif Ahmed Alghathie, employee

Hassan Ali Hussein, employee


C&M Mini Mart
18420 James Couzens Detroit, Michigan
Abdo Mahfouz, owner

Ali Abdo Mahfouz, employee

Tarek Moshen Baderddine, employee


Rowan Party Store
7000 Rowan
Detroit, Michigan

Saeb Abdul-Ghani Abdul-Ghani, owner

Joseph Soliman Elrubi, employee

Maher Diab, employee


Big Al's Marathon
3910 Grand River Detroit, Michigan

Hussien Kamel Beydoun, owner

Ali Hussein Beydoun, employee

Van Dyke Petro
19030 Van Dyke Detroit, Michigan

Taha Ahmad Dika, owner

Nizar Ali Nazha, employee

Michael Maher, employee

Bassel Ibrahim-El-Sayed-Sleim Hachem, employee

Schaefer & Puritan
15901 Schaefer Detroit, Michigan

Mr. and Mrs. Adel Mohamad Kobeissi, owner

Khaled Abid Al-Bonijim, employee

Moahamad A. Berro, employee

Detroit Free Press article, here.

Press release from the Michigan Attorney General's Office, here.

Article from 1998 (WRAL.com) about how EBT cards reduce fraud, here.

Eurasian organized crime loots public coffers

Well placed government sources claim that the government loses $300 billion a year in healthcare fraud - with about half of this figure being stolen from immigrant gangs - many of whom hail from the former Soviet Union.

Troy Anderson of the LA Daily News reports on one small part of the overall problem:

Lana Michael and her husband collected welfare benefits in 2003, claiming they earned less than $24,000.

But authorities say Michael, the former office manager of a job-training center for immigrant welfare recipients, also owned a liquor store and recycling business.

And, authorities say, she drove a $76,000 luxury car, shopped at Neiman Marcus and Saks Fifth Avenue and had $147,980 stashed in her bedroom dresser.

Lana Michael is also known as Svetlana Djangarian was part of an elaborate scheme, where welfare to work checks were issued from the inside and cashed using fake ID. Fraudulent tax returns were also filed.

Daily news story, here.

No wonder programs designed to help the less fortunate are in trouble!

Will a hot-line being staffed 24 hours solve the fraud problem in Los Angeles?

A story recently hit the press about Los Angeles County (potentially) losing $2 billion a year to fraud. That's a lot of taxpayer money!

This dollar figure was "estimated" (using Association of Certified Fraud Examiner statistics), which say that 5 percent of all revenues (generic) are lost to "employee fraud, waste and abuse." Nonetheless, there have been a lot of recent allegations of "too much fraud" occurring in Los Angeles County.

The problem with any fraud statistic is that the intention of the people - who commit financial misdeeds (fraud) - normally like to keep it rather anonymous. I keep seeing different figures (the $2 billion was from an article a couple of weeks ago), but the truth is - all anyone knows - is that it appears to be a substantial problem.

Now the County officials are announcing a fraud hot-line to report instances of government fraud and abuse will be manned 24/7.

The LA Times is reporting:

Ratcheting up efforts to crack down on bureaucratic waste, fraud and abuse, Los Angeles officials unveiled a 24-hour whistle-blower hot line Thursday to take tips from workers and the public.

The latest move to clean up City Hall comes two years after the City Controller's Office created a special task force to investigate fraud.

LA Times story written by Rick Orlov, here.

If you are a resident of Los Angeles County and have something to report, the number is (866) 428-1514.

In the recent article, I read quoting the $2 billion loss figure, there were also allegations that very few people are ever prosecuted, or even lose their jobs when caught committing fraud in the County.

In fact, a recent DailyBulletin.com story stated:

Despite the large number of prosecutions, critics said only a small proportion of county employees found to have engaged in fraud and misconduct are disciplined or charged criminally.

While investigators substantiated 120 fraud hot-line cases last year, only 38 employees, or 32 percent, were fired, suspended, transferred or allowed to resign.

Does this mean that the County is losing $2 billion a year to fraud, the hot line only netted 120 "substantiated cases," and of the personnel implicated - 68 percent of them are still employed?

I'm just an "average person," but to me, increasing the fraud hot-line hours isn't going to make this problem go away.

And not going after the problem "aggressively enough" isn't fair to the honest citizens of Los Angeles, who are "footing the bill" for all of this.

I wonder how many private companies would put 2 out of 3 people bilking their bottom lines back to work?

I feel sorry for the investigators trying to put a dent in this problem!

