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Fraud taints state's FoodShare program
'Lost’ debit cards, cash for food among scams some officials see
By Raquel Rutledge and Jason Stein of the Journal Sentinel
April 23, 2011 |(115) Comments
Thousands of people who receive publicly funded food assistance report losing their benefits card routinely - a sign investigators say shows many are cheating the state's $1 billion program.
Some sell their Quest cards for cash. Others trade them for drugs.
And that's not the only way the state's FoodShare program is being abused, an investigation by the Journal Sentinel has found.
Instead of using the cards as intended - as a tool to keep the poor from going hungry - participants who aren't hungry can use the cards to profit.
Unscrupulous recipients sometimes buy steaks, seafood and other expensive items with their subsidized benefits and then sell the food to friends at a discount to get cash. Other times they approach strangers in grocery stores, offering to use their Quest cards in exchange for cash - completing the deal in the parking lot and pocketing $50 for every $100 they spend in Quest funds for the strangers' groceries. In other cases, recipients fail to report all their income or that a working spouse lives in the home. Some collect money from multiple states.
Lax rules and oversight make the program susceptible to fraud.
"It's horrible," said Deborah Vanderboom, a 12-year veteran fraud investigator with the Waukesha County Sheriff's Department who retired 18 months ago. "And it will remain horrible until more of this gets exposed."
Last year, nearly 2,000 FoodShare recipients reported losing their Quest card six or more times, according to new data obtained by the newspaper from the state Department of Health Services. Sixty recipients had the cards replaced 12 or more times in 2010 - meaning they averaged a lost card or more every month, the data show.
Other issues also are raising concerns. Rules have been loosened for recipients seeking to enter or remain in the program, and cuts have been made in funding for fraud investigations - all at a time when the harsh recession helped drive a massive expansion of the program.
Consider:
• The average number of FoodShare recipients doubled to nearly 800,000 from 2006 to 2010, according to the Legislative Audit Bureau. Over that same period, the annual benefits paid out in Wisconsin nearly tripled to $1 billion in federal money.
Besides high unemployment, the increase was fueled by residents seeking newly expanded BadgerCare Plus health coverage who were often signed up for FoodShare as well. In 2008, the state also dropped a requirement that unemployed recipients participate in a work-search program to qualify for food benefits.
The growth in Wisconsin's FoodShare program outpaced the rest of the nation during the recession, according to an analysis by the Wisconsin Council on Children and Families.
• State and federal funding to counties for detecting fraud in programs, including FoodShare, fell from $1.8 million a year in 2008 to less than $200,000 in 2010. Funding was increased back to $750,000 this year.
• As funding for fraud investigations dropped, detection of overpayments due to outright fraud or mistakes by recipients fell sharply. The number of fraud cases uncovered dropped to 36 last year from 95 in 2008. Cases of client error - considered mistakes, not fraud - dropped from $2.4 million to $1.4 million over the same period.
• Cases of cards being lost multiple times are found around the state, but Milwaukee County has a disproportionate share of them, according to state data. Milwaukee County has about a third of the FoodShare households, but it accounts for more than half of the cases in which cards are reported lost multiple times.
Regulators, who promptly replace cards reported as lost or stolen but rarely investigate those claims closely, note that FoodShare participants include some of the most vulnerable residents of the state who live chaotic lives that may cause them to frequently lose their cards. The federal government requires the cards to be replaced promptly.
State officials, who run program enrollment in Milwaukee County, examine some lost card claims and say there are legitimate reasons for most of them, such as recipients who are homeless or have mental illnesses, said Ed Kamin, chief executive officer of the state-run Milwaukee Enrollment Services.
In some cases, losing one card can lead to two or even more replacement cards being sent, since recipients often receive a temporary card first and then a permanent replacement, Kamin said.
"While it's a flag, it's only a flag," he said of the multiple card requests. "You need to get down to the individual level."
