The Doughnut and Cigarette Swindle

The U.S. Senate begins debate on the 2007 Farm Bill this month, which should be of interest not just to lobbyists, farmers, and food-industry types, but also to small urban grocers working food-stamp scams.

The Farm Bill re-authorizes the USDA's Food Stamp Program. Advocates hoping to bolster the vital $29 billion-a-year social service are hoping to build in extra money to fight fraudsters like Twins Market and Meats of St. Paul.

The owner and three employees of Twins were indicted this summer for conspiracy to defraud the USDA by swapping food-stamp credit for pastries, cigarettes, and cash. On one occasion, for example, a Twins employee swiped a food-stamp debit card for $323.58. In exchange, the cardholder received $150 cash, a bottle of pop, a pack of doughnuts, and three packs of smokes. What the government sees is the $323.58, and, when the scam works, a check for that amount comes back to the grocer, who is now skimming more than 50 cents on the dollar from the USDA.

According to the U.S. Government Accountability Office, small stores redeemed less than 15 percent of food-stamp benefits in 2005 but were responsible for $190 million of the roughly $241 million in stolen benefits. The indictment against Twins Market and Meats doesn't say exactly how much was made off the smokes-and-doughnuts scam, but recent nationwide convictions quantify the potential. Last year, a Michigan man admitted to scamming $380,000 in just 20 months. That's a whole lot of smokes and doughnuts.

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