Idias v. United States

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

SABER A. IDIAS, d/b/a Nashville 
Supermarket,
Plaintiff-Appellant,
v.
UNITED STATES OF AMERICA; DANIEL  No. 03-1619
GLICKMAN, Secretary, Department of
Agriculture, in his official capacity
as Secretary of the United States
Department of Agriculture,
Defendants-Appellees.

Appeal from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
James C. Fox, Senior District Judge.
(CA-00-793-5-F1)

Argued: January 23, 2004

Decided: March 8, 2004

Before WILKINSON, LUTTIG, and MICHAEL, Circuit Judges.

Affirmed by published opinion. Judge Wilkinson wrote the opinion,
in which Judge Luttig and Judge Michael joined.

COUNSEL

ARGUED: William Webb Plyler, MCMILLAN, SMITH &
PLYLER, Raleigh, North Carolina, for Appellant. Neal Irving Fow-
2 IDIAS v. UNITED STATES
ler, Assistant United States Attorney, Raleigh, North Carolina, for
Appellees. ON BRIEF: Frank D. Whitney, United States Attorney,
Anne M. Hayes, Assistant United States Attorney, Raleigh, North
Carolina, for Appellees.

OPINION

WILKINSON, Circuit Judge:

Plaintiff Saber A. Idias owns and operates a grocery store that was
disqualified from the federal Food Stamp Program by the Food and
Nutrition Service (FNS) of the United States Department of Agricul-
ture. The FNS had detected a pattern of suspicious activity in Idias’s
store, most importantly that Idias occasionally collected more in food
stamp reimbursements than he reported in total sales. Idias was at a
loss to explain these discrepancies to the district court, and it awarded
summary judgment to the United States. We now affirm the judg-
ment.

I.

Idias runs the Nashville Supermarket ("Supermarket") in Nashville,
North Carolina. On June 15, 2000, the FNS notified Idias that he was
being charged with food stamp trafficking, which is "the buying or
selling of coupons, ATP cards or other benefit instruments for cash
or consideration other than eligible food." 7 C.F.R. § 271.2. The
FNS’s allegations were based on the Supermarket’s Electronic Bene-
fit Transfer (EBT) debits for the period from January to June 2000.

The EBT system is the modern replacement for traditional paper
food stamps. Each food stamp recipient may purchase food stamp-
eligible items by use of an EBT card with a magnetized strip, similar
to an ATM or a debit card. A retailer simply totals a recipient’s pur-
chases, and then swipes the customer’s EBT card through the retail-
er’s point-of-sale device. The customer’s food stamp account is then
debited, and the retailer reimbursed, for the amount of the purchase.
Because EBT debits are electronically recorded, the records can be
scanned by various computer programs for irregularities and abnor-
malities.
 IDIAS v. UNITED STATES 3
According to the FNS, its analysis of the Supermarket’s EBT
records had "establish[ed] a clear and repetitive pattern of unusual,
irregular, and/or inexplicable" food stamp sales. The FNS contended
that the Supermarket had an excessive number of large transactions
for its type of store, in addition to multiple transactions on the same
cards within short time frames. Specifically, the FNS forwarded to
Idias with its June 15 letter a list of eighty-eight such transactions that
it considered irregular. In response, Idias submitted a statement from
his accountant, but the FNS was unpersuaded, and on June 28, 2000,
it permanently disqualified Idias’s Supermarket from the Food Stamp
Program. The FNS’s decision was upheld on administrative review,
and Idias then filed suit to challenge the administrative determination.

During discovery before the district court, Idias produced the sum-
mary tapes generated by the Supermarket’s single cash register. The
register tapes show information like the store’s daily gross sales, the
number of items sold, and the number of customer sales. In addition,
each item sold is categorized as either Grocery, Hot Food, or Food
Stamps, and the register tapes show sales information broken down
by these categories. Idias testified that he used the Food Stamp cate-
gory for all non-taxable items, including items purchased with food
stamps and items purchased with Women, Infant, and Children
vouchers issued by the state of North Carolina.