Here is another post, I did on fraud in Los Angeles:

Los Angeles Grand Jury Calls Child Care Program an ATM for Thieves

The Road Home for Katrina Victims is Frustrating

With all the allegations of "poorly spent money" in the hurricane disasters, it's become apparent that a lot of money hasn't reached the people, who need it.

For instance, take the "Road Home Program", which has paid a company called ICF International over $60 million to issue $4 million in checks. The program is intended to assist victims in getting back into "livable housing," and will manage the distribution of $7.5 billion in federal relief money.

ICF International is a "consulting firm" based in Fairfax, Virginia. According to Wikipeida, it's services have been used by the U.S. Environmental Protection Agency, the Department of Homeland Security, the Department of Energy, the United States Postal Service, and Housing and Urban Development.

The program has it's own website, which states:

The Road Home program was created by Governor Blanco, the Louisiana Recovery Authority, and the Office of Community Development. The program is funded by the U.S. Department of Housing and Urban Development.

There has been a lot of criticism that ICF has been slow to fill positions for the project. Interestingly enough, there are a lot of positions (still not filled) advertised on their website.

The Times Picayune did an excellent assessment of the lack of program staffing, here.

The "Road Home" website also states that it dispels a lot of myths about the program, but it appears not everyone is "buying their version" of what is going on.

Because of the allegations of "mismanagement," the Louisiana House and Senate have passed two resolutions to terminate ICF's $756 million contract. They are also calling for an investigation into "possible conflicts of interest."

The Times Picayune reported:

The House and Senate, in separate unanimous votes, also passed House Concurrent Resolution 34 by Rep. Cedric Richmond, D-New Orleans, ordering a special legislative panel of New Orleans lawmakers and the Louisiana Recovery Authority -- the state agency overseeing recovery operation in the state -- to investigate ICF's handling of the contract. It was amended by Rep. Jim Tucker, R-Algiers, to also urge the federal Securities and Exchange Commission to probe ICF's public stock offering, shortly after winning the state contract, for possible conflicts of interest.

The Times Picayune article, here.

Sue Sturgis, who writes for Facing South, has also written some interesting commentary on the program.

Ms. Sturgis points out that ICF initially was involved in a contract to help the state decide how to spend federal grant money, which conceptualized the "Road Home Program." During this time frame, ICF decided to seek the "lucrative program administration project."

When the Louisiana Board of Ethics raised concerns that this contract might be perceived as giving ICF an unfair advantage in getting the larger contract, ICF ended the initial one. The payout for the first contract was $900,000, while the Road Home Program could pay ICF up to $756 million.

She also brings out other concerns the Board had with some of the banking relationships that were being proposed by ICF to administer the funds.

Facing South article, here.

Whether conflicts of interest exist remains to be seen. What can be clearly seen is that taxpayer money intended to help Katrina victims isn't getting to those who need it very quickly.

Red tape and excuses aren't going to be acceptable when there are a lot of people still living in "not very nice" conditions.

And until this matter is rectified, there are going to be "voices" calling for some "accountability."

Some of these voices are getting pretty loud.

This month, federal investigators plan to release audit results on contracts given to "so called" politically connected firms in the Katrina crisis. Speculation has it that these audits are going to reveal additional concerns about how money was squandered in the Katrina aftermath.

Los Angeles Grand Jury Calls Child Care Program an ATM for Thieves

In the past year, I think I've figured out one of the reasons why governments are broke and taxes are at an all-time high - there is too much fraud and abuse in a lot of entitlement programs.

Here is a report by the Los Angeles Grand Jury, which estimated that LA County is losing half a billion dollars a year in fraud in their child care (Back to Work) program.

And if it's this bad in LA, I wonder how much we are losing nationwide? If I'm not mistaken, every State in the Union is running one of these programs.

Here are the findings, directly from the most recent LA Grand Jury report:

MILLIONS OF TAX DOLLARS LOST TO CHILD CARE

Millions of tax dollars have been lost to fraud from child care funds allocated by the State of California and administered by the County of Los Angeles Department of Public Social Services (DPSS) in a program entitled California Work Opportunity and Responsibility to Kids (CalWORKS). As currently administered, the program is equivalent to an ATM for thieves. Our research included previous civil grand jury reports, audits, contracts, other documents, and interviews with over 100 individuals involved in the CalWORKS program.

This 2005-2006 County of Los Angeles Civil Grand Jury investigation revealed:

Only 28% of the children placed with license-exempt child care providers were verified as present with their child care provider, according to the April 2005 California Department of Education (CDE) Error Rate Study Report.

