fraud – RI Future

September 7, 2013September 8, 2013

No need to overreact to SNAP fraud indictments

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RI Future’s editor Bob Plain called out WPRI, specifically for the lede in the story by Tim White and Dan McGowan covering yesterday’s announcement of indictments of nine people for Supplemental Nutrition Assistance Program (SNAP) fraud. At the conference announcing the indictments, U.S. Attorney Peter Neronha said “I think [SNAP fraud] is a significant problem in Rhode Island.”

The argument here hinges on what we consider “significant.” If you look at the issuance of SNAP funds to Rhode Island in the last two years (which is when this fraud occurred) Rhode Island was given about $275 million in 2011, and $290 million in 2012 (we don’t 2013’s data yet). Assuming the 5 stores that defrauded $3 million were stealing at a consistent rate, that’s only about half a percentage of SNAP issuance lost to fraud. The vast majority of the program is operated honestly; virtually all of it. And that’s a significant thing to think about, considering that it works based on the honesty of recipients and retailers alike.

Now it’s an unfortunate reality that virtually all budgets operate with some level of waste and fraud. Whether it’s printing off copies of your March Madness bracket at work or it’s defrauding the Department of Defense, fraud happens.

It’s worth comparing the Department of Defense fraud to the SNAP fraud, merely because our responses are vastly different. For instance, a 2011 report prepared by the Department of Defense for Senator Bernie Sanders (I-VT), discovered that the DoD had issued over $1.1 trillion during the preceding 10 years to companies that had defrauded the government; including continuing to issue millions to companies that had been convicted or found liable of fraud. Some of these are the biggest names in defense contracting; Northrup Grumman, Boeing, Lockheed Martin, etc. Those companies will continue to be the recipients of government largesse, regardless of their track records, because they form a vital part of our defense network. The DoD spent $1.811 trillion on procurement and research, development, testing, and evaluation over the same period; but that’s merely the best number I can find. Suffice it to say, a history of fraud does not disqualify one from receiving DoD money.

In contrast, the U.S. Department of Agriculture’s Food and Nutrition Service (USDA-FNS) comes down much harder on those vendors who commit fraud. These nine people aren’t going to get to continue defrauding the government. Their businesses aren’t either. Thanks to the Electronic Benefit Transfer (EBT) card, it’s much easier to track, as well. The bottom line is that while $3 million is a grabbing headline, yesterday’s indictment is proof of a system doing what it’s designed to do. For more evidence, in 2011, the FNS conducted 519 investigations in Rhode Island. Of those 519, only 134 were “positive” (demonstrating problems with fraud). Out of the 134 positive investigations, 125 were conducted before anyone received SNAP benefits.

Now, for fraud freaks and welfare witch hunters, this isn’t enough. Even if this had been $3000 or $300, they’d insinuate the majority of SNAP recipients deserve to be treated poorly, and then demand reducing benefits and placing stringent regulations on what is already a strongly protected program (and in my opinion, the government’s best program).

While I think Neronha is wrong when he suggests it’s a “significant problem” he is right about how we should approach this, saying, “You have to be careful here not to paint with too broad a brush because there are many people who use this program responsibly.” Again, virtually all are. The fact that in such an important program you pick a few people of low character is neither surprising, nor cause for alarm. They’re getting what they deserve now. This fraud can’t exist without retailers being complicit in it. As Neronha says, “The reason we focus on the retailers is they’re in a position to stop this conduct in its tracks. If a recipient comes and says ‘I want cash’ they don’t have to do it. They say no and recipient doesn’t get the cash and the stamps are used properly.”

This is a federal program, and the federal government is dealing with it. The wrong response would be to repeat what happened after the release of the Block Report. Attempting to put wrong-headed (and illegal) regulations on SNAP benefits and EBT cards; as well as wasting state dollars to chase after federal fraud. Those continue to be wrong ways to deal with this, but ways that are favored by politicians.

It’s easy to see why politicians gravitate towards “ending” waste and fraud as a political promise. Because it’s fraud, you can always assert there’s more of it. And waste is just money that wasn’t needed. It involves no extra raising of revenue nor cutting of programs. You’re only preventing money from going to bad people or being misspent. Who’s against that? Absolutely no one. It’s a completely popular policy, because it doesn’t require hard choices. It’s a great policy for the politically lazy. And if you want to look serious, you can always just cut the amount of money you expect to be saving from fraud and waste, and let the various effected government departments make the tough choices; consequences be damned.