Margaret Davis, a certified public accountant, compiled reports that
compared the register tapes to the EBT data collected by the FNS
over the period from January to June 2000. Davis’s reports revealed
a number of irregularities. Most importantly, on three different days
during that six-month span, the daily EBT debits exceeded gross sales
as reflected on the register tapes. In other words, Idias rang up more
on the EBT terminal in food stamp sales than he rang up on the regis-
ter in total sales — even though total sales included purchases of
items not eligible for food stamps.

In addition, on thirty-one different days, the EBT debits exceeded
the register tape totals for transactions recorded in the Food Stamp
category. All told between January and June 2000, the Supermarket
processed more than $10,000 in EBT debits not reflected in sales
recorded in the Food Stamp category on the register tapes. Finally,
there were forty-nine purchases that the FNS deemed unusually large,
4 IDIAS v. UNITED STATES
and forty transactions in which multiple EBT debits were made using
the same card within a matter of minutes.

Faced with this mound of circumstantial evidence, the district court
found that the United States had presented a prima facie case that
Idias had trafficked in food stamps. The district court further found
that Idias had offered nothing more than speculation to explain many
of the suspect transactions. For instance, as to how EBT debits possi-
bly could have exceeded gross sales, Idias merely mused that "there
must have been EBT sales which were not entered in the cash register
at all" — even though Idias and his accountant, Lawrence E. Alford,
had already testified that all sales passed through the register. The dis-
trict court concluded that Idias’s surmise did not create any genuine
issues of material fact, and it therefore granted summary judgment to
the United States on its claim that Idias had trafficked in food stamps.
Idias now appeals the district court’s decision.

II.

The Food Stamp Program was established by Congress "to safe-
guard the health and well-being of the Nation’s population by raising
levels of nutrition among low-income households." 7 U.S.C. § 2011
(2000). Given the importance of providing nutritional assistance for
the needy, Congress has been quite firm in ensuring that food stamps
are used only to purchase eligible food items, and are not exchanged
for cash or other things of value. See Traficanti v. United States, 227
F.3d 170, 174-75 (4th Cir. 2000) (discussing "strict liability regime"
established by Congress to prevent food stamp fraud). In fact, a store
that is caught trafficking in food stamps even one time must be per-
manently disqualified from the Food Stamp Program, unless the Sec-
retary of Agriculture determines that the store had in place an
effective anti-trafficking policy. See 7 U.S.C. § 2021(b)(3)(B); 7
C.F.R. § 278.6(e)(1)(i).

In the present case, the FNS imposed precisely the penalty required
by Congress: based on a pattern of suspicious EBT activity, the FNS
disqualified the Supermarket from participating in the Food Stamp
Program. The FNS’s decision was subsequently upheld on adminis-
trative review. Idias then sought judicial review of the FNS’s deci-
sion, see 7 U.S.C. § 2023(a)(13), specifically, de novo review before
 IDIAS v. UNITED STATES 5
the district court of the validity of the Supermarket’s disqualification,
see id. § 2023(a)(15).

There can be little question that the United States made a strong
case for food stamp trafficking before the district court. It presented
evidence of a pattern of irregular and suspicious activity, including
that (1) on several occasions, total food stamp debits exceeded the
store’s documented total sales; (2) total food stamp debits systemati-
cally exceeded the sales categorized as food stamp sales on the store’s
register tapes; and (3) large food stamp debits often occurred in quick
succession, sometimes even using the same EBT card, despite the
Supermarket’s modest size.

