A federal grand jury has indicted six individuals for their role in a nearly $70 million food-stamp fraud scheme.
Prosecutors’ superseding indictment says Arlasa Davis, an employee of the federal Department of Agriculture (USDA), was bribed to help a gang of co-conspirators rob the taxpayers. For a piece, she retailed confidential information to defendants.
In a scheme worthy of reformed Mafia capo Michael Franzese, the defendants wove a complex web of crimes involving illegal electronic benefits (EBT) machines in New York, prosecutors allege.
The Indictments
The unconstitutional Supplemental Nutrition Assistance Program (SNAP), which gives money to the “poor” to buy food, permits recipients to use EBT cards for purchases at licensed stores. The recipient swipes the card at the store’s EBT terminal. The terminal validates the purchase and deducts the money from the user’s account. That deducted money is then moved electronically to the store’s bank account.
The defendants found a way to line their pockets, prosecutors allege, beginning in 2019.
Top defendant Michael Kehoe, who founded a credit-card processing company that was an intermediary for stores that wanted the terminals, “orchestrated a network that supplied approximately 160 unauthorized EBT terminals to stores across the New York area to illegally process more than $30 million in EBT transactions,” prosecutors allege.
He was working with five others: Мohamad Nawafleh, Omar Alrawashdeh, Gamal Obaid, Emad Alrawashdeh, and Davis.
The gang allegedly submitted about “200 fraudulent USDA applications, misappropriating USDA license numbers and, in some cases, doctoring application documents, to obtain EBT terminals for unauthorized stores — including smoke shops and other ineligible businesses.”
But a key conspirator in the scheme was Davis, a veteran USDA employee:
[She] worked within the very division of the USDA responsible for identifying SNAP fraud. Davis [sold] hundreds of EBT license numbers enabling over $36 million in fraudulent SNAP redemptions at unauthorized stores. Davis photographed handwritten lists of license numbers intended for qualifying stores with her personal cellphone and funneled them to an intermediary who sold them to co-conspirators, including Nawafleh, Omar Alrawashdeh, Emad Alrawashdeh, and Obaid, who then used those license numbers to fraudulently obtain EBT terminals for stores that were not authorized by the USDA to process SNAP transactions. In return, Davis received substantial bribes that were disguised in communications as, among other things, “birthday gifts” and “flowers.”
Total stolen: $66 million.
The defendants ran the scheme up through April this year, according to prosecutors.
Charges and Prison
The seven-count, 21-page superseding indictment lodges the following charges and maximum prison sentences:
- Conspiracy to steal government funds and misappropriate USDA benefits — five years;
- Theft of government funds — 10 years;
- Misappropriation of USDA benefits — 20 years;
- Conspiracy to commit bribery — five years;
- Bribery — 15 years;
- Conspiracy to commit honest services wire fraud — 20 years; and,
- Failure to appear — 10 years.
The bribery, conspiracy to commit bribery, and wire fraud counts are against Davis. The last count concerns Nawafleh’s failure to show up for a court appearance after his release on bond.
Along with prison time, the defendants also face forfeiture not only of any property used in the crimes, but also of any money derived therefrom or property purchased with the ill-gotten booty. If that money or property can’t be located or was given to a third person, “substantially diminished in value,” or mixed with other assets that “cannot be subdivided without difficulty,” the government will seize “any other property of the defendants up to the value of the above forfeitable property.”
A superseding indictment replaces a previous indictment. Prosecutors might add, remove, or modify charges.
Gas-tax Scheme
The conspiracy to defraud the government by creating a massive network of unauthorized EBT terminals sounds similar to a racketeering scheme involving Franzese, a caporegime, or captain, in the Colombo Mafia family.
The son of Colombo underboss Sonny Franzese, Michael Franzese helped conceive and execute a conspiracy with the Russian Mafia to defraud the government of New York and Florida of tens of millions of revenue by not paying taxes on the gasoline that his stations sold in the two states. The scheme defrauded the states out of at least $290 million in tax revenue.
At the height of the scheme, Franzese collected $1 million weekly, an associate testified. However, the former mob capo has claimed he earned $8 million a week.
Franzese is now a motivational speaker and owns a pizza franchise and wine company.
