U.S. Department of Agriculture Food and Nutrition Service Administrative Review Branch Alexandria, VA FINAL AGENCY DECISION ISSUE AUTHORITY

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1 U.S. Department of Agriculture Food and Nutrition Service Administrative Review Branch Alexandria, VA Prince Food Market, Appellant, v. Case Number: C Retailer Operations Division, Respondent. FINAL AGENCY DECISION It is the decision of the U.S. Department of Agriculture, Food and Nutrition Service (FNS) that the permanent disqualification from the Supplemental Nutrition Assistance Program (SNAP) imposed upon Prince Food Market (hereinafter Appellant ) by the ROD (Retailer Operations Division, Investigations and Analysis Branch, hereinafter ROD Office ) is hereby sustained. ISSUE The issue accepted for review is whether the ROD Office took appropriate action, consistent with 7 U.S.C. 2021, 7 CFR 278.6(a) and 7 CFR (e)(1) and (i) in its administration of the SNAP when it imposed a permanent disqualification upon Appellant. AUTHORITY 7 U.S.C and the implementing regulations at 7 C.F.R provide that A food retailer or wholesale food concern aggrieved by administrative action under 278.1, or may file a written request for review of the administrative action with FNS. CASE CHRONOLOGY In a letter dated September 12, 2016, the Retailer Operations Division charged the Appellant with trafficking, as defined in Section of the SNAP regulations, based on a series of irregular SNAP transaction patterns that occurred during the months of February through July The letter noted that the sanction for trafficking is permanent disqualification, as provided by 7 CFR 278.6(e)(1). The letter also noted that the Appellant could request a trafficking civil money penalty (CMP) in lieu of a permanent disqualification within 10 days of receipt under the conditions specified in 7 CFR 278.6(i). The record reflects that the SNAP Office received and duly considered Appellant s replies to the Charge Letter. By a letter dated October 24, 2016, 1

2 Appellant was informed that it was permanently disqualified from participation as a retail store in the SNAP and was ordered upon receipt of the letter to cease accepting SNAP benefits; consequently, Appellant ceased to accept said benefits. On November 4, 2017, Appellant requested an administrative review of the SNAP Office s decision; the request was granted. STANDARD OF REVIEW In appeals of adverse actions an appellant bears the burden of demonstrating by a preponderance of the evidence that the administrative actions should be reversed. That means an appellant has the burden of providing relevant evidence which a reasonable mind, considering the record as a whole, would accept as sufficient to support a conclusion that the matter asserted is more likely to be true than not true. CONTROLLING LAW The controlling statute in this matter is contained in the Food & Nutrition Act of 2008, as amended, at 7 U.S.C and in Part 278 of Title 7 of the Code of Federal Regulations (CFR). 7 U.S.C. 2021, Part 278.6(a) and Part (e)(1)(i) of the Regulations establish the authority upon which a permanent disqualification may be imposed upon a retail food store or wholesale food concern. 5 U.S.C. 552 (b)(7)(e).. 7 U.S.C. 2021(b)(3)(B) states, inter alia: a disqualification under subsection (a) shall be permanent upon the first occasion or any subsequent occasion of a disqualification based on the purchase of coupons or trafficking in coupons or authorization cards by a retail food store or wholesale food concern or a finding of the unauthorized redemption, use, transfer, acquisition, alteration, or possession of EBT cards 7 CFR 278.6(a) states, inter alia: FNS may disqualify any authorized retail food store if the firm fails to comply with the Food & Nutrition Act of 2008, as amended, or this part. Such disqualification shall result from a finding of a violation on the basis of evidence that may include facts established through on-site investigations, inconsistent redemption data, evidence obtained through a transaction report under an electronic benefit transfer system. (Emphasis added.) 7 CFR 278.6(e)(1)(i) states: Disqualify a firm permanently if: Personnel of the firm have trafficked as defined in CFR states, inter alia: Trafficking means the buying, selling, stealing, or otherwise effecting an exchange of SNAP benefits issued and accessed via Electronic Benefit Transfer (EBT) cards, card numbers, (PINs), or by manual voucher and signature, for cash or consideration other than eligible food, either directly, indirectly, in complicity or collusion with others, or acting alone. 7 CFR 278.6(f)(1) states, inter alia: 2

