CAMDEN. – A Camden man admitted Wednesday that he stole more than $2.5 million dollars from the U.S. Government through a food stamps scheme, U.S. Attorney Paul J. Fishman announced.
Alexander D. Vargas, 34, pleaded guilty on Oct. 30 before U.S. District Court Judge Joseph H. Rodriguez to stealing U.S. Government monies during a scheme in which he purchased Supplemental Nutrition and Assistance Program (SNAP) benefits (formerly known as food stamps) for approximately 50 cents on the dollar at the local grocery store he managed in Camden. Vargas was detained after his arrest on May 16, 2013, and his detention was continued.
According to documents filed in this case and statements made in court:
From January 2012 through December 2012 Vargas managed Eddies Grocery, a small store in Camden that was authorized to accept SNAP benefits. The program is administered by the U.S. Department of Agriculture. Retail food stores approved for participation in SNAP may sell food in exchange for food stamp benefits. However, they may not exchange food stamp benefits for cash.
Every food stamp recipient receives an Electronic Benefits Transfer (EBT) card, similar to a debit card, with which to make purchases. Every retailer authorized to accept food stamp benefits has an EBT terminal. Food purchases are made by swiping the card at the terminal. After the customer enters a secret Personal Identification Number (PIN), the EBT terminal verifies the PIN, determines whether the customer’s account balance is sufficient to cover the proposed transaction and informs the retailer whether the transaction should be authorized or denied. If the transaction is authorized, the amount of the purchase is then deducted electronically from the food stamp benefits reserved for the customer, and the amount is credited to the retailer’s designated bank account.
Eddies Grocery designated a bank account at Sovereign Bank to receive the reimbursements for SNAP benefits. Bank records listed Vargas and another individual as managers of Eddies Grocery.
Eddies Grocery was first approved to participate in the SNAP program in 2007. In his application to participate in SNAP, the owner estimated that Eddies Grocery would generate receipts of approximately $280,000 annually, or an average of $23,333 per month. The volume of SNAP benefits reimbursement received at Eddies Grocery substantially exceeded those estimates, indicating large scale food stamp fraud. From February 2012 through November 2012 the SNAP redemptions were more than $2.8 million greater than the estimates.
In addition to the high volume of SNAP benefits redemptions, law enforcement agents verified the fraudulent exchange of SNAP benefits for cash through the use of a cooperating witness and an undercover law enforcement officer. During a series of five transactions from June 7, 2012, through Oct. 4, 2012, law enforcement agents directed a cooperating witness and an undercover law enforcement officer to go into Eddies Grocery and exchange $1,359.75 in SNAP benefits for $650 cash.
A review of the bank records for the Eddies Grocery account showed total cash withdrawals of $3,109,776 for the 2012 calendar year. Records from Feb. 15, 2012, (when defendant Alexander Vargas was added as an authorized cosigner on the account) through December 2012, showed $2,548,510 in cash withdrawals – of which Vargas’ name was on 40 withdrawals totaling $1,869,266.
Vargas faces a maximum potential penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Under the terms of the plea agreement, Vargas has agreed to forfeit $22,273 seized from him on the date of his arrest, and has also agreed to the entry of a forfeiture money judgment for $2,981,642. Sentencing is scheduled for Feb. 5, 2014.
Fishman credited special agents of the U.S. Department of Agriculture, Office of Inspector General, under the direction of Special Agent in Charge William G. Squires Jr. in New York; the Department of Homeland Security, Homeland Security Investigations, under the direction of Special Agent in Charge Andrew McLees; and IRS – Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen, with the investigation leading to the guilty plea.
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