The sober reality is that our problems continue to require serious action and serious thought. What’s really significant about SNAP in Rhode Island is its growth since 2008; up from about $108 million in 2008 (the worst of the recession) to nearly $290 million in 2012. SNAP is a great indicator of economic issues, and what it’s shown us over the last five years is that the need has continually gotten worse. If we were transitioning out of recession, we’d expect to see that number drop, as income replaced SNAP as a source of food money. Policies designed to limit SNAP spending in Rhode Island are damaging economically; all that SNAP money gets spent. And considering that Rhode Island’s gross state product was around $50 billion in 2010, the SNAP money issued to us is a not insignificant part of our economy under the current conditions.

The reaction to this indictment should not be a trading of recriminations nor a vilifying of SNAP recipients. WPRI focuses on things like this because that’s what they’ve hired Tim White to do, to cover government waste and abuse. That’s his beat, as he’ll be the first to point out. But just because this is a case of fraud, doesn’t mean we have to focus on solutions to it in such a narrow frame. We’re free to consider the underlying issues, and how to address those issues. And because the state continues to have a hard time addressing those issues, we’re going to continue to need SNAP. And that will mean allowing the Feds to deal with the issues as they crop up, and complying with what they need from us. Until the state demonstrates that it’s capable of addressing the problems that SNAP works to fix.

March 21, 2013March 21, 2013

Ken Block: Why Progressive RI Should Agree With Me

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While I might not agree with where Ken Block invests his energy and determination, I certainly have a lot of respect for his energy and determination. Even after I compared him to PT Barnum and likened his SNAP fraud investigation to Anthony Gemma’s voter fraud investigation, he still took the time to write an essay for RI Future on why progressives should support his efforts.

But either before or after reading Ken’s thoughts, please read my editor’s note at the bottom of his piece, and Sam Howard’s excellent analysis about how and what we communicate about those who live in poverty.

Here’s Ken’s piece:

There are two fundamental truths when it comes to social service spending programs—1) even now, these government assistance programs are not fully meeting the needs of low-income Americans and 2) there will always be people who say the government spends too much on these efforts.

The recent Washington Post story highlighting the effect of the Supplemental Nutrition Assistance Program (SNAP) on the residents of Woonsocket was a powerful reminder not only of the impact of the program, but how it is leaves people struggling to make those benefits last.

The issue of targeting waste and fraud in these programs is one that makes some in the progressive community uncomfortable, because they fear that highlighting real-world abuses of welfare programs will give fodder to the forces that want to eliminate them. But let’s be honest: no degree of welfare reform, not even the most effective effort to stop waste and fraud in the system, will be enough to silence those who want government to stop funding social service efforts.

So is it best then for the progressive community to fight for state and federal expansion of programs like food stamps and housing assistance, while simply ignoring whether waste and fraud are limiting the effectiveness of those programs? I say no. If we truly believe that these programs provide lifelines to individuals and families who desperately need help to get by in today’s difficult economy, I would argue that while fighting to fully fund these programs, progressives also need to make sure that the people who need help the most are getting it.

If government isn’t moving to add additional funding to these programs, then the next best thing is making sure that waste and fraud isn’t taking money away from families in Woonsocket and other parts of the state who need it.

I have spoken to people who run Health and Human Services programs here in Rhode Island and in states across the country. They are good people who know how to get assistance dollars out the door and into the community. But they are not always as effective when it comes to making sure those dollars are creating the desired outcomes. So when I talk to them about the importance of program integrity, they get it and they realize it is a way to maximize their effectiveness and to make an even bigger difference in the lives of the people they are trying to help.

What is program integrity?

It’s a way to make the most of a limited pool of dollars. It’s a way to get the most bang for our social spending buck. And it’s a way to help make sure that people in need don’t get left out because assistance dollars are going to those who don’t deserve them.

Program integrity is the formal name given to efforts to ensure that spending in public assistance programs is consistent with the mission and rules of those programs. I believe that program integrity should be an issue that the progressive community backs whole-heartedly.

In SNAP, the key program integrity issue involves stopping unscrupulous retailers (most often small convenience store owners) who facilitate the conversion of food benefits in the SNAP program into cash. Like payday lenders who prey on those without access to the banking system, these people take a cut of the money for providing this service—often as much as 50% of the total benefit due to a recipient. The beneficiary is then able to use whatever cash is left for non-food items that SNAP would not pay for otherwise. An effective program can red flag retailers engaged in this practice and put an end to it, so that funds aren’t being channeled to retailers and so that the children of SNAP beneficiaries aren’t left going hungry because the funds the family was counting on went to pay for cigarettes, alcohol or other non-food items.

