An algorithm kicks businesses out of food stamp program on dubious fraud charges
newfoodeconomy.org
newfoodeconomy.org
Very misleading title.
> Mejia violated the agency’s rules, which prohibit retailers from establishing informal credit systems with their customers.
> many of them, like [Mejia], were probably unjustly caught in the crosshairs
So which is it? Is the charge unjust and dubious, or did he violate the rules?
(Not making any political point myself - just can't even work out what the opinion of the article is on whether he was doing something that was not allowed in the system he was using.)
There are actions that are not fraudulent (as the case with Mejia), but considered fraudulent by rules set up by the agency. This is a case where agencies hide behind rules, algorithms, etc.
This guy should have read the rules and followed them. If he's not willing to do that, then the decision to end the relationship with him makes sense.
Why not, exactly?
Whatever rules you set up, you'll have false positives and false negatives. Some people will figure out how to do illegitimate things without being noticed by the rules. And some people will find the rules too burdensome and fail to do legitimate things aligned with the program's goals.
There is an old proverb in law: Better that ten guilty persons go free than that one innocent person is punished.
It might serve the program's goals better to decide, we're willing to allow some amount of fraud in order to make sure the program functions smoothly and people don't get trapped by rules, or we're willing to allow some amount of fraud because the cost of enforcement outweighs the fraud itself. (Major retailers work like this, for instance; they budget in some amount of expected shoplifting, because it's cheaper than both increasing security and potentially scaring off customers with increased and hostile security.) It might also not serve the program's goals better, and you want to take a hard line at the risk of blocking legitimate use. But it's not obvious the latter is the right approach.
And, yes, rules aren't perfect. But you can keep improving them as you learn more. And that leaves you with, yet again, a set of rules.
They are the government, and they cannot make such statements about individuals or individual businesses, they can only file a legal complaint, and the point out they've done so, nothing more.
I can claim someone comitted fraud, you can (still risky though, but not per se illegal, only illegal if you do it to damage the other person in any way, not if you merely genuinly think they committed fraud), but they can't (not even if there's zero damage). Not allowed.
So sue them. They deserve it.
Both these things can be true. I think the point of the article is that there was no fraud against the government, in the sense that he did not bill them for food stamps that never existed - he maintained a credit system, which is against the rules, but not fraudulent. (The definition of fraud requires the victim of fraud to have actually lost something; unless you argue that the government lost interest from floating some people's food for a few days, they weren't actually defrauded.)
This is why (if I'm reading it right) the article says that the government didn't prove fraud (because he didn't keep itemized receipts) - the intent of the rule and the algorithm is to catch people using food stamps on ineligible purchases, using nonexistent food stamps, etc. The investigation could have proved that no fraud existed if it turned out he gave them credit for eligible purchases, or that it did exist if he gave them credit for ineligible purchases, or made up credit out of thin air, but it didn't prove anything because there were no records. So violation of the rules got him kicked out of the system.
Mejia violated the agency’s rules, which prohibit retailers from establishing informal credit systems with their customers.
The agency wanted itemized receipts for the purchases that had been flagged, but Mejia’s cash registers at the time printed only total sales figures; he couldn’t provide an accounting of the individual products that his clients had bought on credit.
He admitted to breaking a rule of the program, so all his transactions were now fraudulent. Then he couldn't prove that those transactions weren't fraudulent because he had no itemized records of each purchase. He is quite lucky all they did was kick him out of the program.
Frankly, anyone who enters one of these programs and doesn't keep records of what was purchased is foolish. This is a program that will come down like a hammer if you let someone microwave a legally bought burrito while still in the store since it then becomes illegal.
I don't think that's what "fraudulent" means. The agency might assert that it's fraudulent, but that doesn't mean that it is fraudulent. That's the article's point. (And if there's a way for him to have proved it wasn't fraudulent, that necessarily means it hasn't been proven fraudulent yet.)
To your second point: sure, he probably did something strategically wrong. And yes, he broke the rules. But that's not the question the article is asking. The question the article is asking is, is an agency that brings down the hammer on illegally microwaved burritos actually doing something responsible, just, and good for society?
Well, its what the government means when it says you are committing fraud. The agency asserted that the transactions were fraudulent, the store owner agreed he ran an illegal credit system thus agreeing he had broken the law, and then could not prove that the transactions were in fact not fraudulent. He admitted guilt (probably to avoid court and the significant penalties the law allows).
To your second point: sure, he probably did something strategically wrong. And yes, he broke the rules. But that's not the question the article is asking. The question the article is asking is, is an agency that brings down the hammer on illegally microwaved burritos actually doing something responsible, just, and good for society?
Well, they should probably highlight someone who did nothing wrong instead of someone who followed all of the steps that a scammer would follow. Stopping scammers is a good thing for society.
So he broke the rules, not in an attempt to defraud the system but by helping out the neighbors by giving them credit on purchases.
...which I could see as causing a problem, you spend all your benefits for next month, pay off the bill when they put money on the card, spend all your benefits for next month, rinse and repeat.
At this point, he cannot prove that was the case since he doesn't have records of the items purchased. He might be on the side of angels, but he sure is doing everything a scammer would do. Plus, the whole pay next month thing is just fundamentally a problem (what happens if eligibility is lost?) in addition to the treadmill you pointed out.
Then the store owner can't cash in the food stamp and has extended credit to the customer, which is a problem for the store owner but not for the food stamp agency. Why should the food stamp agency get involved?
Now, the interesting thing is since Walmart is such a destination, you will find some interesting policing in some communities. I would love someone to do an actual study on who gets tickets at what times of the month. After all, kicking people when they are down is pretty safe.
Grocery store 1: No credit option, must have a positive balance on my EBT card.
Grocery store 2 (P&L Deli Grocery) flexible credit option, able to take a loan out while waiting for EBT card to get replenished.
As a customer, which one of these two offerings is better?
#2 is clearly a better grocery store. It is a grocery + lender for those on EBT cards!
The EBT system (and, likely every other credit card / merchant processor) bans informal credit because there is no basis of control or audit-ability on these kinds of transactions.
If you follow the news, you'll see the word "fraud" increasingly thrown around as it gives the government a bigger hammer to use on its citizens.
Meanwhile, actual fraud like civil asset forfeiture rolls along with full government endorsement.
Sure, but people do the same thing with their paychecks, so I don't see an issue.
I suspect that unless you're working as a cashier, "countless people" is an exaggeration, and even if you are it's likely confirmation bias.
None of those services are anything like the government managing a bank account for you. Anyone can decide they don't want those employee perks, someone on food stamps does not have much of a choice.