Four, restrictions on determining citizenship or legal alien status should be removed. Let me review briefly some of the restrictions and requirements which we believe should be reviewed and changed:

Citizenship status is supposed to be declared on the application. If an applicant does not provide this information, the eligibility worker must have some specific reason for pursuing verification of citizenship or legal alien status. Even then, the worker is not to contact the Immigration and Naturalization Service without the applicant's written consent;

If official verification of citizenship is not available, the worker shall accept a signed statement from someone who is a U.S. citizen and who declares under penalty of perjury that the applicant or household member in question is a U.S. citizen;

Income and resources of an ineligible alien living in a food stamp household may not be counted in determining the household's level of benefits, even though the ineligible alien may be the wage earner of the family.

Five, identification and verification regulations restrict eligibility staff in their efforts to determine the true family situation. In some aspects, the certification process is a declaration system, not a verification system, and consequently open to abuse and fraud. Caseworkers should be allowed to make unannounced home visits and make collateral contacts to verify information, without the consent of the applicant or recipient.

Six, direct mail issuance of food stamps should be restricted, perhaps limiting this service to the elderly and disabled. If a fraudulent attempt is made and stamps are mailed to the suspect, you cannot prove a theft case because you cannot prove the recipient received the stamps.

Seven, consideration should be given to writing Federal regulations that are sufficiently broad in scope to give the States greater flexibility in the regulating process and thus enhance the prevention of fraud.

Eight, more stringent regulation and supervision of grocers who accept food stamps are needed. I believe USDA's Office of Investigations will agree that the food stamp is a black market currency. We know that almost anything can be purchased with food stamps-cars, boats, television sets, narcotics, prostitution, whiskey. In a random sample of 30 individuals and retail businesses in the central Texas area, our undercover agents were able to sell food stamps at 50 cents on the dollar to 17 of these individuals and businesses. They included a motorcycle shop, barbershop, a schoolteacher, and of course, grocery stores. In another area of the State, we even paid a bondsman with food stamps to get a man out of jail. In this testimony, I have been critical of certain Federal regulations which I have found in my experience to be conducive to abuse and which, in some situations, thwart or frustrate my agency's efforts to deter and detect fraud. No criticism of the concept or purposes of the food stamp program is intended. We support the program as the best effort yet devised by the Federal Government to make food and sound nutrition available to the poor.

Until some better way is found to meet those needs, we have every desire to see its continued operation in the most efficient

manner possible, to insure that the program's benefits go only to those for whom they are intended.

Thank you for the opportunity to make some observations toward that end.

Senator PRYOR. We appreciate your testimony.

Mr. Chairman, I yield back this symbol of power to you.

The CHAIRMAN. You can keep it. Maybe you will catch some of the flack, too.

Mr. Richards, I thank you for your excellent testimony. You perhaps heard me this morning when I made inquiry of the lady of Tennessee as to whether there was any validity to the reports we are receiving constantly of fraud in the program, the 50 cents on the dollar for the food stamp recipient, the 80 cents on the dollar to the storekeeper, who then turns it in for 100 cents on the dollar. Do you believe that is going on?

Mr. RICHARDS. Yes, sir.

The CHAIRMAN. Now, how did you conduct your random sample? Mr. RICHARDS. We had one or two of our investigators, working together, approach various individuals and grocers. Let me say it this way:

In Texas, our State legislature passed a specific statute making trafficking in food stamps a crime. And so with this in mind, we felt encouragement from our legislature to pursue some of these investigations. And we approached the people who sold these, Mr. Chairman, in a manner such that we would not nullify criminal prosecution with entrapment allegations.

We merely approached the people and sold them the stamps. And sometimes the approach was, "Does anybody here know where I might move these food stamps?"

The CHAIRMAN. On page 2 of your testimony, you mention the $7 million that was unlawfully taken from the program through fraudulent activities.

Mr. RICHARDS. Yes.

The CHAIRMAN. What sort of method is there available to recover this money?

