Authorities believe benefit cards have been bought at discounts from homeless people and fraudulently redeemed at grocery stores.
Federal authorities are investigating a scheme in which they believe a man bought food stamp cards at half their value from homeless-shelter residents in the St. Paul area and redeemed them at local grocery stores.
The probe involves about $46,500 in food stamp benefits, dozens of homeless people and the owners of two stores, according to a search warrant affidavit filed by a federal agent.
St. Paul police said they have heard of other food stamp fraud cases targeting homeless people and see it as an emerging and troubling trend, spokesman Howie Padilla said. The department is aware of the federal probe and "we are glad this is being addressed," he said. The investigation started in May 2011, when an informant told the Ramsey County Sheriff's Office he knew a person who would buy the electronic benefit cards from the homeless, according to the affidavit of Tiffany Nelson, a special agent with the U.S. Department of Agriculture. EBT cards are like credit or debit cards used to buy food at authorized retailers.
The informant, working with police, gave a card and its PIN to a man, identified in the affidavit as Chin Son Kim. Several other people thought to be homeless also gave him cards while his car was near the Dorothy Day shelter, the document said. Kim went to Seoul Foods in Fridley and, after leaving the store, gave the informant $100, the affidavit said. The EBT card allegedly was swiped for $199.94 while Kim was inside.
Kim, who has not been charged in the case, bought and used cards on several other occasions, according to the affidavit. Based on a review of EBT card transactions, he is believed to have helped 89 people with selling food stamp benefits to associates and owners at Seoul Foods and Kim's Oriental Market in St. Paul, the document says.
Ken Peterson, executive director of Union Gospel Mission in St. Paul, the other homeless shelter mentioned in the affidavit, said he hadn't heard about the fraud investigation until receiving a call from a reporter. About 450 people stay at the mission on a nightly basis, he said.
"Our goal is to alleviate their suffering," he said. "We work very closely with people who come here, so I would probably hear if this was consistently going on."
The affidavit also said Sung Soo Choi and Kyung Min Ahn, owners of Seoul Foods, and Kyung Hee Chung, owner of Kim's Oriental Market in St. Paul, are believed to have conspired with Kim in the activity. Kim's relationship to them is unknown. They have not been charged.
A woman who answered the telephone at Kim's Oriental Market on Wednesday wouldn't comment about the allegations. A man who answered the telephone at Seoul Foods said the owner wasn't available and hung up.
The average dollar amount of a food stamp transaction at stores in Minnesota in the past year was $59. The average dollar amount in transactions at Seoul Foods tied to Kim was $172, the affidavit said.
Tackling a problem
Minnesota is trying to address the problem of food stamp cards that are reported as stolen or lost. The state ranks fourth in the nation in the number of recipients requesting at least four new cards in a year; such numbers are a flag for possible illegal behavior, authorities say.
Minnesota provides food stamps for 535,520 low-income residents. Although just under 3 percent have sought four or more new cards in the past year, the federal government considers any level above 2 percent significant.
Minnesota planned by the end of this month to ship food benefit cards by mail -- rather than providing them over the counter -- and those cards will include the recipient's name.
Nationwide, fraud in the Supplemental Nutrition Assistance Program, commonly called food stamps, costs the federal government an estimated $750 million a year, or 1 percent of the program's budget.
When a store illegally engages in food stamp trafficking, the recipient and the store typically split the cash 50/50, the search warrant affidavit in the current case said. For instance, if a card is swiped at a store for a $100 food stamp transaction, the store will give the recipient $50 cash. The store will later receive a $100 reimbursement from the state for the groceries that the transaction indicates were purchased. The recipient is willing to get half the value of their food stamps because they are able to buy anything they want with the cash, including prohibited items such as cigarettes and alcohol.
In a federal food stamp fraud case earlier this year, the former owner of a corner store in St. Paul was sentenced to 3 1/2 years in prison for illegally redeeming food stamps for cash and ineligible products.
The federal government said Khaffak Ansari of Arden Hills trafficked more than $3 million in food stamps from 2006 to 2010. He did not turn himself in to authorities when he was supposed to, and was recently arrested in Belize and deported from Belize after police there arrested him on an unrelated crime.
David Chanen • 612-673-4465