3 A civil money penalty for hardship to SNAP households may not be imposed in lieu of a permanent disqualification. 7 CFR 278.6(i) states, inter alia: FNS may impose a civil money penalty in lieu of a permanent disqualification for trafficking as defined in if the firm timely submits to FNS substantial evidence which demonstrates that the firm had established and implemented an effective compliance policy and program to prevent violations 7 CFR 278.6(b)(2)(iii) states, inter alia: If a firm fails to request consideration for a civil money penalty in lieu of a permanent disqualification for trafficking and submit documentation and evidence of its eligibility within the 10 days specified in 278.6(b)(1), the firm shall not be eligible for such a penalty. SUMMARY OF THE CHARGES A series of multiple SNAP transactions 5 U.S.C. 552 (b)(6) & (b)(7)(c) were debited from individual benefit accounts in unusually short time frames (Attachment 1). A series of 351 excessively large SNAP transactions 5 U.S.C. 552 (b)(6) & (b)(7)(c) were debited from recipient accounts (Attachment 2). APPELLANT S CONTENTIONS In Appellant s reply to the Charge Letter, in its written request for review dated November 4, 2017, and in subsequent correspondence, it was argued that: 1. The firm is located in a low income area where most customers rely on public transportation. The firm is conveniently located and customers can walk to the store. Appellant provides customer letters in support thereof. 2. Regarding Attachment 1 to the Charge Letter: this situation occurs when a household consisting of several members uses the same SNAP benefit card at different times. Appellant has no way of controlling this. 3. Regarding Attachment 2 to the Charge Letter: Appellant provides a list of expensive items 5 U.S.C. 552 (b)(6) & (b)(7)(c): a. Case of Red Bull (24 bottles, 12 oz.): $71.99 b. Case of Red Bull (24 bottles, 8 oz.): $53.99 c. Case of Monster (24 bottles, 20 oz.): $53.99 d. Case of Arizona (24 bottles, 20 oz.): $26.40 e. Leg of Lamb: $45.49 f. Bag of Chicken Wings (10 lb): $32.99 g. Olive Oil (one gallon): $26.99 h. Shortening: $24.99 i. Basmati Rice: $

4 4. Appellant extended credit to customers, but has no records of the credit activity. The Owner did not understand the SNAP rules regarding credit accounts and did not know extending credit was counter to SNAP rules and regulations. Credit was extended to four or five households. Appellant provides 11 customer statements in support thereof. Appellant states that Charge Letter Attachment 1 transactions 1 through 12, 23 through 25, 32 and 33 were credit payments. 5. There was food in the store s freezer that was not seen during the store visit. When meat is purchased it is stored at Appellant s son s business. Purchases of olive oil were made through another store operated by a friend of the Appellant. 5 U.S.C. 552 (b)(6) & (b)(7)(c). This store is not a wholesaler and cannot provide receipts of Appellant s purchases. Appellant provides photographs and invoices in support of its review request. 6. Appellant has ceased accepting SNAP benefits as payment on credit accounts. 7. Appellant has been a business owner since 1990 and has not had any prior problems. 8. A disqualification will work a hardship upon the Store Owner and upon SNAP customers. Appellant provides customer letters in support thereof. ANALYSIS AND FINDINGS At the outset it should be noted that the ROD Office ordered a contracted store visit to the Appellant firm as part of its investigation into Appellant s questionable transaction activity; the visit was conducted on August 4, 2016, as a result of which documentation was obtained including photographs of the interior and exterior of the store, a store layout diagram and a store inventory survey. This documentation reflected the following: No optical scanners. No shopping carts or baskets. One cash register. One SNAP card reader. No hot food sold. No dining area. No deli section. No meat/seafood bundles/specials or fruit/vegetable boxes. Approximately 750 square feet of retail space. No food stored outside public view. No night window used. Not a delivery route, farmer s market or specialty food store. The firm sold tobacco and tobacco-related products, including glass pipes and hookahs, jewelry, clothing, purses, paper products,cleaning supplies, household items, tools, health and beauty products, movies, sunglasses, pet food, automotive supplies, and other nonfood items. Prices in standard retail variations of $.x9. Photos: 1, 2, 6, 22, 25, 29 and 36. Typical convenience store inventory and setup, although it had a larger than usual inventory of non-food items. The store appears to operate also as a general store. Photos: 1, 10, 24, 25 and 37. 4