Mr. RICHARDS. Well, first of all, it is our policy within our division that any time we develop all of the elements of a criminal fraud case, we present these to the prosecuting attorneys in the State of Texas. And one of the methods, of course, is to have restitution as a means of resolving the criminal activity. Usually restitution is ordered by the courts when the people are convicted. The CHAIRMAN. Do you have any idea how much you have recovered?

Mr. RICHARDS. Yes.

In all programs last year, the last calendar year, we recovered around $1 million. Most of that is AFDC and food stamp money. The CHAIRMAN. What is the conviction rate on the indictments? Mr. RICHARDS. Of those that actually go to court, we are convicting around 95 to 97 percent of them. I will give you an example. Again, during the last calendar year, we presented to the prosecutors in the AFDC and food stamp programs, we disposed of 3,196 fraud cases in the State of Texas. Of those, 619 were actually prosecuted, 614 of those were found guilty. And of course many of the other cases are handled through the district attorney's office

with some sort of restitution in lieu of prosecution sometimes. But that is strictly up to the prosecuting attorney. And they are handled similar to sometimes criminal check cases by prosecutors. They are handled with restitution rather than prosecution.

The CHAIRMAN. The figures you are giving sound enormous. What kind of impression do you have, just as one who has worked closely on this? Do you feel like you are just scratching the surface as to what is really going on in the program? Or are you getting a substantial percentage of the fraud? I know this is a question you cannot answer with any precision.

Mr. RICHARDS. It is very difficult for me to answer. We are frequently asked that question. And the only thing I can say is, as I mentioned earlier, that we have 10,000 pending cases to investigate at this time. And obviously we will never be able to get to all of them. So we find of the cases that we do investigate, that the percentage is running 60 to 70 percent fraud in the cases we do investigate.

The CHAIRMAN. Now, as I understand it, you have made repeated recommendations to the Food and Nutrition Service to implement this sort of thing nationwide.

What sort of response do you get from them?

Mr. RICHARDS. Well, we have had very little response.

The CHAIRMAN. Or interest?

Mr. RICHARDS. No; I cannot say that. They are interested to the point that periodically somebody from USDA visits our office and asks how we are working the fraud, what our procedures are. We provide the manuals and everything we have; and we point out the problems that we find with the Federal regulations. And we get very little response. But you know, we are talking to a different group every couple of months from the Federal Government, asking us what is wrong. But we get no feedback.

The CHAIRMAN. The point is, they come down and ask but they don't do anything about it?

Mr. RICHARDS. Yes; that is exactly right.

The CHAIRMAN. Well, they might as well not even bother asking, somebody might say.

And this is the problem I have had as a Senator. The Federal employees charged with the operation of the program have done everything in the world to thwart any cleanup of the program. They say, "Oh, we have done this and we have done that." But to the contrary, really.

I remember one day, people from the FNS rushing on out of here just like the building was on fire when an amendment had passed that I offered. And I found out later they went back to their offices, got on the WATTS line, which is paid for by the taxpayers, and they engineered and orchestrated a great national protest against Senator Helms. And they made all sorts of allegations, that Senator Helms wanted to take food out of the mouths of the needy, of the hungry.

And that is a falsehood.

If anything has been clear from the very beginning, it is that we want to do more for the truly needy and eliminate these ripoff artists. But trying to get a handle on this thing up to now has been virtually impossible. I have not been successful.

Oh, we have made some inroads. I have saved $1 billion here and $1 billion there by my interest. But I do hope that the new administration and the new Secretary of Agriculture and the new people operating FNS are going to bear in mind that it is the truly needy of this country that this program was designed to help, not these people who walk in and say the Government owes me a living. Now, on page 5, you state, "The present regulations prohibit verification of facts stated to food stamp eligibility workers. Would you elaborate on what types of Federal limitations impede eligibility determination?

Mr. RICHARDS. Senator, if you don't mind, I will ask Jim.

Mr. GRAHAM. Senator, a general statement to that effect would be when we first started our investigations in food stamp fraud activities in 1974, the program struck us as a verification system more than it does now. Verifications that were everyday and commonplace for the food stamp certification worker then, Senator, don't exist now.

