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Food Stamp Use - and Abuse - Reaches All-Time High in US

Government says trafficking by the unscrupulous in the $30 billion program reached $1 billion last year

USE of government food stamps has reached an all-time high. Some 27 million Americans put bread and milk on the kitchen table with food stamps. But according to the government, under-the-table trafficking in food stamps reached $1 billion last year, also an all-time high.

``Trafficking is the exchange of food stamps for cash or goods,'' says Paul Shanholtzer, a spokesman for Food and Nutrition Service (FNS) of the United States Department of Agriculture. ``Someone buys stamps from a recipient for less than face value,'' he explains, ``and sells them to an unscrupulous retailer who in turn cashes them in to the government for full value. Everybody takes a profit at each step.''

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Fraud in the food stamp program has increased slowly since the program was launched in 1968, when 2.2 million Americans received $173 million worth of stamps.

The program gained little in numbers during the 1980s. Rapid increases began in 1990 as unemployment benefits ran out for laid-off workers, more and more poor working families stayed below the poverty line because of inflation, and the number of single mothers with babies began to increase.

Today, with the US still feeling effects from the last recession, the food stamp program costs a staggering $30 billion a year. Nearly 11 percent of the US population receives food stamps. The program is regulated by the US government, but administered by the states.

Of equal concern to officials, indicating the depth of poverty in the country, are government studies concluding that only 60 percent of those who qualify for stamps participate in the program. ``Many people are unaware they could qualify, or they choose not to participate because of pride,'' says Mr. Shanholtzer.

But pride is not a factor for thousands who engage in food stamp fraud. Typically, the big supermarkets in cities have well-run food stamp programs. Nearly 75 percent of all food stamps are redeemed through supermarkets.

More than likely, it is a small number of independent grocers who engage in trafficking. State officials in California say that for nearly three years, two small grocery-store owners in Los Angeles bought food stamps for cash below face value. One store averaged nearly $19,000 a day in redemptions. Over three years, the two stores paid cash for stamps worth $20 million.

Another well-publicized case involved a wholesale meat company in Brooklyn, N.Y. The company operated illegally for nine years by trading meat for stamps, and then deposited the stamps as cash into a bank account of a non-existent meat market. When state authorities cracked the case, over $82 million worth of stamps had been redeemed over the nine years.

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``The difficulty is the storage of food stamps,'' says Sheri Steisel, director of the Human Services Committee for the National Conference of State Legislatures. ``Unlike other assistance programs, food stamps are vouchers that go through a middle man, and unfortunately there are opportunities for fraud.''

Penalities for individual recipients who engage in fraud are disqualification from the program for a year, and permanent disqualification if they exchange stamps for drugs or firearms a second time. For retailers caught engaging in fraud, civil prosecution follows.

What food stamp officials say is the ``wave of the future'' - or at least provides an electronic shopping cart to help stop fraud - is a plastic debit card known as Electronic Benefits Transfer (EBT).

Instead of using food stamps, a recipient would use the card to transfer benefits from his or her food stamp account into the retailer's account when buying food. No money would change hands. The transaction would create an electronic ``paper trail,'' making it easier to catch abuses.

It would also eliminate mail theft, and with a Personal Identification Number (PIN), the card provides additional security. EBT is also expected to lower the administrative costs of the food stamp program.

Some 36 states are considering EBT, but only Maryland is fully operational now. Texas, with 1.2 million food stamp recipients, is scheduled to go statewide with EBT in 1996, and will test the system in two counties to head off potentially inventive electronic lawbreakers. In July last year, Secretary of Agriculture, Mike Espy, said that the goal was to initiate EBT projects in all states by 1996.

Other fraud situations with food stamps occur when applicants falsify their applications, either as potential recipients, or retailers who lie on their applications to be authorized by the US Department of Agriculture to accept food stamps.

In addition, caseworkers in state offices commit errors when they certify applicants, or establish the level of benefits to be received.

Florida, for instance, had the worst error-rate of all the states in 1992, 19.7 percent of the total applications. The national tolerance level for errors in 1992, established by the FNS, was 10.6.

According to the FNS, the Florida Department of Health and Rehabilitative Services in 1993 approved $256 million in food stamps sent to people who were either ineligible or deceased.

Also, for several reasons, there is less federal money now to prevent fraud and for administration, for both the stamp program and for the federal Aid For Dependent Children (AFDC) program. ``Legislatures are concerned,'' says Ms. Steisel.

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