Fourteen Baltimore-area retailers from Glen Burnie to Park Heights have been charged with defrauding the U.S. Department of Agriculture of more than $16 million from in a practice known as "food stamp trafficking," federal prosecutors said Tuesday.
The Supplemental Nutrition Assistance Program provides low-income individuals with debit cards that can be used to purchase fruits, vegetables, and other grocery staples. Prosecutors allege that the shop owners would pay customers cash, instead of food, for their SNAP benefits.
A customer might receive $50, while the USDA is charged $100, leaving the shop owner with $50 profit.
"Individuals who are involved in fraud and abuse of SNAP and other USDA programs will be aggressively investigated," said William G. Squires, Jr., special agent in charge of the USDA office of the inspector general for the Northeast Region.
Some 300 law enforcement officers executed 32 search warrants at businesses and other locations and seized 46 bank accounts Tuesday, authorities said. The 14 defendants appeared before a judge in the federal courthouse downtown for initial appearances Tuesday afternoon.
Investigators analyzed sales data from the stores for months, authorities said, to see if transaction amounts were above the norm for that store, or if there were multiple transactions on a single card, or manual transactions, when a card is not present.
Investigators spoke to confidential informants and used undercover officers and physical surveillance to document the exchanges, authorities said.
At one store, the number of transactions was about 25 times that of similar stores in the area, and the average transaction was more than 10 times larger, U.S. Attorney Rod J. Rosenstein said at a news conference Tuesday.
Rosenstein said smaller stores, knowing they would catch the attention of the government, would call larger stores to enter in the transactions, splitting the proceeds.
He said some store owners, disqualified from participating in the program, would reopen shops in the same location under new names.
"The Agricultural Department is playing whack-a-mole," he said. "These stores just keep popping up every time they disqualify them, and shut them down."
The USDA has a fraud-monitoring program, regular audits of SNAP data to look for unusual patterns, and the ability to disqualify businesses that don't follow the rules, Rosenstein said, but many businesses continue to benefit in the practice.
One family was accused of operating a Rosedale shop under different names and handing out cash for SNAP benefits.
The business was incorporated by a different person four times since 2009, and applied to participate in the food stamp program four times, authorities said. It was disqualified twice from participating because of food stamp trafficking, they said.
"The government has been unable to shut down that fraud through administrative remedies, but we can stop it by sending the perpetrators to federal prison," Rosenstein said. "That's what we intended to do."
The USDA has authorized more than 4,000 business in Maryland to take SNAP benefits. Eighty-two have been permanently disqualified from participating after investigations.
The majority of businesses nationwide that have been permanently disqualified from participating in the program — 1,517 — are convenience stores. The second-highest category was small grocery stores, with 519.
In 2013, a federal grand jury indicted 10 owners or operators of local businesses for stealing nearly $7 million from food assistance programs by agreeing to debit cash for beneficiaries without selling food. The store operators allowed customers to convert the cards into cash, instead of approved food items. All were convicted.
"Fraud and corruption pose a fundamental threat to our national security and our way of life," said Kevin Perkins, Special Agent in Charge of the FBI Baltimore office. "It takes a significant toll and the public's pocketbooks, siphoning away money that could be used for a lot better things."
The defendants either could not be reached for comment or declined to comment. They were identified as:
— Walayat Khan, 36, of Reisterstown and Barbara Ann Duke, 50, of Owings Mills allegedly obtained more than $1,486,118 in payments for food sales that never occurred at Maria's Market Place, 307 S. Broadway in Fells Point and Royals Food Market, 921 E. Patapsco Avenue in Brooklyn, between October 2013 and June 2016.
— Shaheen Tasewar Hussain, 60, of Ellicott City allegedly obtained more than $778,183 in payments for food sales that never occurred at the Shop & Save, 301 Crain Highway South in Glen Burnie, between July 2014 and October 2015.
— Kelym Novas Perez, 34 and Jose Remedio Gonzalez Reyes, 50, both of Baltimore, allegedly obtained more than $879,500 in payments for food sales that never occurred at the Kelym Grocery, 2734 Pennsylvania Avenue in Penn North, between August 2013 and March 2016.
— Mulazam Hussain, 54, of Windsor Mill allegedly obtained more than $1,242,745 in payments for food sales that never occurred at the Monroe Food Mart and Y&J Grocery in Baltimore between March 2013 and July 2016.
— Mohammad Shafiq, 50, of Gwynn Oak and his daughter, Alia Shaheen, 24, of Baltimore allegedly obtained more than $3,712,353 in payments for food sales that never occurred or were substantially inflated at the Quick Stop Convenience Store, 237 N. Patterson Park Avenue in Baltimore; the New York Food Mart, 1201 N. Patterson Park Avenue in Broadway East; the Barclay Food Mart, 2454 Barclay Street in Barclay, and the Shafiq Corporation, 6929 Holabird Avenue in Dundalk between October 2010 and July 2016.
— Mohammad Irfan, 59, and Muhammad Sarmad, 40, both of Nottingham, allegedly obtained more than $3,550,662 in payments for food sales that never occurred at the New Sherwood Market, 6324 Sherwood Road in Northwood; the Martin Mart, 1504 Martin Boulevard in Middle River; the Rosedale Mart, 6326 Kenwood Avenue in Rosedale; and the M&A Mart 7400-A Belair Road in Baltimore, between October 2010 and August 2016.
— Mahmood Hussain Shah, 57, of Catonsville and Muhammad Rafiq, 58, of Reisterstown allegedly obtained more than $1,610,556 in payments for food sales that never occurred at the Corner Groceries, 1242 Darley Avenue in Baltimore, between October 2010 and August 2016.
— Rizwan Pervez, 38, of Essex, allegedly obtained more than $1,689,511 in payments for food sales that never occurred at the M&N Mini Mart, 1846 W. North Avenue in Mondawmin and Mega Mart1,1522 Ellamont Street in Rosemont, between April 2014 and July 2016.
— Kassem Mohammad Hafeed, also known as Kassam Mohammad Hafeed, 51, of Baltimore, allegedly obtained more than $1,532,642 in payments for food sales that never occurred at the Yemen Grocery, 1400 W. Lombard Street in Union Square, between October 2010 and August 2016.
Each defendant faces up to 20 years in prison for each count of wire fraud; up to five years in prison for conspiracy to commit food stamp fraud and wire fraud; and up to five years in prison for food stamp fraud.
Due to incorrect information from the Maryland U.S. Attorney's Office, earlier editions of this story misidentified the dates and the shop where Kassem Mohammad Hafeed allegedly received payments for food sales that never occurred.
Baltimore Sun reporter Tim Prudente contributed to this story.
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