But on Tuesday, November 9 there were no loiterers around the parking lot at 675 Broadway. Instead, there were cops hauling away evidence of what authorities describe as a wide-ranging fraud scheme perpetrated by the store’s management and possibly scores of Ulster County food stamp recipients who were allowed to trade their benefits for beer, cigarettes, gas and cash.
The search warrant executed by Kingston Police on Tuesday marked the culmination of a 10-month fraud investigation by city police, the Ulster County Department of Social Services and the District Attorney’s Office. During the course of the investigation, police said, undercover officers used food stamp debit cards issued by DSS to buy prohibited items, or in exchange for cash. The transactions would be rung up as milk, bread or other food-stamp eligible items though a special debit machine issued to the store by the federally funded food stamp program, police said. According to police, in exchange the store would skim a 50 percent profit, by, for example, giving a patron $50 in cash for a $100 transaction. The entire $100 meanwhile would be refunded to the store courtesy of taxpayers through the food stamp program.
Following Tuesday’s raid, two men identified by police as clerks at the store, Kuldeep Singh and Surinder Kumar, were arrested and charged with felony grand larceny, misuse of food stamps, falsifying business records and scheme to defraud. Both men were arraigned in Kingston City Court and sent to the Ulster County Jail. An arrest warrant has been issued for a third man, Kanwarjit Singh, in connection with the fraud, but he remains at large and police believe he may have left the country. County District Attorney Holley Carnright declined to specify what Singh’s role was in the scam except to say that he was “part of management” at the store. Kingston Police Chief Gerald Keller said that Singh was a part owner of the Sunoco station. In addition to the criminal charges, Carnright’s office filed a civil action to freeze the bank accounts and other assets of Gurvinder Kaur and Virk Convenient Mart Inc. Carnright said that the action was intended to keep in place potential proceeds from the fraud while the investigation continues. Carnright declined to specify Kaur’s role in the investigation, but county records list Virk Convenient Mart Inc. as the owner of the parcel where the gas station is located. State records show that the company’s headquarters is at another Sunoco station at 740 Main St. in Poughkeepsie. Carnright said that his office is still looking into the corporate structure behind the gas station and the fraud.
“In a fraud case, the issue of ownership can be complicated,” said Carnright. “By design it is common for people to mask assets. It’s something we are looking into.”
Hand over fist
According to Department of Social Services Commissioner Roberto Rodriguez, the Sunoco scam allowed the store to rack up enormous profits. According to Rodriguez, in mid-2009 the store was recording $6,000 a month in food stamp revenue. By January 2010, when the investigation kicked off, $60,000 in food stamp money was moving through the gas station, roughly the same amount registered by the Kingston Plaza Hannaford store. Rodriguez estimated that the fraudulent charges amounted to at least $600,000 to $700,000 over the past year.
“We’re talking about $60,000 a month, from a Sunoco station,” said Rodriguez. “What kind of business could they be doing there?”
The origin of the investigation has become a source of contention between the Department of Social Services and Kingston Police. According to Rodriguez, the investigation began after the DSS Special Investigation Unit received a tip about the fraud. But Kingston Police Chief Gerald Keller said that KPD Detective Norman Good developed an informant who told him about the scam. Good then passed the information along to DSS.
“Clearly we initiated this investigation by developing the informant and contacting DSS,” said Keller. “There’s no question about it.”
Rodriguez was unable to say exactly when the fraud scheme began. But, according to Keller, by the time the investigation got underway in January, large-scale fraud at the store had been going on for months.
The investigation was wide-ranging and, according to District Attorney Carnright, unusual for local law enforcement in Ulster County. While the KPD carried out a series of undercover stings using benefit cards provided by DSS, the DA’s office issued subpoenas for bank records and other information from Virk Convenient Mart Inc. District Attorney’s Senior Investigator William Weishaupt guided the legal aspects of the case, which Carnright described as complex. Carnright said that similar fraud investigations were usually carried out by federal agencies or the state Attorney General’s Office. In the Sunoco case, Carnright said, federal and state officials were advised of the case once the scope of the fraud became clear but, Carnright added, “They weren’t moving on it.”
During the raid, officers seized business records, EBT machines and other items which, Carnright said, would serve as the basis for a broader investigation.
“We executed the search warrant, we quickly made arrests, now we go on to stage two,” said Carnright. “Hopefully we will find some information from inside the building which will lead us further into this investigation.”
At DSS meanwhile, Rodriguez promised a thorough investigation to find and hold accountable food stamp recipients who abused their benefits at the Sunoco station. Rodriguez said that investigators were combing through electronic records looking for suspicious transactions at the Sunoco station. DSS clients found to have abused their food stamp benefits face sanctions ranging from expulsion from the program to felony criminal charges, depending on their level of involvement.
“We have the records, we know which clients went there on what days, we have the dollar amounts,” said Rodriguez. “If you bought a gallon of milk, that’s one thing. But if you charged $90 at a Sunoco station, we’ll have some questions.”
Rodriguez said that it was too soon in the investigation to determine how many DSS clients were involved in the scam. But, according to the Hunger Action Network of New York, the average food stamp award is $109 per person, per month. To take in $60,000 a month in food stamp money, perhaps 90 percent of it through fraudulent charges, dozens of recipients would have had to take advantage of the store’s alleged illicit services.
Revelations of food stamp fraud came as no surprise to neighbors of the Sunoco station who reported a litany of problems there. Mechanic Tim Halpin, who runs a garage half a block from the Sunoco, said that the quality-of-life problems centered on the gas station were one reason why he plans to move business to a new location on Foxhall Avenue.
“That place breeds a different element,” said Halpin. “It was a constant hub of activity throughout the day and night. You would see people go in, get their money, then they’d go to one of the drug dealers hanging around, get whatever and go around back, or in the parking lot and get high.”
Michael Johns, who works at Earl B. Feiden Appliances adjacent to the Sunoco station, said that he personally witnessed patrons at the store swipe their benefit cards through the EBT machine and receive cash from the clerk in return. Johns added that prostitutes were a regular presence at the station.
“I don’t even want to touch the door handles with all the hookers going in and out of there,” said Johns.
Following complaints about the store on the community watchdog website seeclickfix.com, Keller combed police records and found 83 calls for service to the Sunoco station between January and August this year. During the same period, the gas station was the scene of eight warrant arrests, eight arrests for disorderly conduct, 12 open container violations, two drug busts and a single prostitution arrest. Keller said that he believes the alleged food stamp scam, and the store’s round-the-clock business hours, explained the popularity of the gas station with addicts, derelicts and prostitutes.
“I think that without that kind of fraudulent activity going on, we’re not going to see the same kind of problems,” said Keller.