IN welfare reforms reducing fraud, but prosecutions still lacking

INDIANAPOLIS (WISH) – New reforms to Indiana’s welfare system are on track to help cut suspected fraud cases by more than half this year. But, an I-Team 8 investigation found many accused of abusing the system still never face any criminal charges.

A series of I-Team 8 reports in 2012 first exposed some welfare recipients withdrawing Indiana tax dollars in places like casinos, bars, liquor stores and strip clubs. Critics called on the state to do more to stop them.

Two years later, I-Team 8 found the measures have helped dramatically reduce the number of suspected illegal withdrawals.

But, in cases where the measures haven’t worked, some say those responsible are almost never held accountable.

NEW SOLUTIONS

I-Team 8 first reported in May of 2012, the money comes from a federally funded program called TANF (Temporary Assistance for Needy Families). It’s loaded onto debit cards each month and can be withdrawn as cash from any ATM.

The money is intended to help low income families get back on their feet. In Indiana, approximately 10,200 families are now enrolled in the program.

It is a Class C Misdemeanor to withdraw TANF funding at banned locations, including casinos, bars, gun shops, liquor stores, private clubs, and strip clubs. Violators can face up to 60 days in prison and a $500 fine.

I Team 8′s repeated questions about the program prompted new questions at the Statehouse about why the transactions weren’t being stopped.

“Very frankly, it doesn’t appear to me that [Family and Social Services Administration] is doing anything,” Sen. Jean Leising, (R-Oldenburg) told I-Team 8 after seeing the results of the investigation. “I think they want to do the right things to stop this. But, if I was one of my taxpayers listening, I would say–why can’t we do more?”

So, lawmakers began searching for new solutions.

Following a series of I-Team 8 reports showing measures taken by other states to combat welfare fraud, Sen. Patricia Miller (R-Indianapolis) filed language inside SB 559 in 2013 to force ATM vendors to electronically block TANF transactions from occurring inside locations banned by state law. The measure took effect on January 1, 2014.

An I-Team 8 analysis of nearly 100,000 TANF transactions made in the first three months since the law took effect shows a dramatic reduction.

“A SUCCESS STORY”

During the first quarter of 2014, I-Team 8 identified 46 potentially illegal transactions, worth $4,202.14. All of the transactions occurred at liquor stores and bars. No transactions were found at casinos, strip clubs, gun shops or private clubs.

The figures represent a 60 percent drop in suspected illegal transactions from the first quarter of 2013, according to figures compiled by I-Team 8.

The program’s new director called the progress encouraging.

“I think it’s a success story,” said Lance Rhodes, Director of the Indiana Family and Social Services Administration’s Division of Family Resources. “We have a data match with the state Alcohol and Tobacco Commission, which will tell us where these ATMs are. And, if EBT cards are being used in these institutions, when we find that data match and we match up something, we identify the card and we’ll send the person who used the card in a restricted area a very strongly worded letter that this is a crime.”

21 of those letters were first sent out in January 2013. Since then, FSSA records show 33 follow-up letters were sent out for a second offense, and 8 letters were sent out for a third offense.

“If there are repeat offenders, we will pass them on to our investigative unit,” Rhodes said. “But, we are seeing a lot less of that follow-up needed. We only had one repeat offender last month.”

FSSA’s investigative unit has also expanded, Rhodes noted when asked if additional resources had been devoted to rooting out fraudulent transactions.

“We’ve put resources into it,” he said. “I think that might be the key–that we put some resources into it.”

BLOCKING PROBLEMS

The requirement to block TANF withdrawals in locations banned by state and federal law is not being universally followed, I-Team 8’s analysis found.

For example, records show at least five TANF transactions took place at D&S Liquors on E. 10th Street in Indianapolis during the first quarter of 2014, after the blocking law took effect.

Two years ago, I-Team 8 found no sign near the ATM warning that TANF withdrawals were illegal there, as required by law at the time. When I-Team 8 returned to the store in June 2014, the sign was up, though it was partially blocked by a display case.

