Manhattan U.S. Attorney Charges 16 Defendants With Defrauding Federal Program For Low-Income Pregnant Women, Mothers, And Young Children
Grocery Store Operators And Employees Allegedly Paid Cash For Public Benefit Vouchers And Fraudulently Obtained Reimbursement From Government Program
In Parallel State Prosecution, New York State Attorney General Charges 10 Additional Defendants
Preet Bharara, the United States Attorney for the Southern District of New York, James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), Nirav Shah, the Commissioner of the New York State Department of Health (“NYS DOH”), and Eric T. Schneiderman, the New York State Attorney General, today announced charges against 16 defendants for defrauding the federal Special Supplemental Nutrition Program for Women, Infants and Children (“WIC”) out of millions of dollars. All of the defendants, who were owners or employees of nine different grocery stores in Manhattan, Queens, and Brooklyn, New York, were charged with participating in fraud schemes from 2011 to the present in which they exchanged WIC vouchers for cash while keeping a portion of that cash for themselves. Ten of the defendants charged today are married couples or family members. Twelve defendants were arrested this morning and are expected to be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox this afternoon. An additional defendant was also arrested and will be presented at a later date. Defendants QIGUANG ZHANG, HUILAN LIU, and LAN LU JIANG are still at large. In a parallel state prosecution, today the New York State Attorney General’s Office arrested 10 additional individuals who were owners and employees of stores located in Brooklyn, Queens, and Manhattan.
A civil forfeiture complaint was also filed this morning in the Southern District of New York against 19 businesses in the New York City area, real property located at 6101 Fifth Avenue, Brooklyn, New York, and 19 bank accounts. The 19 bank accounts were seized by law enforcement, as they contained proceeds of the WIC fraud described herein and were used to promote and conceal the WIC fraud.
Manhattan U.S. Attorney Preet Bharara said: “As alleged in the complaints unsealed today, the defendants defrauded a vital federal program that provides a lifeline to women, mothers, and young children in need throughout New York. This Office will continue its work to prosecute corruption and protect taxpayer-funded programs, particularly at this time of scarce government resources and where it involves vulnerable victims.”
ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Business owners and their employees arrested today allegedly committed a series of fraud against the American taxpayer. We will continue to work hard to ensure that social programs meet the needs of their intended beneficiaries.”
New York State Department of Health Commissioner Nirav Shah said: "New York State takes an aggressive stance against any and all fraud. This case is a testament to the effectiveness of the collaborative investigation by the State Health Department, the NYS Office of the Attorney General, the US Department of Homeland Security, and the U.S. Attorney’s Office – Southern District of New York. We are committed to protecting public funds through fraud prevention, detection and prosecution to support this critical program which serves 500,000 women, infants and children throughout New York State.”
New York State Attorney General Eric Schneiderman said: “These crimes are a betrayal of the trust of the people of New York and those who rely on the WIC program to ensure the health and well-being of their children. This joint investigation by my office in conjunction with the New York State Department of Health, the United States Department of Homeland Security and the United States Attorney’s Office for the Southern District of New York sends a clear message that fraud against New York State benefits programs will not be tolerated. The conduct charged here is particularly egregious in light of the fact that the defendants stole monies intended to provide nutrition for infants, young children and pregnant mothers. My office is dedicated to seeking justice against perpetrators who defraud the public and to preserving the integrity of important benefits programs such as WIC.”
The following allegations are based on the Complaints unsealed today in Manhattan federal court:
The “WIC” Program and the Defendants’ Scheme to Defraud
WIC is a federally funded program through which the U.S. Department of Agriculture provides grants to states for supplemental foods, health care referrals, and nutrition education for low-income pregnant women, mothers of young children, and children up to age five who are found to be at nutritional risk. Grants are administered in New York by the New York State Department of Health, Division of Nutrition (the “NYS DOH”). Participants in the WIC program receive vouchers which may only be used to purchase certain specified food items such as infant formula, milk or juice. Participants can exchange these vouchers for food items specified on the vouchers at grocery stores run by licensed vendors.
Only vendors who are licensed by the state may accept WIC vouchers. Because the purpose of the program is to provide food to low-income women, mothers, and children at nutritional risk, WIC vendors are prohibited from exchanging WIC vouchers for cash, but instead must provide specified food items in exchange for WIC vouchers.
