Two Ohio men were indicted on Jan. 22 for an alleged $2.7 million food stamp fraud scheme. The amount of fraud is itself noteworthy, but other aspects of the case are also unusual.
Amin M. Salem, 59, and his son Mohamed Salem, 32, were both indicted on one count of conspiracy to launder money and one count of engaging in real estate transactions using laundered food stamp proceeds.
The elder Salem, a convicted felon, was also charged with the illegal possession of a 12-gauge shotgun and AR-15 long rifle, in addition to operating an unregulated animal slaughterhouse.
For at least two years, Salem slaughtered lambs and goats on his property and sold misbranded and uninspected meat to customers, often in exchange for food stamp benefits, according to the U.S. Attorney’s Office for the Northern District of Ohio.
Salem faces an additional count of making unpermitted discharges into a waterway, for habitually dumping discarded animal blood and body parts into a stream that emptied into the Black River and eventually Lake Erie.
The unsanitary discharges caught the attention of the U.S. Environmental Protection Agency, in addition to the Federal Bureau of Investigation, Internal Revenue Service, U.S. Department of Agriculture, and an array of state law enforcement agencies.
“This case demonstrates that the EPA and its law enforcement partners will pursue those who violate laws designed to protect the health of our communities and the environment,” said Jennifer Lynn, special agent in charge of EPA’s criminal enforcement program.
According to the U.S. Attorney’s Office, Salem secretly owned seven gas stations, and his son Mohamed managed their finances.
Each gas station had point-of-sale terminals to process Electronic Benefits Transaction cards, or EBT, as part of the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps.
But Salem was prohibited from participating in the USDA Food and Nutrition Service’s SNAP retailer program due to previous convictions for conspiring to defraud the government, food stamp fraud, mail fraud, and money laundering.
However, program rules were evaded by registering the EBT terminals to Mohamed Salem and another individual.
Food Stamp Trafficking
The men are accused of operating a highly lucrative food stamp trafficking fraud ring for six years.
According to the USDA, food stamp trafficking occurs when those issued food stamp EBT cards sell their food benefits to corrupt store vendors for cash.
Since program benefits are preloaded onto cards, which function like bank debit cards, an authorized store retailer can swipe the card on an EBT terminal and give cash back to the cardholder, often at a steep discount and without any actual food changing hands.
The USDA Food and Nutrition Service then reimburses the store retailer, who pockets the difference of the amount charged to the EBT card and the lesser amount of cash given to the food stamp cardholder.
The USDA’s most recent trafficking report estimates roughly $1.1 billion in annual trafficking fraud, with 11.8 percent of all authorized SNAP retailers engaging in the illegal practice.
The report, which spanned 2012 to 2014, indicated that nearly 40 percent of all food stamp trafficking occurred at gas station convenience stores and small groceries.
In all, the Salems are accused of processing $2.7 million in fraudulent benefits from 2010 to 2016 at Amin Salem’s seven Cleveland-area gas stations.
Money from the illegal SNAP transactions and meat sales were deposited into gas station banks accounts and forwarded to separate accounts controlled directly by the Salems.
“This father and son duo engaged in various illegalities to include stealing from every taxpaying citizen by engaging in food stamp fraud, a program designed to help those in need,” said Robert E. Hughes, FBI acting special agent.
U.S. Attorney Justin Herdman said Amin Salem will “be held accountable for years of disregarding our nation’s laws and flouting the rules to enrich himself.”
Need for Reform
The United Council on Welfare Fraud, a national organization of SNAP investigators, administrators, and other stakeholders, describes food stamp fraud accountability as a Sisyphean effort of pushing an enormous boulder uphill, only to watch it come back down, again and again.
The group proposed a list of 23 reforms to the House Committee on Oversight and Government Reform in May 2018, prior to federal Farm Bill negotiations, which encompasses SNAP funding.
Among them were requests to include states in the authorization of SNAP-approved retailers “to overcome the lack of federal background checks,” and to update program rules relating to the disqualification of fraudulent retailers.
Both items could potentially have impacted the six-year Ohio alleged fraud scheme, involving the previously convicted and disqualified Amin Salem.
According to UWCOF, the USDA Food and Nutrition Service (FNS), which administers the food stamp program, does not require sufficient information about where SNAP retailer proceeds are deposited. “This provides ample opportunities for fraud including business identity theft and straw ownership (where funds are diverted to an account held by a permanently disqualified individual).”
The group also asserted that “FNS waits too long to remove a store from participation in SNAP after there is highly credible proof of SNAP fraud.”
Under program rules, investigations of FNS-approved EBT retailers can only be conducted by federal agents from the USDA Office of the Inspector General, whereas state investigators are tasked with pursuing food stamp recipient fraud. The FNS typically removes approved retailers only after a criminal case is completed.
“This failure to act allows untold millions of additional dollars to be spent,” said UWCOF member Andrew McClenahan, a Florida regional director.
According to the Government Accountability Institute, a conservative research nonprofit, food stamp participation exploded in the aftermath of the 2008 financial crisis, but without a corresponding increase in state and federal fraud investigators—a problem that persists.
The number of FNS-approved stores jumped by 50 percent during the period, and at a time when the USDA OIG’s investigative staff “was at its lowest since 1978.”