What is Felony Welfare Fraud?
Improper welfare payments cost the U.S. government billions of dollars every year. In 2017, wrongful welfare payments were estimated to have cost the government $77.3 billion. This number accounts for 10.6 percent of all federal welfare payments made that year. But what exactly is felony welfare fraud?
The Office of Management and Budget defines an improper welfare payment as:
- Payments going to the wrong person
- The right person receiving an incorrect amount of money (including both overpayments and underpayments)
- No documentation supporting the payment
Because this type of crime costs the government more money than the entire budgets of many government programs, it’s a felony that is taken incredibly seriously and is under scrutinous investigation. Federal law makes it a requirement for each state to run dedicated fraud control units to detect and substantiate violations.
What is Welfare Fraud?
Any time a person wrongly receives welfare assistance due to misrepresented information, they have committed welfare fraud. To be eligible for assistance programs, specific conditions must be met, and the criteria ranges depending on your marital status, family size, and household income. Welfare fraud is most commonly committed when people hide their income or misrepresent the size of their household to receive fraudulent assistance.
When is Welfare Fraud a Felony?
Most states follow the same guidelines when prosecuting welfare fraud. Generally speaking, if you defraud the government out of up to $1,000, you will be charged with a misdemeanor. If you defraud the government of over $1,000, you will be facing a charge for felony welfare fraud.
But the law still varies by state, and some states are much stricter on when welfare fraud becomes a felony. Florida is the most stringent state in the country when it comes to felony charges for welfare fraud.
Welfare Fraud by State
It is not at all uncommon for people to be collecting welfare from states they no longer live in or never lived in at all. The easiest way people commit this form of welfare fraud is by using a relative’s address.
To fight this, in 1993, the ACF (Administration for Children and Families) began working with other agencies to share information on people getting assistance. The data proved useful, and the program expanded. By 2002, the program had turned into the Public Assistance Reporting Information System (PARIS).
But ultimately, the Department of Health and Human Services reported that PARIS had limited state participation and incomplete information.
Taking matters into their own hands, five southeastern states have cracked down the most on welfare fraud. Mississippi, Alabama, Georgia, Florida, and Louisiana began the National Accuracy Clearinghouse to share data on eligible members of each state’s programs. The system they developed was to prevent fraud from happening in the first place, rather than trying to track down people already committing a crime.
The way the system works is that, whenever someone applies for an assistance program in Mississippi, welfare offices in Georgia, Florida, and Alabama are immediately notified, and vice versa for each state. The results in Mississippi have been incredible, cutting down over 80 percent of would-be fraudulent applicants.
Mississippi Welfare Fraud Laws
A felony welfare fraud conviction in Mississippi has a maximum sentence of three years in prison and a fine that can range from $1,000 to $10,000.
For misdemeanor welfare fraud, punishment is up to one year in jail and a fine ranging from between $100 and $1,000.
Full restitution of the defrauded funds must be paid back in all circumstances.
Florida Welfare Fraud Laws
In Florida, if you defraud the government out of a cent more than $200, you’ve committed felony welfare fraud. Welfare fraud between $200 and $20,000 in a 12-month period is a felony in the third degree. If the amount is between $20,000 and $100,000, a second-degree felony has been committed. Any amount over $100,000 is a felony in the first degree.
New York Welfare Laws
Florida is comparatively as harsh as any state with its welfare fraud laws. New York, for example, has a $1,000,000 threshold before welfare fraud can become a first-degree felony. For welfare fraud to become a felony in New York, the benefits must exceed $1,000, which is a fourth-degree felony. A third-degree felony is when the total exceeds $3,000, and a second-degree felony is when the fraud exceeds $50,000.
Welfare Fraud Investigations
Close to 450,000 welfare fraud investigations are launched by various states across the country each year. Some states end up finding less fraud than it costs to run the investigations.
For example, in 2011, California found issues in two percent of their 150,000 investigations. They found $20,000,000 of wrongful payments, at a cost to the state of $35,000,000.
In total in 2011, $126,000,000 was spent on investigations that revealed $115,000,000 in wrongful payments.
Famous Welfare Fraud Cases
In some cases, the perpetrators of felony welfare had no idea just how serious of a crime they were committing. In other cases, the perpetrators used elaborate schemes to defraud the government out of as much money as possible. Below we’ll cover some of the more well-known and interesting welfare fraud cases and their punishments.
