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Updated: Wednesday, 16 May 2012, 11:06 PM EDT
Published : Wednesday, 16 May 2012, 11:06 PM EDT
INDIANAPOLIS (WISH) - Reaction is building at the Indiana Statehouse to an I-Team 8 investigation that showed your tax dollars being withdrawn as cash in liquor stores, strip clubs and casinos across the state and even across the country. One lawmaker who saw what I-Team 8 uncovered is now demanding immediate action and an investigation into why one potential fix to the problem is being ignored.
Following more than four months of research, I-Team 8 unveiled its findings Tuesday . In total, our investigation found at least $120,000 in questionable withdrawals made by Indiana welfare recipients. At least $68,000 of that money was withdrawn from locations currently banned under Indiana law.
The money comes from a federally funded program called Temporary Assistance for Needy Families, or TANF, that is administered by the states. Each month, the cash is loaded onto electronic benefit transfer (EBT) cards, also known as Hoosier Works cards. Families who qualify under the program can then use the cards either as debit cards at a point of sale or as direct withdrawal cards at any ATM.
The money is supposed to help struggling families get back on their feet. Indiana law also makes it a crime to withdraw or spend TANF money at bars, clubs, liquor stores, casinos, horse racing tracks and gun shops. Strip clubs will soon be added to that list.
But I-Team 8 found that didn’t stop thousands of withdrawals from being made last year in the banned locations. Hundreds of additional withdrawals were made at places not currently banned under state law, like tobacco stores and resorts. Our research also showed Hoosier Works cards used in 39 different states in 2011, including Hawaii, as well as at least two withdrawals in Puerto Rico.
But the state of Indiana doesn’t track what that money was spent on - only where it was withdrawn.
NO SIGN OF SIGNS
To cover that, state law requires ATMs at those "banned" locations in Indiana to have a sign posted no less than 18 inches away, warning TANF recipients that withdrawing cash there is illegal. But I-Team 8 found no sign of those signs in all eight Indianapolis area liquor stores we checked.
“In those specific locations, it's up to that vendor and that ATM owner to have those signs posted,” said Adrienne Shields, deputy director for Indiana’s Family and Social Services Division of Family Resources, when informed what I-Team 8 had found. “If we find a client has withdrawn cash from one of the prohibited locations, we will send that information to our Bureau of Investigative team. The team will then go out to the specific location and see if there is a sign posted at that ATM.”
Shields says both the store and the ATM vendor can be charged with a Class C misdemeanor, punishable by up to a $500 fine and 60 days in jail, if the signs are not posted as required by law.
But when I-Team 8 asked how many stores, ATM vendors or banks have been charged or convicted in connection with the TANF signs, Shields said FSSA doesn’t track that information.
“It's not up to FSSA to charge a vendor or a client. That's up to the local prosecutor,” she said.
I-Team 8 found some store owners may be unaware of their responsibilities.
“I was not aware of that law,” Indiana Beverage Retailers Association President John Livengood told I-Team 8, when asked about new restrictions on TANF withdrawals in liquor stores. “We will definitely inform our members about it. I know there have been some questions about who owns the [ATM] machines, because it’s usually not the retailer.”
But Shields said anyone receiving TANF funding knows where the money cannot be withdrawn under state law. TANF recipients can also be charged with a Class C misdemeanor for withdrawing TANF funds from a location banned under state law.
“Every TANF member is notified that it is illegal to withdraw TANF benefits from specific locations. They know [they’re breaking the law], that is correct,” Shields said.
Again, Shields said she did not know how many may have been charged or convicted.
“I do not have that data,” she said.
I-Team 8 requested additional information last week on charges filed in connection with all forms of welfare fraud, but has not yet received that data from the state.
“This is just horrible,” said Sen. Patricia Miller, R-Indianapolis, when shown what I-Team 8’s investigation uncovered. Miller sponsored Indiana Senate Enrolled Act 13, which will make TANF withdrawals from strip clubs illegal starting July 1.
“This is very disappointing. [It’s] disappointing to say the least, actually. It's very disappointing to find out that TANF recipients are using the funds apparently for other reasons beyond the reasons it's provided to them, which is basic needs to their family,” she said.
Asked if research prior to the passage of SEA 13 had suggested that such withdrawals were a problem, Miller shook her head.
“No, I did not [know they were],” she said. “And there was no evidence during committee hearings that it
did run that deep. If it had, I suspect the bill would have been much stronger. When this bill was presented, none of the evidence that you have shared was brought forward.”
Miller said her focus now is on stopping illegal withdrawals before they happen.
“All the evidence you have found must be investigated and must stop,” she said. “It is assistance for families. That's where the money needs to go. And we need to stop any amount of fraud. To me, that’s what this is: fraud. With the technology we have today, there have to be ways to stop that and address it. And to me, the simplest seems to be to just be able to block it.”
I-Team 8 asked Shields whether Indiana could block TANF funds from being withdrawn in places where that practice is banned under state law.
“No, they're not blocked currently,” she replied.
Asked again if that was an option, Shields replied: “I'm not certain.”
Later in our interview, Shields revised that opinion.
“[Blocking is] not in place in any state that I'm aware of,” she said.
