Food Stamp Trafficking: Defense Strategies for SNAP Retailers

By: Attorney Kevin Marcilliat

The United States Department of Agriculture, which is the federal agency that oversees the Supplemental Nutrition Assistance Pro gram ("SNAP"), is cracking down on retailers who illegally exchange cash for food stamp benefits, a practice known as food stamp trafficking. The USDA recently released a new report examining the trafficking rate within SNAP authorized retailers which "better pinpoints where the vast majority of SNAP trafficking occurs -smaller stores that typically offer minimal access to the healthier foods encouraged by the Dietary Guidelines for Americans. " The takeaway from this recent report is simple: the USDA is actively investigating small retailers such as gas stations, convenience stores, and specialty grocery stores for any violation of the federal SNAP regulations and seeking to permanently disqualify any retailer who commits even a single trafficking offense. As a result, if you own a small or medium-sized retail business which is authorized to accept food stamps or you are interested in submitting an application to become authorized to accept SNAP EBT benefits, this article will provide some helpful tips on common missteps made by retailers (which can lead to civil sanctions or even criminal charges), as well as let you know when it's time to hire an experienced defense attorney.

The federal laws governing which items may be sold by retail stores to customers using food stamps are found in Title 7 of the Code of Federal Regulations. The Regulations state that only authorized retailers may accept EBT payments for "eligible food." The term "eligible food" is defined as any food or food product intended for human consumption except alcoholic beverages, tobacco, and hot foods and hot food products prepared for immediate consumption." The Regulations are clear that the Food and Nutrition Services (FNS ) Regional Office "shall disqualify a firm permanently if personnel of the firm have trafficked." Trafficking is defined as "[t]he buying, selling, stealing, or otherwise effecting an exchange of SNAP benefits issued and accessed via Electronic Benefit Transfer (EBT) cards . . . for cash or consideration other than eligible food. . ."

How Does Trafficking Occur in Small Retailers?

The typical trafficking scenario in a small SNAP-authorized retailer looks something like this: imagine that you are the owner of a small grocery or convenience store that has recently been authorized to accept SNAP EBT as a form of payment for food items in your store. Like many small business owners, you have transferred the day to day operations of the store to a store manager, who has hired a few individuals to serve as cashiers at the store's only cash register on a rotating basis. Also imagine that, like many SNAP authorized retailers, your store's customer base is comprised of many low-income individuals who qualify for food stamps, which is what motivated you as the store owner to apply to accept food stamps in the first place. Now imagine that the store's young cashier, who was probably hired out of the same neighborhood as many of the store's customers, is approached by "a few guys from the neighborhood" who are offering a common-sense trade: they want to swipe their EBT cards in a sham transaction that gives the store $150 in SNAP payments from the government, and in exchange all they are asking for is that the store give them $75 from the cash register. The young store employee, who probably realizes that this transaction isn't the best idea but who hasn't been trained specifically on the EBT regulations and has never even heard the word "trafficking," succumbs to peer pressure and makes the sale. After this sale, word spreads through the neighborhood that this particular store is handing out easy money, and before long, the store's employees (without the knowledge of its owner) are engaged in a full scale trafficking scheme that benefits the store's bottom line and helps out the neighborhood guys who want easy money.

You are probably thinking to yourself - the store owner can't possibly be responsible for this behavior since he didn't condone it in any way, and he wasn't even in the store when the trafficking transactions occurred. Unfortunately for the store owner, you would be wrong. Pursuant to federal law, the SNAP authorized retailer is 100% responsible for the illegal conduct of his employees, and the store owner is now subject to a permanent disqualification of his store (and, potentially, any other store he might own or plan to open in the future) for trafficking. Additionally, if the disqualified store owner attempts to sell or otherwise transfer his store after a permanent disqualification for trafficking, the USDA deems this to be a de facto attempt to avoid the disqualification and can issue a "transfer of ownership civil monetary penalty." For many retail food businesses in low-income neighborhoods, the ability to accept SNAP EBT as a form of payment is the difference between staying in business and losing everything - so it's probably a good idea to start paying attention to the steps needed to avoid the scenario described above.

