- Elizabeth Larson
- Posted On
Lakeview Supermarket disqualified from food stamp program; owner calls decision ‘a nightmare’
LUCERNE, Calif. – A well-known local businessman said his business is facing a devastating blow as the result of a federal agency’s unilateral action to bar him from participating in the food stamp program.
Kenny Parlet, whose family has owned and operated Lakeview Supermarket & Deli since 1970, was notified by letter last week that the U.S. Department of Agriculture’s Food and Nutrition Service was permanently disqualifying the store from accepting food stamps.
The reason: The store was accused of “trafficking,” or exchanging Supplemental Nutrition Assistance Program – or SNAP – benefits for cash. SNAP is now the official name for the federal food stamp program.
Parlet said he expected a $5,000 fine and a one-week suspension from using the program. Instead, he was hit with one of the program’s most stringent sanctions.
The USDA Food and Nutrition Service confirmed to Lake County News on Monday that Lakeview Market was permanently disqualified on Nov. 16 for trafficking, but would divulge no further details about the case.
Parlet said one of his employees made several inappropriate transactions totaling $132.50, mistakes which he said could end up costing him half a million in lost sales annually – or about 25 percent of his business – and which may, ultimately, cause him to close his business’ doors.
During the USDA’s sting operation, Parlet said the one employee was approached four times and, as a result, accumulated multiple violations. He said that employee had been trained, but he said the SNAP system can be very complicated.
One sale included a box of forks and matches that the cashier – who admitted to making mistakes – wrongly ran as food items, he said. A few weeks later, a $3 sale that included a box of forks and a scouring sponge also violated the rules.
In two other instances, the same cashier allowed the undercover agent to treat their SNAP card like a debit card and receive cash back rather than using the funds only on food, Parlet said.
While the Food and Nutrition Service can choose to impose a civil penalty in lieu of permanent disqualification, Parlet said he was not given that option and, after no warnings or contact, was notified of the final action.
Parlet now has a 10-day period from the receipt of the letter in which to begin a lengthy appeal process that he said a USDA agent already has told him he’s likely to lose.
In the meantime, he’s been ordered to return the electronic benefit transfer equipment used for SNAP transactions within five days or else face fines.
For Parlet, the most incomprehensible part of what he called a “nightmare” for his business is that his store never had a previous violation or warning.
“If we make a mistake, we’re done,” he said.
While he said the employee who was responsible for the transactions was terminated, the store’s entire staff, management team and all of the the local SNAP customers are being punished to “the ultimate degree.”
Parlet said he’s now starting to look at employee cutbacks in order to keep his business afloat.
Caught in a federal crackdown
The action against Parlet comes months after the USDA began a nationwide crackdown on abuses of SNAP, which is now serving 46 million Americans every month, a program record.
According to the U.S. Census Bureau’s American Community Survey, 4,784 Lake County households were estimated to have received food stamp assistance during 2011.
“The Extent of Trafficking in the Supplemental Nutrition Assistance Program: 2006-2008,” a March 2011 report by the USDA Food and Nutrition Service’s Office of Research and Analysis, estimated that trafficking diverted an estimated $330 million annually from SNAP benefits between 2006 and 2008.
Agriculture Under Secretary Kevin Concannon said the USDA has a “zero tolerance policy” for SNAP fraud.
The agency in August unveiled what it said were aggressive new tactics meant to address misuse of SNAP benefits, including tougher financial sanctions for retailers found in violation.
The new sanctions also allow USDA to permanently disqualify a retailer who traffics and, and at the same time, to assess a monetary penalty in addition to the disqualification. Such financial penalties would be proportional to the amount of SNAP business the store is conducting, which the USDA said will help ensure that the financial punishment more closely fits the crime.
Before the changes, the USDA could disqualify a retailer or issue a financial penalty, not both.
Also in August, Concannon released a report for fiscal year 2012’s third quarter showing that 574 stores across the nation had sanctions placed against them that included fines or temporary disqualifications, while another 1,016 stores were permanently disqualified for trafficking or falsifying applications.
A reading of the federal regulations that govern business sanctions and disqualification suggest that the ruling against Parlet is particularly heavy handed.
The regulations state that the Food and Nutrition Service regional office making a disqualification or penalty determination “shall” consider the following: the nature and scope of the violations committed by personnel of the firm; any prior action taken by the service to warn the firm about the possibility that violations are occurring; and any other evidence that shows the firm's intent to violate the regulations.
In addition, the regulations suggest there are a number of lesser sanctions for firms that have a first-time offense.
Parlet, who said he has never had a previous violation, qualifies for a warning letter or a disqualification period of six months, which can be applied “if it is to be the first sanction for the firm and the evidence shows that personnel of the firm have committed violations such as but not limited to the sale of common nonfood items due to carelessness or poor supervision by the firm's ownership or management.”
Parlet has asked for a review of the action against him by the USDA office in Virginia, but he said the USDA’s Sacramento office told him the chances are 99 percent against a ruling in his favor.
Sting operation targets store
Parlet doesn’t know why federal officials focused in on his store, although he suggested it may be because of the market’s large amount of SNAP transactions, which make up 25 percent of its sales. He said total SNAP transactions average between 10 and 15 percent in most stores.
“We cater to them,” he said of SNAP recipients. “That’s what I think prompted the investigation.”
Lakeview Supermarket also fits the USDA’s profile of a high risk store. Among large stores, supermarkets have higher trafficking rates, the USDA’s trafficking report found.
The report said trafficking also was likely to happen in the most impoverished areas, which it defined as being where more than 30 percent of households live in poverty. Based on the most recent figures available from the U.S. Census Bureau, Lake County’s poverty rate for all age groups is 24.6 percent, just shy of fitting the definition.
However, Lake County fits the definition of being rural, and trafficking rates, according to the agency’s report, are highest in the most urban and the most rural areas.
An uncertain future
Parlet said the SNAP program is a significant portion of his business. “We do about $40,000 a month in food stamp sales on average.”
He estimated he will lose as much as $40,000 starting in December, when he usually expects to be filling holiday orders for his popular meat packs.
If customers can’t use their food stamps at his store, he believes he will lose additional sales for other items that aren’t covered by the SNAP program and which those customers purchase with cash.
Parlet said the appeal process will require him to get an attorney, as the case likely will be transferred to a federal court, where a USDA official told him he will have to sue the government, and win, in order to get his SNAP privileges reinstated.
He said he’s spoken to Congressman Mike Thompson’s office, which is trying to work with the USDA to find a less damaging outcome for the business.
“Meanwhile, we’re just bleeding every single minute we’re without this,” Parlet said.
He’s also concerned that if he wanted to sell his business, the USDA could go after him with fines.
Parlet said he’s survived an increasingly difficult business climate, put in tens of thousands of dollars to upgrade his store and worked to build a lasting business. All of that now hangs in the balance.
“I’ve lost all faith in pretty much everything at this point,” Parlet said.
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