But I-Team 8 found several banking industry experts who disagree.
"We can do that through a software upgrade," said Steve Gernes, vice president of Minneapolis-based Elan Financial Services. His company is often contracted by outside ATM vendors across the country.
"We got an order last week for eight ATMs at a casino in California,” Gernes continued. “We were able to block a batch of TANF cards from being used in them that same day. Usually they wait until they find a problem or an illegal use before asking for a batch of cards to be blocked."
“There are two ways to do it,” said another Chicago-based ATM industry expert, who asked not to be identified in our story. “The most common way is to block specific ATM terminals from accepting an EBT card by blocking what’s called the BIN number - the first six digits of a specific card or a batch of cards. And you can do that to all 54 programs - 50 states and U.S. territories. The catch is that has to be requested by the store owners. The owner calls up their ATM vendor and says, ‘Take away these BIN numbers from my ATM.’”
Experts say it would be very difficult to install information into a TANF cards’ magnetic strip that would block it from being used in certain ATMs. But our expert from Chicago said there is a way for the state to block the numbers itself.
“You can, alternatively, get a list of ATM terminals that are not supposed to be used, then go to each of the ATMs to get its terminal number. That’s much more labor-intensive, difficult and costly, and we rarely see that used,” the expert told I-Team 8 by phone.
According to FSSA Communications Director Neal Moore, a recent law in the xtate of Washington requires ATM owners to “modify machine coding in a way that disables use of TANF cards at ATMs in prohibited locations.”
“This coding is not accomplished or monitored by the state agency responsible for temporary cash benefits. Our understanding is California has adopted a similar approach,” Moore wrote in an email to I-Team 8.
Shields said there is another major barrier that makes blocking large numbers of ATMs extremely challenging.
BLOCKS TO BLOCKING
“Part of the problem is looking at the third-party vendors that own ATM machines,” Shields said. “That's primarily most of the ATMs that are moving. And it would be a matter of tracking those locations and ensuring there are blocks on those machines.”
For example, Shields said, an ATM inside a location banned under SEA 13 could be moved to one that isn’t banned under the law, either for a specific event or permanently. If TANF withdrawals were to be blocked in one location, a technician could be required to visit each specific ATM that has moved to ensure it blocks or unblocks the proper cards.
“It's a larger issue than simply blocking a few ATMs,” she said.
“ATMs move all the time,” agreed our expert from Chicago. “And the ID number stays with the ATM, not the location.”
Soon, states across the country may not have a choice but to implement some sort of blocking program for TANF funds.
HR 3630 was passed by Congress in February, tucked inside what’s become known as the Middle Class Tax Relief and Job Creation Act of 2012. It requires states to “maintain policies and practices as necessary" to keep TANF cards from being used at ATMs in liquor stores, casinos and strip clubs. States that fail to employ such policies by 2014 will face a 5 percent cut in annual TANF funding from the federal government.
But the federal law doesn't specifically contain the word "block.”
“The industry is talking with the U.S. Health and Human Services Department to hammer out what [policies and practices] actually means. We expect more clarification later this summer,” our Chicago expert said.
“There are discussions taking place with our vendors on how Indiana can implement this, using technology,” Shields said. “If there are requirements that require us to implement technology to block withdrawals, we will
definitely do that.”
But pressed about whether plans exist now to implement any sort of block on illegal TANF transactions, Shields shook her head.
“Not at this point,” she said.
A NEW CALL FOR ACTION
For Miller, waiting for clarification on federal laws isn’t good enough.
“If we have a problem, we need to address it now,” she told I-Team 8.
In response to I-Team 8’s findings, Miller wrote this letter addressed to Senate President Pro Tempore David Long, R-Fort Wayne, House Speaker Brian Bosma, R-Indianapolis, and Legislative Services Agency Director Jack Ross, asking for an investigation to be launched into what we uncovered. The letter also asks the Legislative Council to assign the Health Finance Commission responsibility for determining if and how software might be used to block TANF cards from being used in ATMs in locations banned by state law.
“It is very much a concern. And something that - in my opinion - has to stop. So, if our laws and the law we just passed is not strong enough, then I believe we need to go back and make the standards even tougher next year,” Miller said.
Still, even without blocking in place, Shields said the state is tracking allegedly illegal withdrawals and can get money back.
“If there are criminal charges, that's what we will ask for: repayment to the program,” Shields said.
And Shields says those convicted of withdrawing TANF funding from illegal locations can be stopped.
“If we believe there is inappropriate use, we do have the right to put a protective payee in place if we believe that benefits are not being used appropriately,” she said.
When asked how often that process is used, Shields said she didn’t have a concrete number.
“The frequency really depends,” she said. “Right now, we are working with our caseworkers in the local offices with training to ensure benefits are being used appropriately. If we refer a case over to [the Bureau of Investigation] and they find we have an individual that does not have the mental ability to use TANF benefits appropriately, we will assign a protective payee.”
Exactly how many TANF recipients have been charged in connection with allegedly illegal withdrawals, however, remains unclear.
“FSSA is aware of Sen. Miller’s request to Health Finance,” Moore wrote to I-Team 8. “We look forward to discussing this topic during summer study committee, and considering how other states manage their programs and best practices.”