5 Cases of water. 12-packs of soda. Photos: 2 and 21. o Low inventory of staple foods fronted on shelves. Photos: 7, 11, 17, 22, 26 and 34. o Small check-out counter, approximately 1 X 2 feet and surrounded by candy, jewelry and tobacco products. Photos: 19 and 35. o Outdoor signage advertises Keno Bar, Smoke Shop, Groceries, Smoke Accessories and T-Shirts. Photo: 40 The documentation presents no indication of advertised specials, promotions or bulk or expensive food items. As noted above, photographs reflect that several visible prices of food and other items were in standard retail variations of $.x9. The checkout area was set up in typical convenience store fashion, utilizing a small check-out area (approximately 1 by 2 feet of useable space) but was otherwise cluttered/surrounded by candy, jewelry and tobacco products and other non-food items. There were no shopping carts or baskets with which customers could transport large orders to the small check-out area or to waiting transportation. This documentation reflects that the firm was a typically-stocked convenience store in all relevant respects. It is worth noting that the average SNAP purchase in a convenience store in the state of Rhode Island during the analysis period was $8.08, reflecting that large purchases are not routinely made in such stores. In regard to contention 1 above, while there may well be SNAP households living near the Appellant firm, the ROD Office has provided substantial evidence showing that several households conducted repetitive and/or excessively large transactions at the Appellant firm on or about the same day as shopping at much better-stocked and very likely more competitivelypriced super stores and supermarkets (which are typically the most competitively-priced firms in a given area), calling into question what these customers could obtain at the Appellant firm that they could not obtain at these larger and better-priced stores. Moreover, the ROD Office notes that at the time of the sanction decision there were at least eight other SNAP-authorized stores within a one-mile radius of the Appellant firm, including one super store (at just over one-half mile from the Appellant store), two supermarkets, one medium grocery store, two combination grocery/other stores and two other convenience stores. 5 U.S.C. 552 (b)(6) & (b)(7)(c). The Appellant firm is clearly not the only store in the area to which Appellant s customers have access, it is not the best-stocked or best-priced firm in the area and it is not the only firm being visited by Appellant s clientele. In regard to contention 2 above, while there are legitimate reasons why a SNAP recipient or household member might return to a small grocery store during a short period of time, such purchases are more typically in small amounts and for obtaining just a few items. The examples in Attachment 1 indicate a series of repetitive purchases that total large amounts. Customers spending such substantial amounts of SNAP allotments in a typically-stocked convenience store, when there are other larger food stores nearby which carry substantially larger varieties of food at lower costs, is implausible. Lastly, large transactions for the purchase of legitimate food items (which at this store would have been a substantial number of lower priced items), using no shopping carts and very little checkout-counter space, is additionally implausible. Multiple transactions over a short period of time, especially of high dollar value, are very suspicious because they are typical of stores and SNAP customers which are attempting to diminish attention to signs of SNAP-benefit trafficking. Moreover, the record further reflects that 5