A Story of Food Stamp Fraud
Candice Heath Lynn was a single mom of three kids, and she was receiving food stamps from the SNAP (Supplemental Nutrition Assistance Program) before she got married to a man named David Heath. David supported the family through his job, making a little less than $40,000 a year, but he was also responsible for paying $800 a month in child support from his first marriage.
David and Candice were quickly pregnant with a child, and money soon began to get tighter for the family from McAlester, Oklahoma. One day Candice revealed that she had an Oklahoma EBT card that provided $426 each month for food assistance. Candice had not yet reported her new marriage to SNAP, and only did so after their new child was born. As it turned out, David’s salary was over the $35,000 threshold to be eligible for the SNAP program in a family of five.
Candice’s caseworker first suggested that she get a divorce to get her assistance back. But a less drastic option that the caseworker also suggested was a 45-day separation. Separated couples can receive support to stay out of detrimental relationships, and the caseworker suggested that if Candice left with her kids for 45 days, it would appear that she and David had separated.
The couple faced a choice and took the 45-day option presented by Candice’s caseworker. Candice went to live with her mom and stepfather while David stayed home. Forty-five days later, they were receiving food assistance again.
The following year, Candice’s ex-husband revealed that he could no longer care for their son, their only child not in Candice’s custody. Candice went through the long and arduous process of regaining custody, and the family of five became a family of six. With the larger family size, Candice and her kids moved back in with David.
Now for the sad twist in the story. Oklahoma has an annual budget of five million dollars to employ 30 deputized welfare fraud investigators, and Candice’s caseworker was the wife of one of those investigators. At her next visit to the Oklahoma Department of Human Services for her SNAP benefits, the husband of Candice’s caseworker pulled her aside. Candice had previously reported her caseworker, who was then disciplined for the advice that she gave.
The investigator, Agent Comer, told Candice to get her food stamps, but also revealed that he had all the evidence he needed to convict her. Later that summer, authorities came into David and Candice’s home to arrest her for welfare fraud. Candice became one of around 14,000 people who are prosecuted each year for welfare fraud, with most considered felony offenses.
Those who enter a welfare program forgo many of their 4th Amendment privacy rights, which allows investigators to walk in unannounced with no probable cause to inspect a home. People on welfare are also disadvantaged by how the system handles childcare payments. In David’s case, the $800 he paid each month in child support was not deducted from his salary when determining his income. But that same money counted as income for the person on the receiving end.
In total, the Oklahoma Department of Human Services found that Candice owed $20,100 worth of fraudulently collected assistance. After multiple pre-trial hearings, Candice was offered a plea deal that totaled two felony offenses, ten years’ probation, and no time in prison, but the family had to pay back the money that was fraudulently obtained.
Linda Taylor
Dubbed the “Welfare Queen” by the Chicago Tribune in 1974, Linda Taylor might be the most famous welfare fraud criminal. Linda began her criminal life in 1943. Still just a teenager, she was arrested for disorderly conduct as “Martha Davis” in Seattle. A year later, Linda was arrested for vagrancy under the name of “Martha Gordon” in the state of Washington. The following year she was arrested for malicious mischief as “Connie Reed.” And finally, in 1946, she was arrested as “Betty Smith” for suspicion of prostitution.
After a couple of failed marriages that resulted in five kids, Taylor ramped up her nefarious activity again in 1959 as “Connie Harbaugh.” In Peoria, Illinois, she filed a lawsuit alleging that a gas explosion at school had injured her kids. Seven years later, the case was thrown out.
Five years later, in 1964, she claimed she was the daughter of a man who had recently died named Lawrence Wakefield, who was found with $760,000 cash in his home. As “Constance Wakefield,” Taylor sued to be named heir. Taylor’s grandmother and uncle had to be flown in to testify against her.
Taylor finally came under severe scrutiny in August of 1974 after calling in a false burglary report to the Chicago Police department. The reporting officer did not believe Taylor’s story, and after digging into her past, he found a warrant for her arrest in Michigan using the name Connie Green. Upon being arrested, Taylor’s stash of public assistance ID cards under a wide variety of names was uncovered.
