DOJ and USDA Crack Down on Food Stamp Fraud

On May 29, the U.S. Department of Agriculture (USDA), with help from the Federal Bureau of Investigation (FBI), charged a USDA employee and five others with misappropriating tens of millions of dollars in taxpayer-funded food stamp funds.  This isn’t an isolated incident within federal agencies, which have been largely ineffective at rooting out waste, fraud, and abuse in government-run social welfare programs.

Currently, the U.S. has 16 federal nutrition assistance programs administered by the USDA‘sFood and Nutrition Service (FNS). These programs are meant to serve low-income individuals and their families. Instead, bad actors can exploit these services, resulting in fewer resources available for those who truly need them. The programs are in need of stringent oversight, improved monitoring, and robust enforcement measures to protect taxpayer dollars and ensure that assistance reaches struggling Americans. Congress must focus on addressing these issues to protect the integrity of programs designed to support vulnerable populations.

The recently-discovered fraud dates back to 2019, when Michael Kehoe orchestrated a network that supplied 160 unauthorized electronic benefit transfer (EBT) cards to stores across the New York area to illegally process more than $30 million in EBT transactions. Working alongside his co-conspirators Nawafleh, Omar Alrawashdeh, Obaid, and Emad Alrawashdeh, Kehoesubmitted approximately 200 fraudulent USDA applications, misappropriating USDA license numbers and, in some cases, doctoring application documents, to obtain EBT terminals for unauthorized stores—including smoke shops and other ineligible businesses. Arlasa Davis (a longtime USDA employee) was critical to the scheme and worked within the division of the USDA responsible for identifying fraud within the programs. “This fraud was made possible when USDA employee Arlasa Davis betrayed the public trust by selling confidential government information to the very criminals she was supposed to catch. Their actions undermined a program that vulnerable New Yorkers depend on for basic nutrition,” U.S. Attorney Perry Carbone said in the media release.

EBT cards replaced paper food stamps in 2004 to combat waste, fraud, and abuse.  It appears that criminals have found a way to steal taxpayer money with EBT cards.

Department of Agriculture Secretary Brooke Rollins noted that, “At the USDA, we are hyper-focused… on rooting out that waste, fraud and abuse, and… yesterday was, if not the largest, one of [the] largest stings.” She went on to tell Fox Business that she believes 20 to 30 percent of the program’s annual funding, estimated at roughly $200 billion, may be lost to fraud. The recently uncovered $66 million scheme, she says, is “just the tip of the spear.” She is consistently supportive of overall reform within the program.

Unfortunately, fraud is rampant within government social welfare programs. Only days after extensive fraud within the USDA was exposed, on June 1, three Ohioans were indicted following a year-long investigation into the use of card skimmers to steal $600,000 from the Supplemental Nutrition Assistance Program (SNAP).

It is time for Congress to act and protect taxpayer dollars by strengthening oversight and implementing stricter safeguards within SNAP. Instilling fiscal responsibility and eliminating waste, fraud, and abuse is critical to ensure that assistance reaches only those who truly need it. Additionally, Congress should focus on proposed reforms that include strengthening work requirements and closing eligibility loopholes to reduce overall program spending. According to the 2023 Congressional Budget Office (CBO), estimated that work requirements are estimated to result in federal savings of $109 billion over a ten-year period. States should also have a larger role in administering SNAP benefits, allowing the states to tailor programs to fit their specific needs.

With the right reforms and safeguards in place, Congress and the USDA can ensure that SNAP and other benefits remain in place for struggling Americans, not crooks and scammers.