In programs like housing assistance, there are finite financial resources and a limited number of available housing units. Using program integrity here helps to ensure that the neediest citizens are not unfairly denied assistance. Section 8 housing can often have a waiting list of many years. If someone living in a subsidized housing unit is misrepresenting their financial situation and hanging onto the unit as a result, a needier family is being denied access. This is an issue of basic fairness and if the agency providing the benefits has the ability to make sure everyone is playing by the rules, they have an obligation to do so.

As with any effort that throws off a lot of data, there will be people who misconstrue and attempt to misuse program integrity data to undermine the mission or activities of the agency involved. But with or without data, those attacks will go on from those who are hell-bent to force the elimination of these necessary social service programs. But by gathering and acting on this data, program integrity initiatives produce a larger good—ensuring that taxpayer dollars targeted for social service programs provide the best possible results. And in the long run, improved results will effectively marginalize the empty noise made by those whose agenda does not involve producing positive outcomes in our communities.

I truly believe that government should always strive to measure the effectiveness of all programs and initiatives to determine if those programs are achieving their stated goals and operating efficiently. That holds true whether we are talking about evaluating economic development incentives, tax policy, social service spending programs or even something as unglamorous as DMV waiting lines or wait times for service at the Department of Labor and Training. To me, this analysis is a cornerstone of good governance and an indicator of government accountability to voters and taxpayers. And that’s something progressives should be proud to support.

And here’s my equally long editor’s note:

I firmly believe Ken Block’s efforts on this report was not the work of someone who would make a good governor. I think he is really smart and obviously hard-working, but, as Howard writes, it is “full of conjecture and insinuation that wouldn’t receive a passing grade in a college course.”
Holding such an opinion does not equate to supporting public sector fraud. In fact, many have suggested areas of government where both more fraud and more potential savings can be found. Scott MacKay suggested physician and health care industry fraud, for example.
I think the most common takeaway from this piece will be that the progressive left doesn’t value good government initiatives.
I think because of the way the mainstream media reported on Block’s SNAP investigation, the biggest effect of his efforts will be to further foster the false narrative that there is a widespread social services abuse among those who live in poverty (Again, see Sam Howard’s post).
I might be wrong, but it’s worth considering that I’m right. It is an indisputable fact that local Republicans and other fiscal conservatives are using the media swirl around his report to counter progressive proposals – see this video of Dave Fisher asking House Minority Leader Brain Newberry about tax equity.
If I’m right, it’s an example of how politicians and pundits have learned to manipulate the marketplace of ideas, which is still largely driven by print and broadcast journalism/journalists/pundits.
Ian Donnis and Scott MacKay are the best around at using the tools of unbiased journalism to get Rhode Island politicians on the record, and it is well worth listening to their probing interview with Block from last week.
However, it’s worth mentioning that MacKay, who dismissed Block’s report last week in this op/ed, tipped his hand in the interview: When Donnis asked Block if teaming up to form a “taxpayers” group with members of RISC and the tea party – probably two of the most conservative groups in the state – cast a shadow on his reputation as a “moderate,” you can actually hear MacKay laugh when Block responds by saying, “I became the president of a re-branded, move to the center organization…” (It happens at 6:55 here … perhaps MacKay coughed, but it is laughable to suggest that joining forces with Lisa Blais, Harriet Loyd and Donna Perry is an attempt to move to the center.)
So much of what Ken Block does reminds me of the famous Thomas Pynchon line from Gravity’s Rainbow: “If they can get you asking the wrong questions, they don’t have to worry about the answers.”
Only news in his post: Ken Block says it is more important to increase funding to SNAP than it is to investigate waste and/or fraud.

March 14, 2013March 14, 2013

Ken Block Is PT Barnum, Rhode Island The Suckers

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mr block head — Joke picture that someone sent to me. Not an actual picture of Ken Block.

Ken Block is the new PT Barnum of Rhode Island. He’s dominating local politics like it’s his own private three ring circus. Too bad he’s treating Rhode Islanders like suckers in the process.