For instance, the regulations do say now that we are required to verify income and various other points. But further regulations make it very difficult to do that, and especially in light of the fact that before a verification can take place, the documentation of the need for that verification has to be included in that case folder. It is not so much that the Federal regulations say, "You will not verify," they say, "You will verify, but also you must do this and this and this to substantiate your need for the verification."

For example, the illegal alien problem, verification of that is not a question for the caseworkers unless there is something on the application itself or something during the interview that gives that caseworker a suspicion this is an illegal alien.

Simply the fact that the recipient is living on the Texas border of Mexico, comes in and does not speak English and is maybe driving a car with Mexican license plates and can't give you a very good answer as to what other types of aid he had applied for, and this kind of thing, but as long as that recipient does not put down, “I am an illegal alien," then that cannot become a question of certification for the worker.

The CHAIRMAN. You have got to be kidding.

Mr. GRAHAM. No, sir.

The CHAIRMAN. Well, my time is up.

Let me just ask you one final question.

Now, I do a lot of advocating myself, and I have not only respect for advocacy groups and their right to be heard, but for people like yourself. And in your case, what you are trying to do is ferret out abuse and fraud; is that correct?

Mr. RICHARDS. That is correct.

The CHAIRMAN. Now, what sort of confrontations or difficulties have you had with any advocacy groups?

Mr. RICHARDS. We have not had real confrontations. In fact, we were surprised back in the beginning when our division first started its fraud operation with something that happened.

I personally made a meeting with a national welfare rights organization, and those people seemed to support what we were doing. The CHAIRMAN. That is good.

Mr. RICHARDS. They indicated they were no more for fraud in the program than we were.

The CHAIRMAN. That is certainly good.

Mr. RICHARDS. We had some very mild criticism from some legal aid people in Texas; you know, recommending things, not liking to see us take our cases into criminal prosecution rather than going to some administrative fraud hearing; well, handling the cases administratively rather than going the prosecution route. We have had these types of things. But we have had no real major problems. The CHAIRMAN. That is very good.

Thank you.

Senator Pryor?

Senator PRYOR. I just have a couple of questions.

Mr. Richards, what Federal agencies do you have to deal with in your fraud investigations? You have already mentioned the Immigration Service and the Food and Nutrition Service of the USDA. Are there other Federal entities that you have to deal with on a daily basis to administer your charge?

Mr. RICHARDS. Yes, sir. We are dealing with the Social Security Administration.

Senator PRYOR. What about the Department of Health and Human Services?

Mr. RICHARDS. Yes, sir.

Senator PRYOR. What about the Department of Commerce?

Mr. RICHARDS. Not to my knowledge. Some of our investigators may have had some dealings that I would not know of.

Senator PRYOR. What about the Department of Justice?

Mr. RICHARDS. Yes, sir; we do.

Senator PRYOR. And are there other areas within the USDA you have to deal with on a daily basis, not only in the administration of the program but also finding the fraud and abuse?

Mr. RICHARDS. Most of our direct and close working relationships with USDA have been with the Office of Investigations.

Senator PRYOR. On the State level, in the State of Texas, how many State or local agencies are you having to deal with? What I am trying to determine very simply is not only the size of the bureaucracy, but the cost of the bureaucracy. I am trying to come to grips with this issue. Would you help us?

Mr. RICHARDS. Yes, sir.

We deal probably with 75 percent of all the State agencies, such as the Texas Department of Public Safety, the Texas Employment Commission, the attorney general's office.

Senator PRYOR. Is this in the administration of the program or the fraud finding?

Mr. RICHARDS. No, sir. It is in the fraud investigations.

Senator PRYOR. Do you have any feelings that the error rate or the abuse rate might be less if the program were a State-administered program?

Mr. RICHARDS. That is a State-administered program. Senator PRYOR. I understand the State is interested in regulations set in Washington. If the State set the eligibility requirements, would you have more or less abuse in the system?

Mr. RICHARDS. Senator, I don't feel really qualified to try to answer that. There could be benefits both ways, I think.