6 5 U.S.C. 552 (b)(7)(e).. Five of the six nearest convenience stores conducted no repetitive transactions during the analysis period. This data calls into question the rationale that these customers were sharing benefits at the Appellant firm, as they clearly were not at the other convenience stores. Frequent and large transactions conducted in order to purchase eligible foods at Appellant s store are highly unlikely given Appellant s logistical wherewithal and store stock. There is no compelling reason in the record why only Appellant s customers made repetitive visits spending large amounts in short timeframes. The record reflects, as noted above, that the Appellant firm was a typically-stocked convenience store in all relevant respects and provides no plausible bases for customers unusual attraction to the firm and unorthodox transaction patterns. With regard to contention 3 above, the store visit conducted on August 4, 2016 did not reflect that the firm offered cases of Red Bull, Monster energy drinks or cases of Arizona products. Appellant provided photos of store inventory yet no such cases of products were provided. While Appellant provided invoices reflecting the purchase of these products, that they were sold by the case is not corroborated by any documentation in the record. Again, as noted, while these products were seen at the time of the store visit to be in the firm s inventory, they were offered for sale in individual cans/bottles and no signage or other advertising noted the availability of cases of such items. Also, as noted, many of Appellant s customers also shopped at super stores, supermarkets and grocery stores, all which typically sell these same products at competitive prices. Moreover, the store visit did not reflect the presence of leg of lamb or bags of chicken wings. Appellant provided close up photos of what appear to be two boxes of chicken; it should be noted however that these photos are undated and thus viewed as unreliable evidence of store inventory held at an earlier time. The ROD Office points out that Appellant s June and July invoices reflect the purchase of 20 pounds of leg of lamb and 40 pounds of chicken wings in June and four pounds of leg of lamb and no purchases of chicken in July Appellant provided additional invoices in support of its request for review; these invoices reflected the purchase of 40 pounds of chicken wings and 40 pounds of chicken legs in April, One additional receipt reflected the purchase of approximately 15 pounds of leg of lamb and 40 pounds of chicken leg quarters; however the receipt was not dated and it is not clear that it occurred during the analysis period. It is noted that several invoices/receipt were dated outside the analysis period and cannot constitute reliable evidence of inventory held at a another time. Given the above and that Appellant has stated that it sold bags of chicken wings at $32.99, Appellant had the inventory to sell eight bags of chicken in April and four in June. Invoices/receipts reflect the availability of approximately 20 pounds of leg of lamb in June. However, there were 340 transactions in Attachment 2 alone that exceeded Appellant s purported price of 10-pound bags of chicken and 239 transactions that exceeded Appellant s purported price of leg of lamb. Appellant contends that it sold basmati rice for $29.99 per bag, though there were only two small bags of such rice on hand on the day of the store visit; Appellant s invoices did not reflect the purchase of basmati rice during the analysis period. There was no olive oil seen in the store on the day of the store visit and none appear in the invoices/receipts for the analysis period. Likewise, no shortening was seen at the store on the day of the store visit and none appears in the 6

7 invoices/receipts. The record does not support that these items substantially account for the transaction activity detailed in the Charge Letter. 5 U.S.C. 552 (b)(7)(e).. The ROD Office notes that, compared to the nearest six SNAP-authorized convenience stores, Appellant conducted from over two to 351 times the number of excessively large transactions as did the other firms during the analysis period. The record further reflects that Appellant s average SNAP transaction was over twice that of the state store-type average during the same period. 5 U.S.C. 552 (b)(6) & (b)(7)(c). In regard to contention 4 above, it should be noted at the outset that Appellant must show by a preponderance of evidence that credit account activity, or activity other than SNAP benefit trafficking, accounts for the transaction data detailed in the SNAP Office s Charge Letter. Such a showing is not possible in the absence of substantial documentary evidence in support thereof. A successful contention on Appellant s behalf that the acceptance of SNAP payments on credit accounts adequately explains the transactions detailed in the Charge Letter must be accompanied by substantial and detailed documentation such as ledgers, account books or specific sales records allowing the agency to reconcile all transactions in the Charge Letter attachments with Appellant s records. In reply to the Charge Letter Appellant noted that four or five households were extended credit. Appellant also provided letters from households stating that they had been extended credit by Appellant; there were 11 such letters. Appellant also indicated which transactions in Attachment 1 had been the result of credit account activity: Appellant identified seven households. However, there are 103 households comprising the data in Attachment 2 alone. Additionally, Appellant has provided no ledgers or other bookkeeping documents which would have allowed Appellant to record what amount each customer owed on credit purchases. Of the 11 typewritten customer statements attesting to credit activity at the store during the analysis period, two reflect names that are not legible and could not therefore be verified. Only three of the households submitting statements could be located by the ROD Office in the state SNAP data system. One of the customer statements was connected to a household that had conducted four transactions during the analysis period. Another customer whose statement was submitted conducted no transactions at the Appellant store during the analysis period. The other customer statement was connected to 10 transactions at the Appellant firm during the analysis period. Thus the statements, at best, can account for 14 transactions during the analysis period; however, since it is not known what these customers obtained on credit and subsequently paid for with SNAP benefits, the information is not strongly supportive of Appellant s case. Appellant also provided 15 handwritten customer statements; these were considered by the ROD Office, which found that six which provided household or card numbers produced no Charge Letter transactions at the Appellant firm during the analysis period and thus are not relevant. Two of these also signed credit statements, which calls into question the validity of both of the statements made by both households. One other statement was connected to one Charge Letter transaction and another statement was connected to 21 Charge Letter transactions. The remaining 7

