The investigation into the city business that authorities say regularly defrauded the food stamp system continued Thursday, with the prosecutor saying the total number of recipients who illegally exchanged their benefits for cash could reach into the hundreds.
Nearly two dozen have already been arrested for the alleged actions at Cheese Bakery and Grocery, 1007 State St., including the store owner and his son. More arrests are possible, officials have said. Those not charged criminally could face loss of their benefit privileges.
Prosecutor Katie McCutcheon provided more information on the investigation Thursday, after store owner Vishnunarine Singh, 57, of Ozone Park, and his son Elvin, 27, of Schenectady, were arraigned on multiple felony counts. Both pleaded not guilty.
The two are accused of essentially trading food stamp benefits for cash, with little or no actual food included in the transactions. The recipient would then get typically about 50 percent of the face value of the benefits and the store would keep the other half, officials said.
Such scams have been perpetrated before by store owners.
Three store owners and one store operator were arrested in 2011 in Albany, accused of running the same type of scam. Together, they were believed to be responsible for more than $6.1 million in suspicious food stamp activity.
In the Schenectady case, the arrests of the store owner and son on food stamp fraud charges were accompanied by the arrests of 21 others, accused of using their own food stamp privileges at the store illegally.
“We do want to send a message to the community, store vendors as well as recipients, that this type of fraudulent activity is not going to be tolerated in this community,” McCutcheon said.
Food stamp cards are similar to debit cards, and are intended to help low-income families in purchasing food. They carry restrictions on what can be purchased. Lottery tickets, tobacco products and alcohol are among the items that can’t be purchased, officials have said.
In Thursday morning’s court appearance for the Singhs, bail was set at $10,000 cash for the father and $7,500 cash for the son. Both had been held overnight, but by late afternoon Thursday, both were released, having each posted the full cash bails, jail officials said. Both had to turn in their passports as a condition of bail.
The father was represented by attorney Cory Dalmata, who could not be reached for comment later. The son was represented by attorney Michael Braccini, who said later that his client maintains his innocence.
“He says it wasn’t him,” Braccini said of Elvin Singh, noting that it was the father’s business. “He doesn’t know anything about it.”
Attorneys said the elder Singh owns and operates the store, even though he lives in Ozone Park with his wife and children. His son does not run the store, but runs a small cellphone business in the same storefront, Braccini said.
The elder Singh has owned the business for 10 years and has lived in the state for 19 years. But he has significant ties to Guyana, prosecutors said. The younger Singh owns a house in Schenectady, his attorney said. He also has a prior conviction for DWI.
The grand jury could hear the case as early as today.
Cheese Bakery and Grocery did not carry nearly enough items to account for the food stamp business it was claiming, McCutcheon said.
A store that size and in that general location is expected to do about $5,000 to $8,000 worth of food stamp transactions in a month, she said. Cheese Bakery and Grocery, though, in recent months was doing between $50,000 and $75,000 in food stamp transactions, much of that believed to be illegal.
It is illegal to exchange food stamps for cash.
Over the past three years, the store is believed to be responsible for a half-million dollars in fraud. The store remained open after the arrests late Wednesday afternoon but it was closed Thursday.
The U.S. Department of Agriculture, Schenectady County District Attorney’s Office, Schenectady police and the county Department of Social Services participated in the investigation.
The investigation spanned six months, with investigators from the city police Special Investigations Unit using multiple tactics, including reviewing food stamp program records, McCutcheon said.
“There were undercover operations involved, as well as surveillance cameras,” she said.
But investigators didn’t stop at targeting the business, also working to identify the recipients illegally using the benefits. And they are continuing to identify them, something McCutcheon said is meticulous work.
Authorities have not said what they believe the recipients were using the money for, but in a statement issued after the arrests Wednesday, Schenectady Police Chief Brian Kilcullen indicated it was “potentially used for purposes entirely contrary to the purpose of the program.”
In the 2011 Albany case, prosecutors there speculated the money likely was used to fund drug habits or other illegal behavior.
Of the recipients already charged in the Schenectady case, McCutcheon said investigators used multiple methods to identify who was actually using the cards.
“We have a swipe transaction occurring, documents showing the swipe transaction,” she said. “And we have surveillance video of a certain person coming in and out of the store at the same approximate time.
“For our purposes, that’s not good enough,” McCutcheon added. “We need to verify that, in fact, the person suspected of using the card was using the card.”
That was done through known photographs of the suspects, as well as investigators who were personally familiar with some of the suspects.
So far, authorities have charged only those who had three or more suspected fraudulent transactions of $100 or more each. Those who go uncharged criminally could still face the loss of their benefit privileges, officials said. Schenectady County Social Services, which administers the program and took part in the investigation, is reviewing the information, officials said.
Though administered locally, the program — officially called the Supplemental Nutritional Assistance Program — is fully funded by the federal government.
Data on the number of people receiving food stamp benefits in Schenectady County was not available directly from the county or the federal government Thursday. Online magazine Slate.com, however, put county-by-county data together nationwide in April.
According to Slate, in 2009, the most recent year available, Schenectady County had more than 17,000 people receiving food stamps, with those recipients collecting more than $27 million in benefits.
Those numbers compare with nearly 12,000 food stamp recipients in Saratoga County and nearly 27,000 in Albany County, according to Slate’s tally.
According to the USDA website, the benefit card system is equipped to detect suspicious activity.
Nationwide in fiscal year 2012, nearly 1,400 stores were permanently disqualified for trafficking and nearly 700 stores were sanctioned for other violations, according to the USDA. Those efforts were the result of reviews of more than 1,500 stores and nearly 4,500 undercover investigations.
In the Schenectady case, McCutcheon said, the trafficking at Cheese Bakery and Grocery increased in recent months as word started to spread.
Fraud of the type alleged in Schenectady, she said, hurts the entire system, taking funding from those who truly need the benefits.
“It’s a very valuable program. We need it,” McCutcheon said. “And we need it to work properly, also. Having people defraud that system undermines the entire system. That’s not what the system was put in place for.”
In a statement Thursday, a USDA spokesperson said the department has a zero-tolerance policy when it comes to fraud.
“Due to increased oversight and improvements to program management, USDA has kept the fraud trafficking rate to about 1 cent on the dollar,” the statement reads. “We will continue to work aggressively with our local, state and federal partners to hold bad actors accountable.”
Food stamps have been an issue nationally in recent weeks, with debates in Congress over funding and other details of the program.
Locally, U.S. Rep. Paul Tonko, D-Amsterdam, in a statement called the allegations against Cheese Bakery and Grocery disturbing. If true, he said, those involved should be prosecuted “to the fullest extent of the law.” Tonko’s district includes Schenectady.
“The food stamp program is a lifeline to millions of working Americans that need assistance to make ends meet during tough times,” his statement reads. “At issue here is the possible fraudulent use of funds, and we cannot let a few bad actors cause millions of honest Americans who depend on these critical benefits to lose them.”
He said he is also focused on getting people back to work so fewer need to use the assistance.