NYC Officials Made Millions by Illegally Selling Red Bulls Bought with Food Stamps

What would you say is the most surefire way to covertly amass a small, black-market fortune made from selling illicit goods? Would you submerge yourself in the clandestine world of counterfeit Pogs? Seek out the storage unit containing all the wondrous memorabilia from shuttered Planet Hollywoods? How about ripping off an unending flow of food stamps and using it to start a Red Bull wholesale enterprise?

If you happened to choose the latter, you might just be on your way to a cool two million dollars and an equally cool federal prison stay. That's right: A ring led by a New York State Human Resources Administration bureaucrat came up with a way to rip off $2 million in food stamps and other public assistance benefits over the past five years. They even used the proceeds to start a business reselling Red Bull in bulk.

The New York City Department of Investigation announced the details of the scheme as two HRA workers were arrested and charged in federal court this week. Using fake electronic benefit transfer cards—the currency of the federal food stamp program--they found a way to generate cold hard cash. The ring recruited dozens of welfare recipients to cooperate in their nefarious and highly caffeinated game. Eleven others were charged with violating the law.

Cherrise Watson-Jackson, a supervisor at the agency who made $63,000 per year at work, is alleged to be the head honcho behind the scam. Watson-Jackson and friends are said to have offered food stamp recipients cash in exchange for their electronic benefit transfer cards. Then, the bureaucrats used the information on the cards to access the accounts and issued additional benefits to them—benefits that were intended for people in urgent need. One tactic the fraudsters used was to turn the food stamps in at bodegas and other small stores for a portion of their value in cash. This is illegal but, according to the New York Times citing US Department of Agriculture data, the rate of this kind of trafficking has grown of late, from 1 percent in 2009 to to 1.3 percent in 2011.

Gerard Stokes, an associate of Watson-Jackson, is alleged to be the great mind behind the Red Bull scam. He is said to have made over 100 purchases at various BJ's Wholesale Club stores of Red Bull and then resold them to local bodegas and small grocery stores. The complaint says the proceeds went to Ms. Watson-Jackson.

In addition to ripping off food stamps—or SNAP as the program is known—the gang also posed as fake landlords to steal housing vouchers, prosecutors say.

The fraud came to the attention of HRA Commissioner Steven Banks; what followed was a years-long investigation involving the FBI, the New York State Office of the Inspector General, and the United States attorney's office for the Southern District of New York.

Speaking of Watson-Jackson, New York State Inspector General Catherine Leahy Scott, said, "This defendant was entrusted to provide government assistance to New York's neediest families but instead abused that trust and her authority."

So, the next time you shun coffee and head to the bodega to give yourself some "wings", you might want to think about the clandestine dealing that put said Red Bull can in the store shelf to begin with.