Shocking $66 Million Food Stamp Fraud Scheme Exposed: USDA Insider Among Six Charged

In a stunning blow to the integrity of the Supplemental Nutrition Assistance Program (SNAP), federal authorities have charged six individuals, including a U.S. Department of Agriculture (USDA) employee, in a $66 million fraud and bribery scheme, one of the largest food stamp frauds in U.S. history. The defendants—Michael Kehoe, Mohamad Nawafleh, Omar Alrawashdeh, Gamal Obaid, Emad Alrawashdeh, and Arlasa Davis—face charges of conspiracy to steal government funds, theft of government funds, and misappropriation of USDA benefits. Davis, a USDA employee in the anti-fraud division, also faces bribery and honest services fraud charges, with potential sentences of up to 75 years for her and 35 years for the others if convicted.

The scheme, which began in 2019 and operated primarily in the New York area, involved the use of approximately 160 unauthorized Electronic Benefit Transfer (EBT) terminals to process over $30 million in illegal SNAP transactions. Kehoe, a Long Island resident, allegedly led the operation, working with his co-defendants to submit around 200 fraudulent USDA applications. These applications misused license numbers and falsified documents to secure EBT terminals for ineligible businesses, such as smoke shops, which are not authorized to accept SNAP benefits. Davis, entrusted with preventing such fraud, allegedly sold hundreds of EBT license numbers, enabling an additional $36 million in fraudulent redemptions. She reportedly photographed license numbers meant for legitimate stores and funneled them to intermediaries, receiving bribes disguised as “birthday gifts” or “flowers.”

The fraud went undetected for six years until a joint investigation by the USDA Office of Inspector General (OIG), the FBI, and the U.S. Attorney’s Office for the Southern District of New York unraveled the network. Court documents suggest the investigation gained traction through detailed analysis of transaction records and intercepted communications, though specifics on the breakthrough remain limited. The case, assigned to U.S. District Judge Jed S. Rakoff, has sparked outrage, with U.S. Attorney Perry Carbone stating the defendants “misappropriated tens of millions of dollars in taxpayer funds meant to help low-income families put food on the table.”

This scandal highlights vulnerabilities in SNAP, a program critical for 41 million Americans, including 373,000 households in Alabama alone. While EBT cards reduced fraud from 4 cents per dollar in 1993 to about 1 cent by 2006, insider abuse and lax oversight allowed this scheme to flourish. USDA Secretary Brooke Rollins called it “just the tip of the spear,” suggesting more enforcement actions are forthcoming.

The case underscores the need for stronger safeguards in federal assistance programs. As the investigation continues, it serves as a stark reminder that even systems designed to protect the vulnerable can be exploited when trust is betrayed.

Similar SNAP Fraud Cases:

2016 Miami EBT Fraud Scheme

In Florida, 22 defendants were charged with defrauding SNAP of over $13 million by trading EBT benefits for cash. From October 2015 to March 2016, individuals like Socarras fraudulently redeemed $190,000 in benefits using unauthorized point-of-sale terminals. The scheme was uncovered through collaboration between the USDA-OIG, Miami Police, and other agencies, who tracked irregular transaction patterns. Defendants faced up to 20 years for wire fraud and five years for EBT fraud.

2024 Alabama EBT Skimming

Between September and December 2024, Alabama reported $12.4 million stolen from EBT cardholders via card skimming and cloned terminals. Over 373,000 households were affected. The USDA and local authorities identified the fraud through recipient complaints and transaction anomalies, leading to targeted operations with the Secret Service and Homeland Security.

Massachusetts $400K Benefits Fraud

A Massachusetts woman was indicted in 2024 for a $400,000 SNAP fraud scheme, hiding income to secure benefits. The case surfaced after discrepancies in her reported income triggered a state audit. She faces potential penalties, though specific charges vary.

TikTok-Inspired SNAP Fraud

In 2024, a woman was ordered to repay $35,000 after committing SNAP fraud by concealing income while flaunting luxury purchases online. The case gained attention when her social media posts led to a tip-off, prompting a USDA-OIG investigation.