fraud

Ohio Direct Distributors and SNAP Fraud

If you are unfamiliar with “SNAP,” it stands for the Supplemental Nutrition Assistance Program (SNAP). The program provides food benefits to low-income individuals and families. SNAP is not without its critics however, most of those critics have not been poor and in need. Ohio Direct Distributors and SNAP fraud, created a gold mine in targeting poor, large families (confusing who bought what?).

Nevertheless, the same people who criticize it, sometimes make their money from it and occasionally there is fraud involved.

Ohio Direct Distributors

Ohio Direct Distributors (ODD) was a company based in Massillon, Ohio. They had a large fleet of delivery trucks that sold and delivered food throughout the state of Ohio and nearby states. Their products were mainly meat and seafood products, delivered to door-to-door to retail customers.

Ohio Direct Distributors and SNAP Fraud The company went under investigation starting in April 2018 by the Southern District of Ohio Financial Crimes Task Force for engaging in fraud. According to the task force, from 2011 to 2017, ODD redeemed SNAP benefits for what was termed “ineligible items” such as retail gift cards. In order to do this, SNAP benefits had to be exchanged for cash. SNAP is used for food benefits, not for any other items. Presumably, the ineligible items brought in extra profits to ODD when the cash exchange was made.

The company also extended SNAP credits by postdating account transactions to poor families. It was reported, that the postdating was a not so subtle form of coercion where families were forced to accept goods they may not have needed or wanted at that time. We’ll discuss that a little further on in this post.

Not all of the meat and seafood deliveries of ODD were to SNAP recipients. Like their retail delivery competitors ODD would have meat and seafood deliveries to non-assistance customers. However, the company did seem to specialize in SNAP transactions. In fact, investigators found that ODD had an average of $122,609 in monthly SNAP transactions. Their competitors averaged $8,206 in SNAP transactions. There is nothing wrong with that per se, but ODD saw it had a gold mine in targeting poor, large families where names could get confused as to who paid for what.

Here is where additional fraud could be hidden because it was alleged in the initial investigation (through confidential informants) that Ohio Direct Distributors made transactions to those families with the consent of those families.

Thinking about it another way, it would have been like a food distributor making deliveries to an overstocked grocery store without the store’s knowledge and then covering up the deliveries by claiming the deliveries had been made at a future date.

This type of hedging provides higher cash reserves to the distributor however, the customer would be forced to pay for food it didn’t need or want. Obviously, if ODD could push larger quantities on poor families, at the other end ODD could take advantage of volume discounts from its suppliers.

It came down to opportunity, plain and simple. For the most part, ODD saw the SNAP recipients as poor and powerless. Whether it was allowing them to overpay for gift cards they shouldn’t have been selling or forcing food products on them and then post-dating the transactions, they were taking advantage of the system. The need behind it was simple: profits.

Where Choices Lead

By June 2018, seven individuals at ODD were indicted for SNAP fraud amounting to more than $8.5 million. The charges include money laundering and wire fraud. In order for the fraud to succeed the company had to divert the profits and post-dated sales. The owner of ODD is listed as Kaitlin Koher. I bring this up only to show that when fraud is in play, it is not a gender issue. As long as unethical people are able to rationalize what they are doing, male or female, it makes little difference.

It has been estimated that more than $975 million annually is lost due to food stamp and SNAP fraud.

We may wonder how it is that so much money is lost and so many unethical schemes are developed in regard to programs that are supposed to be benefitting the poorest of the country’s poor? While there are always bound to be problems at the consumer end (it is an imperfect world), at the distributor end, to not cite a lack of ethical training is to be oblivious to the need to correct the system. Apparently (and sadly) there is still little motivation to make things right. Ohio Direct Distributors and SNAP fraud, is there more to come?

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