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Document and Benefit Fraud
10/31/2013

NJ man admits exchanging more than $2.5 million in SNAP benefits for cash

CAMDEN, N.J. — A Camden County man admitted Thursday that he stole more than $2.5 million from the U.S. government through a food stamps scheme. The guilty plea is the result of an investigation conducted by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), the U.S. Department of Agriculture's Office of Inspector General and Internal Revenue Service Criminal Investigation.

Alexander D. Vargas, 34, of Camden, pleaded guilty to stealing U.S. government money 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 has been detained since his arrest May 16.

"This is a blatant example of how the SNAP program can be compromised," said Andrew McLees, special agent in charge of HSI Newark. "HSI will continue to work with our law enforcement partners to detect and seek out those individuals who attempt to defraud the government and abuse the programs which were established to assist those people in the greatest need."

According to court documents, from February through December 2012, Vargas managed Eddy's Grocery, a small grocery store in Camden that was authorized to accept SNAP benefits. Retail food stores approved for participation in SNAP may sell food in exchange for food stamp benefits. They may not, however, exchange food stamp benefits for cash.

Eddy's Grocery was first approved to participate in the SNAP program in 2007. In his application to participate in SNAP, the owner estimated that Eddy's Grocery would generate receipts of about $280,000 annually, or an average of about $23,333 per month. The volume of SNAP benefits reimbursement received at Eddy's Grocery substantially exceeded those estimates, indicating possible large-scale food stamp fraud. From February 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 a cooperating witness and an undercover law enforcement officer. During a series of five transactions from June 7 through Oct. 4, 2012, law enforcement agents directed a cooperating witness and an undercover law enforcement officer to go into Eddy's Grocery and exchange $1,359.75 in SNAP benefits for $650 cash.

A review of the bank records for the Eddy's Grocery account showed total cash withdrawals of $3.1 million from the account for 2012. In addition, records from Feb.15, 2012, through December 2012, when Vargas was added as an authorized cosigner on the account, showed just more than $2.5 million in cash withdrawals. Vargas' name was on 40 withdrawals totaling nearly $1.9 million.

Vargas faces up to 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 a forfeiture money judgment of nearly $3 million.

His sentencing is scheduled for Feb. 5, 2014.