Quincy Store Owner, 21 Others Charged in Connection with State EBT Fraud Investigation
QUINCY – A Quincy store owner and 21 individuals have been charged in connection with the fraudulent use of the Supplemental Nutrition Assistance Program (SNAP), known commonly as “food stamps,” Attorney General Martha Coakley’s Office announced today.
Beginning with a referral from the Quincy Police Department and following an investigation into the fraudulent use of EBT SNAP cards that began in November 2011, State Police assigned to AG Coakley’s Office, in conjunction with federal agents from the United States Department of Agriculture (USDA) and Quincy Police executed a search warrant at Lotto Luck (D.B.A Pat’s Mini Mart) located in Quincy. Investigators arrested Pat Lu, age 48, of Quincy, in connection with his involvement in an ongoing criminal scheme to defraud the EBT SNAP program. Lu, owner of Pat’s Mini Mart, is charged with Larceny by Continuous Scheme, Procurement Fraud, and Access Device Fraud.
Lu was arraigned in Quincy District Court this afternoon. He pleaded not guilty and was held on $100,000 bail. Lu is due back in court on May 14, 2012 for a pretrial hearing.
In addition, a total of 21 individuals were charged with larceny over $250 for illegally selling their SNAP benefits at certain Massachusetts locations. Among the 21, 6 arrest warrants and 15 summonses were issued. The investigation remains active and ongoing at other sites in the Commonwealth.
“We allege that both the store owner and recipients engaged in a scheme to unlawfully exchange food stamps for cash,” said AG Coakley. “This alleged scheme was a direct fraud on taxpayers, and our action today should make clear that we take this type of fraud seriously and it will be investigated.”
Pat’s Mini Mart is a convenience store that primarily sells beverages, candy and other convenience items. Pat’s Mini Mart was authorized by the USDA to accept SNAP benefits from customers for eligible items. Authorities alleged that Lu engaged in a scheme to traffic SNAP benefits in exchange for cash. As part of the scheme, customers presented their EBT card to Lu and another store clerk. Authorities allege that Lu would swipe the customer’s EBT card and enter fraudulent information on a dedicated EBT terminal indicating that a customer purchased groceries. Lu would allegedly furnish cash to the customer for a half of what he charged to their EBT card account. For example, if an EBT card customer wanted $50 in cash, Lu would provide the customer with $50 cash and enter a $100 grocery sale. Lu’s account would subsequently be credited with $100 from the customer’s EBT SNAP account, providing Lu with a $50 profit on the transaction.
The SNAP program does not allow cash to be exchanged in lieu of benefits.
In recent months, it is alleged that Pat’s Mini Mart has been transacting about $70,000 per month in mostly fraudulent sales. It is estimated that Lu’s cut each month resulted in roughly $30,000. Investigators allege that between August 2010 and March 2012, Pat’s Mini Mart processed approximately $700,000 worth of fraudulent SNAP transactions.
Congress enacted the SNAP program to enable low-income households to obtain more nutritious diets. Under the program, eligible households receive food stamps in the form of credits to an electronic benefit card to buy food from retail food stores that participate in the SNAP program.
Massachusetts uses the EBT system for food stamps. The EBT system utilizes plastic debit cards, which are automatically credited with the recipient’s appropriate amount of benefits each month. To access benefits, the recipient presents the card at an authorized retailer’s location. The card is swiped through an electronic terminal which reads coded information on the card’s magnetic strip. The transaction amount is deducted from the EBT card’s balance and deposited into the retailer’s account. Retail grocery stores must obtain a license from the USDA Food and Nutrition Service to accept food stamp benefits from eligible recipients as payment for authorized food purchases. Prior to receiving authorization to participate in the SNAP program, a retailer is provided with an application to participate in the SNAP program and a book of federal regulations regarding the SNAP program. The retailer must accept responsibility for any violations of the SNAP program committed by any employee of the retailer.
The case is being prosecuted by Assistant Attorney General Michael Pine of AG Coakley’s Public Integrity Division, and Gabe Thornton from AG Coakley’s Insurance and Unemployment Fraud Division. The ongoing investigation is being handled by Massachusetts State Police assigned to the Attorney General’s Office. Investigators from the Quincy Police Department, Department of Transitional Assistance (DTA), and the U.S. Department of Agriculture – Office of Inspector General assisted in the investigation.