There can also be little question that the United States was entitled
to use this sort of documentary evidence to prove that Idias trafficked
in food stamps. See Kahin v. United States, 101 F.Supp.2d 1299,
1303-04 (S.D. Cal. 2000) (rejecting the notion that store personnel
must be caught "red-handed" trafficking in food stamps). Congress
expressly authorized the FNS to consider "evidence obtained through
a transaction report under an electronic benefit system" in disqualify-
ing food stores for food stamp trafficking. 7 U.S.C. § 2021(a). And
the FNS has done exactly that, issuing regulations that permit a food
store to be disqualified from the Food Stamp Program on the basis of
"inconsistent redemption data" or "evidence obtained through [an
EBT] transaction report." 7 C.F.R. § 278.6(a). Indeed, one of the
advantages of replacing traditional paper food stamps with the EBT
system was that it made it easier to detect trafficking, see 5 West’s
Fed. Admin. Prac. § 5785 (3d ed.), particularly in more closely-knit
communities where undercover evidence can be difficult and costly
to obtain.

Idias contends, however, that the quantum and types of documen-
tary evidence presented by the United States were insufficient to
prove food stamp trafficking. Certainly Idias managed to controvert
some of the Government’s evidence. For instance, Idias produced
wholesale invoices demonstrating that the Supermarket carried a suf-
ficient number of food stamp-eligible items to justify large purchases.
Idias also introduced affidavits from some of the customers whose
transactions had been flagged as questionable, each of whom denied
ever having received cash in exchange for using an EBT card.
6 IDIAS v. UNITED STATES
Yet what Idias struggled to explain before the district court was
how food stamp debits ever could have exceeded the Supermarket’s
entire recorded gross sales for any given day. There are, of course,
three possible explanations. The first is that the food stamp debits
were accurate and the register tapes were not. Idias then was making
actual sales, but not ringing them up on the register, in order to evade
paying the proper taxes. The second is that the register tapes were
accurate and the food stamp debits were not. Idias then was accepting
food stamps for sales that never took place, while customers were
receiving cash instead of merchandise. The final explanation is that
both the register tapes and the food stamp debits were inaccurate,
which would not conclusively have established which offense — tax
evasion or food stamp trafficking — Idias had committed.

Idias, however, removed all doubt on this score. Idias testified that
the amount listed daily on the register tapes as "gross sales" docu-
mented everything sold in the Supermarket. As Idias put it, "That’s
the bottom line for the day." Idias’s accountant, Lawrence Alford,
was even more explicit. When asked whether EBT debits could ever
exceed gross sales for a given day, Alford replied, "No way." Alford
explained, "First off, [Idias is] not gone [sic] have more sales than
goes through the register. Secondly, I know that it’s not gone [sic] be
all food stamp people come in that day without somebody else com-
ing in that’s not eligible for . . . food stamps or [Women, Infant, and
Children vouchers]." Thus, according to Idias and Alford, all sales
passed through the Supermarket’s register and were recorded on the
register tapes. By their own admissions, if food stamp debits exceeded
gross sales, it was because Idias was exchanging food stamps for cash
rather than merchandise.

Perhaps that is why Idias backpedaled before the district court,
asserting that there simply must have been EBT sales that were not
entered into the cash register at all. Yet Idias provided no evidence
in support of his speculation, nor did he explain why he earlier had
been mistaken to claim that all sales were recorded in the register.
Then, at oral argument before this Court, Idias’s counsel backpedaled
even farther, claiming that the discrepancies between the food stamp
debits and gross sales were the deliberate result of Idias’s attempted
tax evasion. Again, counsel provided no evidence to substantiate his
effort to trade one fraud charge for another.
 IDIAS v. UNITED STATES 7
At day’s end, then, the United States supported the administrative
decision to disqualify the Supermarket from the Food Stamp Program
with extensive documentary evidence of a pattern of food stamp traf-
ficking. In response to the United States’s most incriminating evi-
dence — that on three different days food stamp debits exceeded the
Supermarket’s recorded gross sales — Idias offered only an ever-
shifting story that left him guilty of first one offense and then another.
The district court properly concluded not simply that a preponderance
of the evidence proved food stamp trafficking, but that Idias’s weav-
ing tale could not survive summary judgment, see, e.g., Guinness
PLC v. Ward, 955 F.2d 875, 883, 901 (4th Cir. 1992).

III.

For the foregoing reasons, the judgment of the district court is

AFFIRMED.