Food-Stamp Woes Cost Billions Waste, Fraud Eat Up More Than 10 Percent Of Annual Budget

As Congress considers turning the food stamps program over to the states to run, federal investigators testified Wednesday that waste and fraud cost taxpayers about $3 billion annually, or more than 10 percent of the program’s 1995 revenues of $26 billion.

Though most participants don’t abuse the program, waste and multimillion dollar stamps-for-cash schemes are becoming increasingly frequent, said Roger Viadero, the Agriculture Department’s Inspector General.

“There is no question that it is widespread and involves significant amounts of food-stamp dollars,” Viadero told a House Agriculture Committee investigating the program.

The food stamp program’s growth in recent years - one in 10 Americans receives food stamps - has prompted increased scrutiny of its expenditures and operation.

House Agriculture Committee Chairman Pat Roberts, R-Kan., said his panel aims to root out the waste and make the program more cost effective. He said he favors consolidation of food stamps and other welfare programs. But he added that, because of the abuses, he is skeptical of Republican welfare reform proposals that would end federal jurisdiction over food stamps.

While showing the committee video footage of several fraudulent deals taped by undercover agents, Viadero said that his agency has documented cases of sham retailers - operating without grocery inventories - buying food stamps for between 50 cents and 70 cents on the dollar. They then trade in the stamps for merchandise or cash from authorized retailers who redeem them through the government at face value.

The largest such case resulted in the arrests last September of 29 people in New York charged with a $40 million money-laundering scheme involving food stamps.

In one month alone, a Brooklyn, N.Y., retailer illegally bought $4.7 million worth of food stamps, nearly 5 percent of all stamps redeemed that month in New York City.

Viadero said food-stamp traffickers commonly are active in other criminal enterprises such as theft, fencing rings or drug selling.