Food Stamp Fraud Case Study

Company Description The Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp Program, is the United States government largest food assistance program. It provides a protection for low-income people in the United States to meet food and nutrition needs. The United States Department of Agriculture (USDA) administers SNAP at the Federal level through its Food and Nutrition Service (FNS). The program started in April 1939 and was credited to various people, most notably Secretary of Agriculture Henry Wallace and the program’s first Administrator Milo Perkins.

Its mission is “to provide food assistance and nutrition education to assist participants as they move to a healthier lifestyle and self-sufficiency” [ (Hopper, 2008) ]. SNAP recipients receive a monthly allowance in the form of electronic debit cards, which also known as electronic benefit transfers (EBT). All states have implemented EBT since June 2004 replacing the paper food stamp. The EBT card works just like a debit or credit card when purchasing food. The maximum allowance in 2012 for a family of four is $668 per month, and only allowed to use to purchase food items at the authorized market.

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SNAP recipients cannot use the benefit to purchase alcohol and tobacco, and cannot redeemed it for cash. There were about 230,000 authorized retailers nationwide and served nearly 45 million people, about one in seven Americans in fiscal year 2011 [ (United States Department of Agriculture [USDA], 2012) ]. Problem and Methodology One of many food stamp frauds was discovered when an employee of New York City Human Resources Administration (HRA) noticed and reported irregularities in HRA’s processing of food stamp applications.

The New York City Department of Investigation (DOI) investigated the report and found out that Vanee Sykes with other four people, including current and former New York City employees carrying out a massive food stamp fraud. Vanee Sykes was a supervisor at the New York City Human Resources Administration (HRA), the agency responsible for administering the food stamp benefits program in New York City. Started in 2007 until 2010, Sykes used her access to the Welfare Management System, an HRA computer database that maintains records relating to food stamp benefit.

Sykes processed and approved many Food Stamp Cards and food stamp benefits using fake names, fake social security numbers, and fake income and expense data. Based on the Welfare Management System records, Sykes created approximately 1,122 fraudulent food stamp benefits cases during this period, and the total dollar amount credited onto these fraudulent Food Stamp Cards exceeded $7 million. Sykes was sentenced to 63 months in prison [ (United States Department of Justice [USDOJ], 2011) ]. Alice Bradford gave Sykes mailing addresses to create the fraudulent food stamp cases.

Sykes then had the fraudulent Food Stamp Cards mailed to these addresses. Bradford paid the other people for using these mailing addresses, collected the cards, and then sold most of them in cash. In turn, Bradford gave Sykes a portion of the cash she received from the transaction. Bradford and Sykes created approximately 300 fraudulent food stamps. Bradford was sentenced to 30 months in prisons (USDOJ, 2011). Tori Jackson worked at HRA in various positions, and at times reported to Sykes. She also created and processed fraudulent Food Stamp Cards using fake names and fake social security numbers.

Jackson and Sykes created approximately 45 fraudulent food stamps. As a result, HRA issued almost $300,000 in food stamps improperly. Jackson was sentenced to 41months in prison (USDOJ, 2011). Lois Johnson had worked for HRA for over 30 years, asked Jackson to mail approximately four fraudulent Food Stamp Cards to her post office box. Johnson used the three Food Stamp Cards for her own benefits, and gave one to another individual. Johnson was sentenced to three years of probation with eight months of home confinement (USDOJ, 2011).

Sykes with other four people abused their position to become the ringleader of a multi-million dollar food stamp fraud and pocketing taxpayer funds. Sykes pled guilty on August 10, 2011, to one count of conspiring to commit mail fraud and one count of embezzlement of funds from a federal program. Bradford pled guilty on July 12, 2011, to one count of embezzlement of funds from a federal program. Jackson and Johnson each pled guilty to one count of conspiring to commit mail fraud on August 2, 2011, and July 12, 2011, respectively (USDOJ, 2011). In addition to their prison terms, they are sentenced with the following: . Sykes, 44, of Brooklyn, New York, was sentenced to three years of supervised release. She was also ordered to pay $6,556,596. 92 in restitution, and a $200 special assessment fee. 2. Bradford, 50, of Brooklyn, New York, was sentenced to three years of supervised release. She was also ordered to pay $821,269. 55 in restitution, and a $100 special assessment fee. 3. Jackson, 34, of Brooklyn, New York, was sentenced to three years of supervised release. She was also ordered to pay $473,406. 43 in restitution, and a $100 special assessment fee. 4.

Johnson, 57, of Staten Island, New York, was ordered to pay $24,406. 00 in restitution, and a $100 special assessment fee. Findings According to the Department of Agriculture, improper food stamp payments are costing the United States roughly $2. 5 billion in 2011 as federal spending on the benefits reaches a record $64. 7 billion and Sykes’ frauds are one of them. The food stamp program is one of the welfare programs that prone to abuse in the United States. Connecticut ranks first, Maryland ranks second, and New York ranks seventh for taxpayer dollars wasted on food stamp fraud.