How to Avoid Permanent Disqualification for Food Stamp Trafficking

There is one simple rule for SNAP retailers to live by: train your employees, and be able to prove it! Businesses which create a culture of compliance with SNAP regulations are far less likely to find themselves in the position of the store owner described above. There is a specific list of rules that every cashier that handles EBT as a form of payment must know by heart before they are allowed to accept those payments in your store, and the USDA actually makes these training materials available to authorized retailers. Just as important as the training itself is being able to prove that your employees were properly trained - so making new employees sign an acknowledgement of that training prior to starting their cashier duties is the best practice for retailers.

The reason the proof of training is so vital is that, if your store is cited for trafficking based on the actions of one lone-wolf employee who acted in deliberate disregard of the regulations, proof that you properly trained them can be the difference in your store being permanently disqualified from accepting SNAP EBT versus qualifying for a "civil monetary penalty" (CMP) - which means that your store would be able to simply pay a fine to the USDA and continue accepting SNAP benefits from customers as a form of payment.

What to Do if You Receive a Charge Letter from FNS

You can identify a "charge letter" citing your business with trafficking (or other violations of the SNAP regulations) by the following language:

"The United States Department of Agriculture Food and Nutrition Service (FNS) has compiled evidence that your firm has violated the Supplemental Nutrition Assistance Program (SNAP) regulations. Analysis of the records reveal Electronic Benefits Transfer (EBT) transactions that establish clear and repetitive patterns of unusual, irregular, and inexplicable activity for your type of firm. A listing of such transactions is enclosed."

If you a receive a letter from the USDA with the language above, this means that the USDA has conducted an investigation into your store's redemption data (a compilation of your store's EBT sales records that are automatically transmitted to the Government for analysis after each EBT transaction) and has made a preliminary determination that your store has engaged in illegal activity. As the charge letter indicates, you have the right to have an attorney assist you in responding to the allegations, and the preliminary determination is not binding and can be overturned. There are two different levels of administrative review within the FNS itself, and this stage provides an excellent opportunity for defense counsel to provide affirmative evidence that your firm has either not engaged in trafficking or that your firm qualifies for a civil monetary penalty based on proper training of staff and lack of direct ownership involvement in the trafficking offenses. Further, the FNS determination can also be appealed by filing suit in federal district court.

The attorneys with the Roberts Law Group have successfully defended clients cited with various types of SNAP violations at the administrative level, including trafficking, thus preserving the client's ability to continue collecting SNAP as a form of payment and preserving the profitability of their businesses. If you or your business receive a charge letter from the USDA, contact our firm immediately for a free consultation with an experienced attorney. We will be happy to discuss representation for any USDA charge letter nationwide.

Please see below for an example of our recent success defending a client cited for trafficking:

USDA v. W.T.:

  • The USDA notified our client that her business had violated regulations of the Supplemental Nutrition Assistant Program ("SNAP"). The violation notice alleged that a large number of transactions appeared to be "unusual" or "irregular" for her business. Three categories of suspicious transactions were cited: 1. Excessively large purchase transactions, 2. Unusual number of transactions that ended in the same "cent" value, and 3. Multiple transactions from the same benefit account in unusually short time frames. In response to the violation notice, we provided photos, invoices, and receipts related to our client's business inventory. We also provided affidavits from customers of the business, explaining the types of purchases that they commonly made. With this information, we were able to address each allegation made against our client's business and persuade the officer to close his investigation against the business. The business was permitted to continue accepting EBT from customers.

USDA Press Release, "USDA Releases New Report on Trafficking and Announces Additional Measures to Improve Integrity in the Supplemental Nutrition Assistance Program," available at http://www.fns.usda.gov/pressrelease/2013/fns-001213 (last accessed on August 9, 2016).

FNS is the branch of the USDA that investigates violations of the food stamp regulations and issues sanctions to those firms found to be in violation, including issuing permanent bans from accepting food stamps for those firms that engage in trafficking.

North Carolina vs. M.W.
Charge: Charge: Robbery with A Dangerous Weapon (4 Counts), First Degree Burglary, Conspiracy to Commit Robbery with A Dangerous Weapon
Facing: 12 - 17 years in prison
Result: Dismissed

An incarcerated defendant accused our client of participating in the robbery of a group of youth at a party. We were able to raise doubt as to the credibility of this individual. In the end, the prosecutor dismissed these charges, citing a lack of evidence.