Forty-nine (49) individuals who cheated the CalWORKS child care program of $3,421,578, between September 2004 and February 2006, have been successfully prosecuted by the County of Los Angeles District Attorney.

DATE DISPOSITION AMOUNT

September 9, 2004 13 convictions $925,000
December 9, 2004 12 convictions $500,000
January 26, 2006 10 convictions $1,200,000
February 23, 2006 14 convictions $796,578

Up to 50% of the more than one billion dollar CalWORKS program may be lost due to fraud and poor oversight as estimated by several of the DPSS personnel.

The 2005-2006 County of Los Angeles Civil Grand Jury recommends that DPSS require verification in each step of the CalWORKS process to ensure that parents have the work opportunity intended, that children are cared for in healthy, safe environments while their parents are working, and that tax dollars are used as authorized. Our study shows that child care welfare fraud is a continuing burden on the taxpayer. There is an urgent need for prompt and thorough implementation of our recommendation.

For a link to the full report: Click Here

The report likened the program to an "ATM for thieves." Sadly enough, we've seen a lot of fraud uncovered in "entitlement" programs this year and this will ultimately hurt those who are "truly needy." I say not only go after the thieves, but also go after the people in charge of administering these programs. If fraud is this rampant - someone needs to "inspect the inspectors."

If the civil servants running these programs did this at a "private company," the company would go broke if they were allowed to continue. Before this happened - unless those in control of the company were insane - they would be fired.

The standard should be no less for those in charge of spending "public funds!"

Profiting at the Expense of the Poor, Electronically

Recently, I was in San Francisco and made a small purchase for about $5.00. While waiting in line, I watched the customer before me use one of the new EBT cards. EBT (Electronic Benefit Transfer) cards have replaced checks and food stamps for that segment of the population receiving government assistance.

The clerk behind the counter asked me whether I wanted to use credit, or debit and I said credit (I hate those pesky ATM fees). Much to my surprise, he put it through as a debit and handed me the PIN pad. I noticed that the amount (taking into consideration sales tax) had increased by $2.00.

When I confronted him, he claimed his command of English wasn't very good. Of course, I demanded a refund (out of principle) and left the store. Interestingly enough, he refunded my money in cash and declined to give me a receipt (which didn't exist).

The reason there was no receipt is that he used a calculator to figure the amount of the purchase. Please note, there was a cash register right in front of him. The only receipt available was from his handy debit card processor, which only accounts for the total dollar amount taken and doesn't break down the transaction.

Pretty handy and makes me suspect he was also skimming sales tax proceeds, which pay for needed government services.

The gentleman with the EBT card was standing near my car so I asked him about the fees. He told me that he gets charged wherever he goes. I mentioned that larger retailers don't charge to use the cards and he informed me that they were too far away and he didn't have a way to get there.

I started to think about it and what amazed me is that someone had just tried to charge me a 40 percent surcharge for using my debit card. Then I reflected on the plight of that poor individual using his EBT card. What was a minor inconvenience to me (I got in my car and drove to a reputable retailer) is something that he is forced to deal on a daily basis.

EBT cards were heralded as a means to reduce fraud and ensure that our tax dollars reached the poor. If they are being charged outrageous fees every time they use the card, it seems to me that this new system isn't helping the poor. Besides paying higher prices at inner city markets, they are getting dinged for a fee every time they use their card.

Alameda County (near San Francisco) has an interesting web page on how people on assistance can avoid surcharges. Please note that it is illegal to add a surcharge on the "food stamp" portion of the card.

A lot of this information is good stuff, but it is unlikely that poor people in inner cities are going to find the places that don't charge the extra fees easy to get to.

Small retailers aren't the only ones profiting from all of this. In fact, most states allow a legal surcharge to administer the cards. This means that certain financial institutions are profiting from processing the transactions. One example of this is Citibank, who contracts nationally to administer EBT. I wonder how profitable this is to their bottom line? At the .53 cents a transaction quoted on the Missouri Poverty at Issue site, it must make a lot of money for them.

Granted, most of this is based on a personal observation, but to me it doesn't seem fair. In fact, it reeks of "welfare reform" gone bad. I wonder how much of our tax money was spent thinking up this program and how many pockets it's lining?

The sad thing is that it probably takes money away from those, who need it the most.

Of course, this happened in California, where welfare reform has been criticized for other abuses. Here is a post, I wrote on that:

Back to Work Programs a Fraud Heaven for Scammers