But Vanderboom and others, including Ed O'Brien, a private fraud investigator whose firm now works with more than 40 counties in Wisconsin, said the lost-card data are clear indicators of likely fraud.
"It might be legit, but usually it's not," said O'Brien, a former Chicago police officer, who said he's seen several cases of multiple card losses due to fraud.
O'Brien said that the dozens of counties he works with haven't focused on frequently lost cards, but that his firm is now urging counties to refer those cases to his investigators.
New scrutiny
FoodShare has come under scrutiny in Milwaukee County in recent weeks as law enforcement officials investigate allegations that nine county employees stole at least $290,000 from the program over the last five years. And state auditors recently found prisoners collecting food benefits.
FoodShare is administered by the state and counties but is almost entirely federally funded.
In a case last month, Tamara K. Thomas, 37, was charged in Brown County Circuit Court with reaping food benefits in Illinois and Wisconsin. A tipster turned her in, telling regulators Thomas had been double-dipping in both states and selling her benefits for cash, according to the criminal complaint. Thomas is accused of stealing about $6,400 from the program in a 10-month period.
Thomas, who has not entered a plea, is due back in court in May. Paul Burke, the public defender representing her, could not be reached for comment.
Kitty Rhoades, state deputy Health Services secretary, said the state is focusing its efforts on detecting fraud when recipients sign up for the program, before any money has been paid out to them. And Rhoades said she wants to require recipients to show identification to use their Quest card in a store, but federal rules make that difficult to do.
Fraud investigators say rules and laws need to be strengthened to help combat fraud.
When drug dealers get busted, for example, detectives frequently find them carrying three or four Quest cards with other people's names on them, said Vanderboom, the former Waukesha County sheriff's detective. But when officials try to prosecute the dealers for public assistance fraud, they claim friends gave them permission to use the cards, and the friends often back up the story.
While rules require Food Share recipients to pre-authorize another person in writing to use their card, the policy is not enforced, said Vanderboom, a former president of the Wisconsin Association on Public Assistance Fraud, a consortium of fraud investigators from across the state.
And when it comes to reselling the food? State and federal officials don't have a definitive answer.
Alan Shannon, speaking for the USDA Food and Nutrition Service, said the 2008 Farm Bill allows sanctions for those who intentionally sell food purchased using FoodShare benefits.
But federal regulators never made it clear that those rules have been implemented, according to Shelley Malofsky, an attorney for the state Department of Health Services.
The rules also are blurry about Quest cardholders offering to pay for others' groceries in exchange for cash, investigators say. If the benefits on a Quest card are used by the rightful recipient, it's hard to prove fraud.
Offers of cash
Colleen Kobe of Glendale knows fraud is happening. At least 10 times over the past year, Kobe said, she's been approached by strangers at grocery stores on Milwaukee's northwest side. The strangers offer to pay the cost of her grocery cart full of food with a Quest card if she'll give them a smaller amount of cash.
"I'm always shocked every time it happens to me, even though I'm used to it," Kobe said. "It is not an urban legend. There is no doubt about that whatsoever."
Kobe, who's heard other shoppers being asked similar questions, said she hasn't reported it to authorities because she's unsure of where to go.
Martha Budnowski of Milwaukee said she's been approached in a similar way while shopping three times over the last year and regularly overhears similar questions put to other shoppers.
"They show me their Quest card and say . . . 'For $50 I can get those groceries for you,' " Budnowski said.
She said she hasn't gone to the authorities because until recently she wasn't sure it was illegal.
Quest cards replaced food stamps, which were easily defrauded because the government had little control over them once they were issued. Quest card users must use a PIN number to ensure the authorized recipient is using it. Once a card is reported lost or stolen, officials cut off access to that account. Scammers will sell a card for cash to someone with the understanding they will not report it stolen immediately, letting the buyer use it, before a new one is issued. The recipient who reports a lost or stolen card doesn't get the money that was spent on that card, but they get the next month's benefits as usual.