8 statements had illegible names and/or no household number/card number which could be used to verify them. Thus only 22 Charge Letter transactions could be connected to customers signing statements and in these cases there is no record of what was obtained in exchange for SNAP benefits. The ROD Office further notes that of the 12 largest transactions contained in Attachment 2, only the largest (5 U.S.C. 552 (b)(6) & (b)(7)(c)) was identified by the Appellant as a credit account payment, which fails to explain the nature of the other 11 large transactions. Appellant s documentation is substantially insufficient to constitute evidence that the transaction activity contained in the Charge Letter was due to payments on credit accounts. Lastly, with such a substantial quantity of Appellant s transaction activity purportedly due to the payment of credit bills/accounts, it is implausible that the firm could produce no records of credit account activity for the entire period of February through July With regard to Appellant s contention that the owner was unaware that the acceptance of SNAP benefits as payment on credit accounts was in violation of the regulations, it is noted that the owner, on November 4, 2013, signed a FNS-252, SNAP Application for Stores certifying thereby that the owner read, understood and agreed with the conditions noted therein which included the following statement: I accept responsibility on behalf of the firm for violations including : Trading cash for SNAP benefits (i.e. trafficking) Accepting SNAP benefits as payment for ineligible items Accepting SNAP benefits as payment on credit accounts or loans (emphasis added) Knowingly accepting SNAP benefit payments from people not authorized to use them. Participation can be denied or withdrawn if my firm violates any laws or regulations issued by Federal, State or local agencies Additionally, upon authorization the firm was sent a standard authorization package containing, among other information, a cover letter stating the following: Training: The video and booklet in this package explain the Supplemental Nutrition Assistance Program rules. As the owner of the store, you are responsible for carefully reviewing the Program rules and making sure all of your employees fully understand these rules. Failure to follow the rules can result in disqualification, fines, civil, and/or criminal action. Need another language or video format? o The training guide is available in Spanish, Korean, Arabic, Russian, and Vietnamese. o The video is available in VHS, CD, or DVD formats (in English or Spanish only). o To order, call (have your 7- digit FNS Permit number handy) 8

9 Enclosures: o The training guide and video is available on our website at: and click on the link to the Retailer Training Guide and/or Retailer Training Video. Supplemental Nutrition Assistance Program Permit Food Stamp Program Training Guide for Retailers and training video Report Abuse of the Food Stamp Program Poster* - MUST BE POSTED IN YOUR STORE Food Stamp Program Regulations We Accept Food Stamp Benefits Window Sticker and Poster Using Food Stamp Benefits Poster Dos and Don ts for Cashiers/Penalties for Violations of the Food Stamp Program Double- Sided Sign EBT Fact Sheet From the SNAP EBT Do s and Don ts card (FNS-136, included in the authorization package): Do not accept SNAP benefits(ebt) as payment on credit accounts. From the SNAP Training Guide for Retailers (page 9): SNAP customers must pay for their purchases at the time of sale. You may not accept SNAP benefits as payments on credit accounts. You may not hold your customers SNAP EBT cards or card account information at your store for future use. Thus Appellant was provided multiple and redundant resources through which a thorough knowledge of program rules and requirements could be readily obtained; information noting that SNAP benefits may not be accepted as payment on credit accounts was contained not only in the DVD/CD but in the written materials as well. Nonetheless, Appellant has not provided a preponderance of evidence demonstrating that the transactions contained in the Charge Letter were more likely due to credit account activity; the evidence, as further discussed herein, more substantially supports a conclusion that the transaction activity at issue was due primarily to SNAP benefit trafficking. Regarding contention 5 above, any inventory not present in the retail area of the store, while questionable that it was available for retail sale, should be reflected in invoices/receipts. Appellant provided product purchase invoices/receipts in reply to the Charge Letter, which the ROD Office duly evaluated. 5 U.S.C. 552 (b)(7)(e). The ROD Office notes that many invoices were dated outside the review period and thus could not be counted; there were also duplicate invoices that were counted only once. The invoices reflected typical convenience store purchases with the majority of items purchased being snack foods, soda and other beverages. Very little meat was reflected in the invoices as having been purchased. 5 U.S.C. 552 (b)(7)(e).. Several invoices were outside the analysis period and several did not state the invoice date and/or the items purchased. Many invoices provided in support of the review request were duplicates of what had been provided in reply to the Charge Letter. Lastly, a few appeared to have dates penand-ink altered to fall within the analysis period, calling their validity into question. It should be 9