The 16 defendants named in the three Complaints unsealed today are the owners, operators, or employees of nine grocery stores located in Manhattan, Queens, and Brooklyn, New York. The schemes to defraud charged in these Complaints involve store owners and employees purchasing WIC vouchers for cash—typically paying 80-85 percent of the face value of the WIC vouchers—and then redeeming those WIC vouchers from the NYS DOH for their full face value. Grocery stores involved in these schemes accepted WIC vouchers regardless of whether they were licensed by the state. In the aggregate, the corrupt owners, operators, and employees of these nine grocery stores have redeemed approximately $30 million worth of WIC vouchers.
The “Six-Store Network” Complaint
TUNG CHA YO, SUNG MAN CHAN, YING ZHENG, QIGUANG ZHANG, FENG ZHENG, SAU WA YEUNG, SAU CHAN, ZHAOJUN LIN, HUILAN LIU, and YU WANG were the owners, operators, or employees of six grocery stores located in Manhattan, Brooklyn, and Queens, New York, only two of which had WIC licenses that were active and in use in 2013. YO and SAU CHAN are married to one another. YEUNG is the mother of SAU CHAN and SUNG MAN CHAN. SUNG MAN CHAN is married to FENG ZHENG, whose sister is YING ZHENG.
Owners or employees at each of those six grocery stores purchased WIC vouchers for cash from confidential informants on numerous occasions between March and November 2013. All of those checks were funneled to one of the stores that had a WIC license, which redeemed them, received payment from the WIC program, and then distributed the proceeds to the other members of this network of stores.
Since 2009, these defendants have opened and closed grocery stores in different names at the same locations. In many instances, the defendants obtained WIC licenses, redeemed significant volumes of WIC checks using those licenses, and then terminated those licenses only to use a different store to obtain a WIC license and repeat this pattern. Based on figures obtained from the NYS DOH, it is estimated that these six stores and their predecessors redeemed more than $19 million from the WIC program since 2009.
All of these defendants are charged with conspiracy to commit theft of government funds, which carries a maximum term of five years in prison. TUNG CHA YO, SAU WA YEUNG, and ZHAOJUN LIN are charged with theft of government funds, which carries a maximum term of 10 years in prison. TUNG CHA YO, SUNG MAN CHAN, YING ZHENG, and QIGUANG ZHANG are also charged with conspiracy to commit money laundering and money laundering, which both carry a maximum term of 20 years in prison.
The “Two-Store” Network Complaint
GIGI DONG, SHUMIN DONG, LAN LU JIANG, and ANIY LI were the owners, operators, or employees of two grocery stores located in Brooklyn, one of which had a WIC license that was active and in use after March 2013. SHUMIN DONG and GIGI DONG are married to one another. Owners or employees at both of those stores purchased WIC vouchers for cash from confidential informants on numerous occasions between March and November 2013. All of those checks were funneled to the store that had a WIC license, which redeemed them and received payment from the WIC program.
These defendants engaged in a fraudulent scheme similar to the scheme described in the first Complaint, only this time alternating their WIC license between stores at two locations. Based on figures obtained from the NYS DOH, it is estimated that these two stores and their predecessors redeemed more than $9 million from the WIC program since 2009.
All of these defendants are charged with conspiracy to commit theft of government funds, which carries a maximum term of five years in prison.
B & B Grocery Commits WIC Fraud
YONG LIN and QIAO FANG ZHENG operate a grocery store located in Brooklyn, New York. LIN and ZHENG are married to one another. LIN obtained a WIC license in February 2010, and over $1.3 million worth of WIC vouchers were redeemed through that store until the license was terminated in February 2012. ZHENG then obtained a new WIC license in the name of a different store at the same location, and redeemed over $540,000 worth of WIC vouchers. ZHENG purchased WIC vouchers for cash from confidential informants on numerous occasions between April and September 2013.
Both of these defendants are charged with conspiracy to commit theft of government funds, which carries a maximum term of five years in prison.
A chart listing the age, place of residence, and charges for each of the 16 charged defendants is attached.
Manhattan U.S. Attorney Bharara praised the investigative work of ICE HSI, the United States Department of Agriculture, Office of the Inspector General, the New York State Department of Health, Division of Nutrition, as well as the New York State Attorney General’s Office.
The Office’s General Crimes Unit is handling the case. Special Assistant U.S. Attorney Jason Wong and Assistant U.S. Attorneys Patrick Egan and Richard Cooper are in charge of the prosecution. Assistant U.S. Attorney Carolina A. Fornos of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.
The charges contained in the Complaints are merely accusations and the defendants are presumed innocent unless and until proven guilty.