Block got an amazing amount of positive press for his report on fraud and abuse in the state SNAP program. Technically, this is called earned media but the term is a little bit of a misnomer in this instance: his report shows virtually no fraud and/or abuse. This is not unlike how Anthony Gemma got unearned media for accusing David Cicilline of voter fraud, without producing any credible evidence whatsoever.

He did the report under the guise that he could save the state a quarter billion dollars a year, even though state money isn’t spent on many of these programs. Where I come from that is called being a snake oil salesman. How is it that no one in the governor’s office noticed that Block was offering to save us more money than we spend?

Instead of saving us millions, he unearthed two homeless guys and a few dozen ACI inmates who are bilking the system and hardly identified even one dollar in savings. Talk about not producing on deliverables! In fact, one could argue that because we are now investing additional resources to ferret out the miniscule amount of fraud that does exist, the report actually costs taxpayers money! (not to say that we shouldn’t invest our tax dollars in our principles … in fact, it seems like a pretty good way to foster a principled society to me!)

But here’s what the report did accomplish: it made poor people and Gov. Chafee look bad. Those two memes – true or false – drive a lot of buzz in the local media. I’m not saying either are non-stories, but I do think several local media outlets did their audience, if not their advertisers, a disservice this week by focusing on this melodrama when much more important stories were equally ripe for the picking.

But the press just can’t resist Ken Block as of late.

The Providence Journal ran a picture of him today with what looks like people saluting him. This wasn’t even the same story as the A1; I thought an editor had botched the jump from the pope story! And the lede was written as if Ed Achorn, who was there, wrote it: “Rhode Islanders do not understand how the so-called “master lever” or straight party voting option works and no one has come forward to provide a compelling reason why it should stay.”

In his third appearance in the Providence Journal of the day, he wrote about an education issue. His expertise on the matter: “One of my dear friends teaches in the Pawtucket school system.” (Hey Sailing magazine, I have a good buddy with boat; want me to be your correspondent in French Polynesia?) Is this really the best copy the editorial page had to use today, or is the paper of record just gaga for Ken Block?

And ere’s how the ProJo described Block’s SNAP report:

The report, more than a year in the making, does not quantify how much waste and fraud might be occurring in Rhode Island’s health and human services programs, nor does it claim to be comprehensive.

But the 16-page document, characterized by Chafee and two of his cabinet members as one piece of a broad effort to fight waste and fraud, provides a rare glimpse into the ways that some of the more than $3 billion that the state spends on social service programs can be wasted or misspent.

This is a great example of how what is commonly referred to as “unbiased journalism” an be 100 percent true and entirely inaccurate at the same time. Some examples:

“A year in the making” Yeah, same with my book about my Occutour. That doesn’t mean I’ve put a lot of effort into it, or that it’s going to be any good!
“does not quantify how much waste and abuse might be occurring … nor does it claim to be comprehensive” An unquantifiable amount of fraud and abuse that isn’t even comprehensive, stop the presses!!! Or, in other words, the report didn’t tell us too much.

Here’s WPRI lede from yesterday: “A company hired to investigate waste and fraud in the state’s welfare programs found prisoners and deceased people receiving food stamps…” Translation: company = small government activist who is probably going to run for governor. Hired = allowed to do so after he pretty much begged for it. That the lede implies prison inmates are engaging in a problematic level of fraud is particularly gross.

First of all, there are more than 3,100 people incarcerated in the ACI and only 60 of them are getting food stamps. Not 60 who are committing And even if all 60 were gaming the system, that’s still just .01 percent of the population. More importantly, of all the crimes that are probably being committed at the ACI, welfare fraud is so totally low on the list of ones that are making our community a better and/or affordable place to live. Sam Howard . Me too.

I have to believe Block knows he’s trafficking in outrage porn too. His new group of cohorts from RISC and the tea party have been specializing in this stuff for years. Even just that Block calls himself a moderate is getting to be a joke. If you look at the RI Taxpayers legislative agenda, there is nothing at all moderate about it. He’s the president of this group. Earlier today I wrote that .

It’s all a bunch of ridiculous stuff trying to bend the debate toward otherwise unpopular politics. It’s not a bad strategy, but it’s pretty devoid of integrity.

This morning he offered to write a post for RI Future about why rooting out fraud is a progressive issue. He knows we have this in common. My opinion is he wants to make it seem like this blog or me or the progressives are pro-fraud. As a point of fact, we are opposed to fraud. That’s why I wrote this post.

July 18, 2012July 18, 2012

Libor Scandal: Will Wall St. Get What It Deserves?

