USDA’s Food and Nutrition Service (FNS) issues charges letters to more than 2,000 small grocery and convenience stores each year alleging that they have engaged in illegal trafficking in SNAP benefits. Formerly known as the food stamp program, SNAP provides nutrition assistance to more than 42 million Americans. While SNAP beneficiaries receive EBT cards from state agencies, FNS authorizes and regulated more than 250,000 retail food stores in every state, the District of Columbia, Guam, and the U.S. Virgin Islands.
SNAP trafficking charge letters are based on two types of investigations: undercover investigations and cases based on the agency’s Anti-Fraud Locator Using EBT Retailer Transactions (“ALERT”). Retailers charged with SNAP trafficking have only ten (10) days to respond to charge letters. 7 C.F.R. § 278.6(b)(1). FNS permanently disqualified nearly 1,600 SNAP retailers during FY21. Under FNS’s regulations, SNAP retailers who engaged in trafficking may request that the agency assess a civil money penalty (CMP) in lieu of permanent disqualification for trafficking. 7 C.F.R. § 278.6(b)(2). The ten (10) day period for requesting a CMP cannot be extended.
Eligibility for a CMP is strictly governed by FNS’s regulations 7 C.F.R. § 278.6(i). FNS will assess a CMP only if a SNAP retailer can demonstrate, via “substantial evidence which demonstrates that the firm had established and implemented an effective compliance policy and program to prevent [SNAP] violations.” FNS has four criteria for assessment of a CMP: (1) development of an effective compliance policy; (2) development and institution of an effective personnel training program; (3) proof that the store’s compliance policy and training program were in effect prior to the violations in the charge letter; and (4) that firm owners were not aware of, did not approve, did not benefit from, or were not involved in the trafficking violations. Id.
FNS’s regulations also contain detailed and complicated complaint training program standards. These standards include but are not limited to, dated training materials, written proof of training of owners, managers, and employees within 30 days of hire and annually thereafter, and a record showing that all employees involved in trafficking violations were trained prior to the date of the alleged violations.
In the event a SNAP retailer charged with trafficking timely request imposition of a CMP and satisfies FNS’s requirements, retailers must pay steep penalties to keep their SNAP licenses if they have engaged in SNAP trafficking. For first offenses, the penalty is the product of six times the average monthly SNAP benefits redeemed at the store during the past year if the highest SNAP transaction determined to be trafficking was under $100; violations over that amount result in the assessment of a CMP that is twelve times the store’s monthly average. While those amounts could exceed $100,000 in theory, the maximum CMP a store can pay is generally $59,000. While the full penalty is normally due in 30 days, OFW has been able to negotiate a much longer payment period in many cases.
Recently, FNS has been more aggressive in communicating training expectations to SNAP-authorized stores. FNS has commenced including training information in authorization and re-authorization materials for SNAP retailers. https://www.fns.usda.gov/resource/snap-training-expectations-retailers At the same time, FNS has been extremely stingy in awarding CMPs in part because most SNAP retailers (and their local attorneys) are unaware of FNS’s SNAP training requirements or how to develop a proper training program. Moreover, FNS requires all owners, managers, and employees to receive initial and annual refresher training on SNAP. Unfortunately, many SNAP retailers fail to properly train their employees and/or document such training, and accordingly are ineligible for a CMP. OFW Principal Stewart Fried has represented hundreds of grocers and convenience stores for more than a decade in connection with the SNAP and WIC programs, from authorization to training to the defense of SNAP violations before FNS and in federal courts across the country. OFW Law has prepared SNAP training materials and conducted in-person training for hundreds of SNAP retailers across the United States and can assist stores with their SNAP training needs.