Many frauds go undetected because most states only have few resources to dedicate to food stamp supervision. Maryland is an example of having only 14 investigators for its 24 counties to seek out food stamp fraud and other improprieties in social welfare programs [ (Peterson & Hughes, 2011) ]. Most of the investigation only conducted based on the reported claim. Sykes and her accomplices would have been able to continue their schemes, had no one ever raise the issue of HRA’s processing of food stamp applications.

Sykes and her accomplices able to defraud the food stamp benefits because no internal control that include a system of checks and balances and segregation of duties over all paperwork. A separate, incompatible function is the most effective means of ensuring proper internal control. No individual should have solely controlled, and maintained the related record. Had the segregation of duties had been implemented in the City Human Resources Administration (HRA), this multimillion-dollar food stamp fraud would never occur.

The United States Attorney for the Southern District of New York, Preet Bharara praised the investigative work of the New York City Department of Investigation. However, there is no record that action is taken after the arrest of Sykes and her accomplices. New York City continues to use the existing system to prevent frauds. Mandatory fingerprinting is one of the systems to prevent fraud that have been around the country a decade ago. SNAP recipients must report to state offices for government fingerprinting.

The federal Department of Agriculture has concluded that fingerprinting is unnecessary, but New York City continues to enforce this rule. The reasons are Mandatory fingerprinting has saved the New York City more than $35 million in fraudulent food stamp payments over the past 10 years and helped catch 1,900 cases of food stamp frauds in 2011. Another established food stamp prevention system in New York City is computerized application systems. The computer stores the information from the food stamp applicants such as birth dates, addresses, and Social Security numbers [ (Eligon, 2012) ].

Recommendations The most crucial steps to prevent and deter the food stamp frauds are the implementation of proper checks and balance. Although New York City has the mandatory fingerprinting and established computerized applications system, without proper checks and balances, the fraud looks likely will happen again. Use a system of checks and balances to ensure no one person has control over all process of food stamp applications. Distribute the responsibility to process and maintain food stamp applications records is mportant for proper controls over error, and to ensure that there is no fabrication against the food stamp recipients. Organization can achieve segregation of duties and cross-trained staff by rotating staff between jobs. When the responsibilities in one individual’s hand, like in Sykes’ case, the opportunity for embezzlement is great, but when the responsibilities are properly separated, a system of checks and balance exists. Provide State agencies more access to information so they can verify the information and identify noncompliance independently and cost-effectively.

Computer records should have the information from matching state food stamp data against other database, such as prisoner data. Reformat the existing databases to have additional useful information to state agencies, such as death notices. Automated matching the data with the states can provide a more cost-effective way with to decreasing the fraud and increasing the program integrity. [ (Robertson, 1998) ]. States should identify and prevent any ineligible individual from the application process before any benefit is issued. Obtain information from credit report services to ensure that applicants are eligible for benefits.

Automated matching data will help the States saving by identifying erroneous information during the application process. These methods would have a deterrent effect on applicants who may be considering fraudulent activities [ (Robertson, 1998) ]. If the Sates implemented these methods of fraud prevention and deterrence, the case like Sykes and her accomplices would not happen, and it could have saved the taxpayers’ money. References Eligon, J. (2012, May 17). Cuomo pushing city to end food stamp fingerprinting. Retrieved October 13, 2012, from The New York Times: http://www. ytimes. com Hopper, R. (2008, September 29). Supplemental Nutrition Assistance Program (SNAP). Retrieved September 24, 2012, from USDA News Release: http://www. usda. gov Moynihan, C. (2010, December 9). 4 Charged With Stealing Millions in Food Stamp Scam. Retrieved from The New York Times: http://www. nytimes. com. ezproxy. umuc. edu Peterson, H. , & Hughes, B. (2011, November 30). Maryland, Virginia at Top of Nation for Food Stamp Fraud. Retrieved September 24, 2012, from Washingtonexaminer: http://washingtonexaminer. com Robertson, R. (1998, August 5). Computerized nfomration matching could reduce fraud and abuse in the food stamp program. Washington, DC, United States: United States General Accounting Office. United States Department of Agriculture [USDA]. (2012, April). Building a Healthy America: A Profile of the Supplemetal Nutrition Assistance Program. Retrieved September 24, 2012, from Food and Nutrition Service: http://www. fns. usda. gov United States Department of Justice [USDOJ]. (2011, August 10). Former New York City Employee Pleads Guilty in Manhattan Federal Court to Participating in $7 Million Food Stamp Fraud. Manhattan, New York, USA.

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