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Jack Reed, Official Portrait 2008 — Sen. Jack Reed pressured regulators to launch criminal charges against fraudulent bankers.

Just over a week ago, the British and American governments announced the largest fine in history levied against Barclays PLC, just under half a billion dollars. The fine agreed to ignore criminal charges against Barclays itself, but current and past employees were not exempt. Well, after a letter from Democratic lawmakers (including Rhode Island’s Sen. Jack Reed) to the U.S. Justice Department and regulatory agencies urging criminal charges, that may well be in the works. According to The New York Times, Barclays traders may be among those slapped with criminal charges. Bloomberg reports that those charges could come as soon as September.

The City of Baltimore already filed a lawsuit back when this rate-rigging scandal broke. Now it comes to light that the attorney generals of New York and Connecticut are working together to investigate Wall Street banks over the scandal.

New York attorney general Eric Schneiderman was considered the most high-profile crusader against Wall Street excess until he was co-opted by the pro-Wall Street administration of Barack Obama. That resulted in the $25 billion settlement with America’s largest loan servicers, who were utilizing automated robo-signing to fraudulently foreclose on American homes. Prior, Mr. Schneiderman led a group of dissenting attorney generals who refused to accept the Dept. of Justice’s settlement, believing the banks deserved greater punishment. When he folded, the virtually all of the attorney generals fell into line with the Justice Department (Rhode Island’s attorney general Peter Kilmartin was with the Justice Department from the get-go).

Libor (London Interbank Offered Rate) is an average of the interest of borrowing for London’s banks. It is set by all of the banks submitting to their trade organization (the British Bankers’ Association) the rate they are borrowing at. These rates are then averaged and the average is declared. That is used to set interest on roughly $500 trillion in securities, and 45% of all U.S. mortgages. In the wake of the 2008 Global Financial Crisis, Libor became a measure of banks’ health as other standard measures became suspect and unreliable. In this case, Barclays has admitted to artificially manipulating rates downward.

This means while the interest the average consumer paid on their mortgage was lower, a state or municipal treasury or a large charity that had savings linked to Libor also saw lower returns. As did lenders who sold mortgages bundled into “residential backed mortgage securities”. So while the average person on the street might feel slightly good about the banks’ malfeasance working out for them, states and lenders are certain to feel quite angry.

Is It Time for the White House to Fight the Banks?

The common impetus behind both the Tea Party and Occupy Wall Street appear to have been that Wall Street got away with collapsing the world economy and over a trillion dollars in taxpayer money. And they never faced a single criminal charge.

The Libor scandal seems to be changing that. The British government announced plans to make it the government with the toughest regulations out of any economic center; the City of London (separate from Greater London) is the epicenter of Western capitalism.

Americans already despise Wall Street for its part in the collapse (Wall Street remains the institution most blamed for the bad economy). Wall Street banks, who strongly backed President Barack Obama in 2008, have shifted their financial support almost entirely to Republican challenger Mitt Romney. Barack Obama has mostly played as the banks’ best friend, his bipartisan so-called JOBS Act passed earlier this year further deregulated Wall Street (Rhode Island’s Senators voted against the act, whereas our Representatives voted for it).

But the Libor scandal may be a chance to put right the wrongs done by the administration and the U.S. government in not punishing the banks following the Global Financial Crisis. One hopes that President Obama would do so because it is the right thing to do. However, since the moral calculus has not appealed to this president in the past, perhaps the political calculus will. This is a rare case of good politics and good policy aligning.

With the big banks having cut the President loose, he does not need to worry about angering potential donors; indeed, charging bankers for the very real crimes they have committed seems likely to energize those who have long feared the President is a stooge of Big Banks. Furthermore, the Libor scandal (and the money-laundering over at HSBC) has proven beyond a doubt that the financial system cannot be allowed to police itself. When given the choice between theft and honesty, banking culture is so toxic they will praise theft before they stoop to honesty.

Unfortunately, Republican obstructionism is undoubtedly assured to block any chance of enacting tough new rules through legislation. And conservative litigation as regulators write new rules is also likely to prevent any real strengthening of the oversight under the flawed Dodd-Frank reform. This means all the government can do is press charges. Indeed, this very public action may be preferable from a political stance; the sight of bankers in court is likely to please many of the hundreds of American families who have wound up in foreclosure proceedings at the hands of such reckless prophets of our financial system.