10 noted as well that the above figures almost certainly underestimate the extent to which invoices/receipts fall short of supporting SNAP redemptions, as they do not take into account any cash or commercial credit/debit sales, of which Appellant surely had some substantial amount. With regard to contention 6 above, it is important to clarify for the record that there is no provision in the statute or regulations for waiver or reduction of an administrative penalty on the basis of corrective action implemented subsequent to findings of program violations The purpose of this review is to determine if the earlier decision of the SNAP Office was proper and in compliance with pertinent laws and regulations. Accordingly, this review is limited to considerations relevant at the time such decision was made. It is beyond the scope of this review to consider what subsequent remedial actions, such as changes in store management, procedures, internal controls, employee discipline/training or facility and/or inventory changes and improvements Appellant may propose to take or may have taken in order to comply with program requirements. Therefore, to the extent Appellant implies that it will, or has, implement(ed) corrective and/or remedial actions, though this would likely have been valuable in preventing program violations at an earlier time, such cannot now apply retroactively and does not provide a valid basis for dismissing the charges or for mitigating the serious impact of the violations upon which they are based. Additionally, as noted, evidence that credit account activity explains the transactions detailed in the Charge Letter is insufficient. In regard to contention 7 above, Appellant notes that this case represents the firm s first and only SNAP violation (or series of same); however, a record of program participation with no previously or subsequently documented violations does not constitute valid grounds for dismissing the present serious charges or for mitigating the impact of the violations upon which they are based. 5 U.S.C. 552 (b)(7)(e).. Moreover, prior sanctions may precipitate an increase in the severity of a later sanction (see 278.6(e)(6)). Further, as noted above, the Food & Nutrition Act of 2008 provides that a store's disqualification "shall be (emphasis added) permanent upon... the first occasion of... trafficking." Regarding contention 8 above, the issue of hardship worked upon retailers or SNAP clients is not a consideration under the statute or regulations in decisions to disqualify firms due to SNAPbenefit trafficking. The only alternative to permanent disqualification, once trafficking is established, is to impose a trafficking civil money penalty in lieu of permanent disqualification. As noted, in order for this alternate penalty to be considered, a retailer must provide sufficient evidence demonstrating that the firm had established and implemented an effective compliance policy and program to prevent violations prior to said violations, as stipulated in 278.6(i). Appellant did not timely request consideration for same and did not provide such evidence and, accordingly, this alternate penalty was correctly withheld. CONCLUSION In view of the above, the decision of the ROD Office to permanently disqualify Appellant from participation in the SNAP is hereby sustained. The decision will become final upon the 30 th day following Appellant s receipt of this document. 10

11 RIGHTS AND REMEDIES Applicable rights to a judicial review of this decision are set forth in 7 U.S.C and 7 CFR If a judicial review is desired, the complaint must be filed in the U.S. District Court for the district in which Appellant s owner resides, is engaged in business, or in any court of record of the State having competent jurisdiction. This complaint, naming the United States as the defendant, must be filed within thirty (30) days of receipt of this decision. Under the provisions of the Freedom of Information Act (FOIA), FNS is releasing this information in a redacted format as appropriate. FNS will protect, to the extent provided by law, personal information that could constitute an unwarranted invasion of privacy. DANIEL S. LAY July 25, 2017 ADMINISTRATIVE REVIEW OFFICER 11