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Document and Benefit Fraud

New Jersey man charged with food stamps fraud totaling more than $1 million

CAMDEN, N.J. – A Camden County man was charged May 16 with stealing more than $1 million in food stamp benefits. These charges are 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 the Internal Revenue Service’s Criminal Investigation.

Alexander D. Vargas, 34, of Camden, was arrested May 16 and appeared in federal court. Vargas is charged with allegedly purchasing 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.

According to court documents, from February through December 2012 Vargas managed Eddies Grocery, a small grocery store in Camden that was authorized to accept SNAP benefits. 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.

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 about $280,000 annually, or an average of about $23,333 per month. The volume of SNAP benefits reimbursement received at Eddies 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 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 of $3,109,776 from the account for 2012. In addition, records from February 15 through December 2012, when Vargas was added as an authorized cosigner on the account, showed $2,548,510 in cash withdrawals. Vargas’ name was on 40 withdrawals totaling $1,869,266.

If convicted, Vargas faces 10 years in prison and a fine of $250,000.