Food stamp fraud is ‘devastating’ Michiganders, document says

When Michiganders’ food stamps are stolen, it can take six to eight weeks for the state to replace the card, according to a fraud expert. 

The Michigan Department of Health and Human Services administers the federal Supplemental Nutrition Assistance Program, which helps feed the state’s most vulnerable people — about 800,000 households.

The dollar amount of reported food stamp fraud increased from fiscal year 2023 to 2024 by 387%, according to documents Michigan Capitol Confidential obtained through a records request. Criminals steal food stamps from Michiganders via card skimmers and card cloning.

Criminals can install fake versions of card readers that process payment cards, such as debit and credit cards, at gas stations, grocery stores and liquor stores. A project proposal from the state health department describes the situation and suggests making benefit cards more secure.

“This project (to switch to chipped debit cards) is expected to realize significant advancements in both improved program integrity as well as benefit delivery modernization,” the proposal says.

Chip EBT Proposal 20250410 Draft by mcclallen on Scribd

Three states — California, Oklahoma and Maryland — are moving to chipped cards for SNAP spending, according to the United States Department of Agriculture.

If Michigan doesn’t switch to chipped cards, according to the proposal, more criminals will defraud Michigan taxpayers.

“It is expected that as other states implement chip card technology the risk for card skimming will increase in States continuing to solely utilize magnetic stripe cards,” the document says.

The state health department did not respond to multiple requests for comment.

Banks have protected customer accounts by using chip cards since 2015.

Criminals have been stealing from benefit programs for decades, Haywood Talcove, CEO of LexisNexis Special Services Inc., told CapCon in a phone interview. Targets include unemployment insurance, disability payments, and the Women, Infants, and Children program. Fraudsters clone point of sale terminals by using the identification number from a legitimate source, such as Walmart or Target, but the payout is to a third party.

“Those are virtually impossible to find,” Talcove said.

Talcove recommended that states use digital payments and wallets, which are more secure. He noted that people who qualify for electronic benefit transfers under food stamps and other programs are also likely to qualify for federal subsidies for internet service and a smartphone.

A May 6 U.S. Department of Agriculture directive requires states to submit to the federal government the names and Social Security Numbers of food stamp beneficiaries. The federal agency will require all states to submit the birthdates and personal addresses of SNAP applicants as part of the directive. States must also provide records used to calculate the total dollar value of SNAP benefits received by participants over time and give federal officials the ability to filter benefits received by date ranges.

“As they’re getting the names of the recipients for the first time, I suspect, of the 41 million people receiving SNAP, 8 million of them are ‘ghosts’ or synthetic, stolen identities,” Talcove said. “They’re not even real people.”

The Department of Agriculture will also increase the frequency of its evaluations of retail bodegas from once every five years to once every six months, Talcove said.

”There are 256,000 retailers in the program,” Talcove said. “Of that, there are 116,000 bodegas. And 80% of fraud is sitting in that group.”

Talcove described a recent visit to Los Angeles during which he saw a bodega reporting $2.1 million in revenue per week, though it wasn't selling any food.

“It was basically a front to steal,” he said.

When states administer federally funded programs, they don’t have an incentive to reduce fraud, Talcove said.

“The [SNAP] program has been infiltrated by transnational and domestic groups, and those groups are stealing at scale,” Talcove said. “Until you put these controls into place, you’re going to have two victims: the American taxpayer and the innocent individuals who rely on the benefit who had their card stolen.”