Program is important
Jon Peacock, research director for the Wisconsin Council on Children and Families, said that despite the growth in the program, the state still lags behind the rest of the nation in signing up eligible people for FoodShare.
"It's finding that balance, where you create disincentives for fraud and abuse without disqualifying people who aren't abusing the system," Peacock said.
Sherrie Tussler, executive director of Hunger Task Force in Milwaukee, which supplies local food pantries, said she believes any fraud by program participants is minimal and shouldn't be used as an excuse to scale back the program or create more hoops for applicants.
"It's an important and critical program," she said. "Without it, we would have widespread hunger. Our pantries would run out of food."
A Legislative Audit Bureau report released in March exposed additional problems.
The bureau identified 33 prison inmates who either improperly received FoodShare benefits themselves or were improperly listed as living with someone else who did. It was the second time the audit bureau had found inmates receiving benefits. After the report, state Health Services officials this month began checking inmates' names against recipients.
Earlier this month, the Legislature's Joint Audit Committee approved a full audit of FoodShare, including the frequency with which replacement cards are issued, after co-chair Rep. Samantha Kerkman (R-Powers Lake) said she was concerned about trafficking. Gov. Scott Walker's Waste, Fraud and Abuse commission also is looking into the program.
State officials point to some positive trends in FoodShare, including a steady decline in the program's error rate as reported to the federal government. In 2001, the percentage of money that was either overpaid or underpaid to recipients due to mistakes by applicants or public workers was 13%, a level that drew federal sanctions. Last year, it fell to about 1%, a level that won the state a federal bonus, according to state and federal data.
But in interviews with county benefits workers, the Journal Sentinel found that the state also has changed the definition of what constitutes an error.
For example, the state extended the reporting time for recipients to notify regulators of a change in income or household members. And officials generally no longer consider assets when determining eligibility - tasks and requirements that often led to errors in the past. So FoodShare recipients can have savings accounts and expensive cars and still receive the food subsidies, with no errors being reported because regulators are no longer required to check for such assets. In the past, if government workers discovered recipients had undisclosed assets that affected their eligibility, the case would be flagged as in error.
Shannon, the USDA spokesman, emphasized that the definition of fraud hasn't changed but said Wisconsin changed its technology and reporting requirements to decrease errors and workloads.
Efforts in Brown County
Brown County is boosting its efforts to combat fraud in the FoodShare program. More than a dozen people have been criminally charged in the last few months with defrauding the program out of tens of thousands of dollars.
In March, the county hired a sheriff's deputy to work full time on public assistance fraud.
"You have to believe it's the right thing to do," said Brian Shoup, executive director of Brown County Human Services. "It's an ethical issue. . . . We consider fraud to be a crime, and in our view it needs to be treated no differently than any other crime."
Having a sworn officer investigate potential fraud spurs cooperation by those suspected of scamming the program, Shoup said, because people can be charged and ticketed for lying to law enforcement authorities. And it makes the cases more credible for prosecutors.
In one recent Brown County case, Jenny Vaillancourt of Green Bay hid for at least six months the fact that Troy Grissman, her boyfriend and the father of one of her five children, lived with her, according to a criminal complaint filed in circuit court last month.
Grissman was working full time and making about $20 an hour. His income would have reduced Vaillancourt's FoodShare money. Vaillancourt was charged with bilking about $5,100 from the program. She has not entered a plea and is due back in court next month.
David Feiss, an assistant district attorney in Milwaukee County, points out that Milwaukee police did a major sting in the mid-1990s aimed at catching crooked grocers and food stamp recipients - and it led to dozens of convictions.
"There's no reason to think this issue has gone away," Feiss said. "It's the next big issue."
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We never expected to have to pay for this house by ourselves (my mother was living here, too, we were splitting the mortgage) and we never expected to have to support his daughter.