Owner Howard Shorr said his store made a point to follow the law after learning about the sign requirement.

“I know that we’re not allowed to do it, because we had to post it on our machine,” Shorr said. “As soon as we got the notice, it was up.”

But, sign or not, the transactions are now supposed to be electronically blocked.

Shorr said that was news to him.

“I was not aware of that at all,” he told I-Team 8. “I think it’s fine. I just didn’t know. I want to do the right thing, so I’m going to go make some phone calls right now and get it taken care of.”

The owner of Victory Liquors on E. 21st Street also said he was unaware of the new blocking requirement. At least three TANF transactions took place there during the first quarter of 2014, according to records analyzed by I-Team 8.

His store’s ATM vendor also said he had no idea the cards now have to be blocked.

“I wasn’t aware of any new law. No one ever contacted us about it. But, we’ll comply with whatever we need to as soon as possible,” said Mark Donnella, an ATM vendor with MTD Investments.

The cases may prove new education efforts are needed, Rhodes said.

“If we can help get the word out on exactly what needs to be done and what the law is, for those that aren’t aware of the law, that’s what we’ll do,” he said.

No retailers or ATM vendors have contacted FSSA for assistance in setting up blocking software, an agency spokesperson said.

NO PROSECUTIONS

Two years ago, FSSA Division of Family Resources Deputy Director Adrienne Shields told I-Team 8 that cases of suspected illegal withdrawals were being referred on for possible criminal charges, and repayment of illegally withdrawn funds.

“That’s up to the local prosecutor,” Shields told I-Team 8 at the time.

When asked if FSSA turns those cases over for potential criminal charges, Shields nodded her head.

“Yes, we do,” she replied.

But, in late 2012, FSSA admitted that had actually never happened.

The agency didn’t even send out the first of those warning letters until January 2013.

Since then, despite the identification of hundreds of potentially illegal TANF withdrawals, just 12 cases have been referred to county prosecutors by FSSA.

Yet, no charges have ever been filed, according to the agency.

“I know there’s been no one that has actually been prosecuted,” Rhodes said. “Once we move it to the process, then the prosecutors themselves have to weigh how much effort, and what’s the value of the return?”

For some legislators, that’s not good enough.

“ONE CASE IS TOO MANY”

“This is really a crime against the taxpayers, essentially,” said Sen. Miller, who authored many of the new restrictions on TANF use. “It’s an abuse that should not occur. One case is too many.”

Miller called the progress made in reducing potentially illegal withdrawals “gratifying,” but said she remained frustrated with the lack of follow-up on cases.

“Early on, we got a lot of push-back from the bank and financial institutions saying–we can’t do this,” she said. “And, now, I think everyone sees [electronic blocking] really was a pretty easy process. But, there have been no prosecutions. So, now we have to go back and talk to prosecutors and say–what is it that you need? Why are you not prosecuting these cases? Do you think it’s not important enough? Do you not have enough evidence? Because, frankly, a few prosecutions should put an end to this.”

But, Miller said even asking those questions has been a challenge.

“I don’t know which prosecutors they are,” she said. “I cannot find out to what counties prosecutions have been referred. Therefore, I can’t call a prosecutor and say–why didn’t you prosecute?”

I-Team 8 requested that data from FSSA as well, and was instructed to file a public records request.

That request remains pending.

FOLLOWING THE MONEY

Senator Miller, meanwhile, is shifting her focus to another concern: repayment.

“I’d like to see [money recovered],” she said. “We are moving forward, but we need accountability.”

Miller also said she plans to file a new bill this fall that would add tobacco shops and cigarette outlets to the list of locations where TANF transactions are banned by law. I-Team 8’s analysis found at least $3,268.65 withdrawn in at least 58 separate TANF transactions from tobacco shops during the first quarter of 2014.

“I would like to add that,” she said. “These benefits are intended for families. If parents are using the money inappropriately, that’s hurting their children. And, we don’t want that to happen.”

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