Camden, N.J., Man Allegedly Exchanged More Than $1 Million In Snap/Food Stamp Benefits For Cash

CAMDEN, N.J. – A Camden man who allegedly stole more than $1 million dollars from the U.S. Government through a food stamps scheme was arrested by federal agents this morning, U.S. Attorney Paul J. Fishman announced.

Alexander D. Vargas, 34, was charged in connection with a scheme in which he allegedly purchased Supplemental Nutrition and Assistance Program (SNAP) benefits (formerly known as food stamps) for 50 cents on the dollar at the local grocery store he was managing in Camden. He is charged by Complaint with one count of stealing monies from the United States. Vargas was arrested by agents of the Department of Agriculture, Office of Inspector General, Homeland Security Investigations and the IRS. He is scheduled to appear this afternoon before U.S. Magistrate Judge Joel Schneider in Camden federal court.

According to documents filed in this case:

From February 2012 through December 2012 Vargas managed Eddies Grocery, a small grocery store in Camden that was authorized to accept SNAP benefits. The program is administered by the U.S. Department of Agriculture. Retail food stores that have been approved for participation in SNAP may sell food in exchange for food stamp benefits. They may not, however, 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 as the manager of Eddies Grocery, and another individual as the owner of the store.

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 approximately $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 from the account for the calendar year of 2012 of $3,109,776.  In addition, records from February 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.

The charge of theft of United States funds is punishable by a maximum potential penalty of 10 years in prison and a fine of $250,000.

U.S. Attorney 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 Investigations, under the direction of Special Agent in Charge Shantelle P. Kitchen, with the investigation leading to today’s arrest.

The government is represented by Assistant U.S. Attorney Diana Carrig of the U.S. Attorney’s Office in Camden.

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Vargas, Alexander Complaint