But despite all the evidence, prosecutors were not interested in taking on the case. So the reporting officer, Jack Sherwin, leaked the story to the Chicago Tribune. The ensuing headline read, “Cops find deceit—but no one cares.”
Eventually, Taylor was brought to justice and was sentenced to three to seven years in jail. However, she was released just two years later in 1980. In total, Taylor used 80 aliases and had 30 different home addresses collecting food stamps. She also claimed Social Security and veterans’ benefits from four deceased husbands that never existed.
The crimes that Taylor was not arrested for may have been her worst, according to Josh Levin, in his biography of Taylor, “The Queen: The Forgotten Life Behind an American Myth.” One of Taylor’s sons claimed that she bought and sold children on the black market, and Taylor’s niece said that she had been kidnapped for four days. Taylor was also involved in the lives of three people who died suspiciously.
John Davis
While Linda Taylor is the most famous welfare fraud felon, John Davis may become the most recent. Davis, the former director of the Mississippi Department of Human Services, and five others recently plead not guilty to welfare fraud in February of 2020. They were charged with misusing money that was meant to help people needing assistance in the most impoverished state in America. Investigators estimated that at least four million dollars was stolen.
Arlene Otis
Arlene Otis graduated with a degree in criminal justice at the University of Illinois-Chicago, and she put her knowledge to use to defraud the government of $150,839 between 1972 and 1978. Otis was arrested in May of 1978 on 613 counts of welfare fraud using six different aliases, and she was eventually sentenced to four years in jail.
Otis most recently tried to sue Target in 2011, and from 2001 to 2011, she filed close to 40 lawsuits against the City of Chicago, Best Buy, and McDonald’s, among other companies and individuals. Otis’ lawsuit against Target was dismissed later that year.
Esther Johnson
The second woman to be dubbed the “Welfare Queen” was Esther Johnson. The title was passed to her after she collected $240,000 per year for over 60 fraudulently claimed children. She was sentenced to four years in prison in 1979.
Dorothy Woods
The title of “Welfare Queen” was eventually passed down to Dorothy Woods, who earned the name after committing the most significant welfare fraud in U.S. history at the time of her arrest in 1981. From 1974 to 1980 Woods impersonated twelve different women, claiming 49 children in total and defrauding the government of $377,000.
Woods spent three years in jail before being paroled. But she was back in prison less than a year later in 1987 for again defrauding the welfare system by collecting assistance for a son who didn’t live with her. Finally, Woods was arrested in 1997 for filing 135 false tax returns to collect $305,000.
Barbara Williams
Another famous welfare fraud perpetrator from the 70s, Barbara Williams would print out fake birth certificates and claimed over 70 children. Starting in 1971 and ending in 1978, she collected close to $250,000 in fraudulent payments. Using ten different names, she opened ten cases with the TANF program (Temporary Assistance for Needy Families). In 1978, she was sentenced to eight years in jail.
James William Smith
Known as a leading voice for raising awareness for Alzheimer’s, James William Smith fooled everyone on his way to $6,700 in disability and welfare payments each month. Smith was diagnosed with early-onset dementia, but he achieved this by altering his speech and purposely failing memory tests. However, the ruse was eventually uncovered, and Smith plead guilty for fraudulently stealing $144,000 from the government in 2013.
Fatima and Wasfi Shalhout
In a unique scheme, husband and wife Wasfi and Fatima Shalhout stole close to $1,200,000 from the Food Stamps Benefits Program in Michigan from 2005 to 2008. The couple owned a store called Ann’s Market and offered 50 percent cash for the use of food stamps. For example, if someone wanted to exchange their food stamps for $50, the Shalhouts would charge $100 to the food stamp card, and instead of giving food in return, they would hand out the $50.
Investigators uncovered the scheme and Wasfi received three years in jail, while his wife received a 30-month sentence.
Wael Ghosheh
The 46-year-old Wael Ghosheh used over 3,000 LINK cards (the SNAP benefits card in Illinois) and would purchase “massive amounts of energy drinks and candy” and then sell them to various stores on the West Side of Chicago. From February of 2013 to March of 2015, Ghosheh fraudulently obtained close to $900,000 in benefits. He was charged with identify theft, money laundering, theft of government property, wire fraud, and unauthorized use of food stamps. Each of these was a felony offense.
