Two Markets Charged in Food Stamp Fraud : Indictments: Owners of small groceries are accused of buying and redeeming $20 million in coupons in the largest such case ever in L.A. County.

In what is being billed as the largest food stamp fraud case in Southland history, the owners of two small neighborhood grocery markets near downtown Los Angeles were charged Tuesday with illegal trafficking in more than $20 million worth of food stamps in the last four years.

Federal grand jury indictments returned Tuesday accuse the proprietors of David’s Produce and Pereira Produce with unlawfully buying food stamp coupons for cash. The grocery owners allegedly bought the coupons for as little as 50% of their face value and redeemed them with the federal government for full cash value.

Charged in a 37-count indictment were South Gate residents Evaristo Pereira, 56, and his wife, Maria Elena, 34, owners of Pereira Produce. A 27-count indictment was returned against Anaheim residents David Rodriguez, 56, his wife, Juana, 44, and their son Eduardo, 25, who operated David’s Produce.

“It is very disheartening to encounter abuses of the federal food stamp program,” U.S. Atty. Terree A. Bowers said. “When individuals corruptly manipulate the program by paying cash for food stamps, they undermine all of the beneficial aspects of the program and inevitably deprive children of badly needed wholesome meals.”

All the defendants, except for Eduardo Rodriguez, who is still being sought, were in custody Tuesday, according to Assistant U.S. Atty. Steven M. Arkow. If convicted, they face maximum penalties of five years in prison and $250,000 on each count, prosecutors said.

“This is the largest food stamp fraud case indictment in Los Angeles County in history,” Arkow said. “These stores were among the highest redeemers of food stamp coupons in all of Los Angeles County.”

According to U.S. Department of Agriculture statistics, the two neighborhood groceries redeemed more food stamps in 1991 than all but one major Los Angeles grocery chain. Such figures made federal officials suspicious and helped trigger the investigation that resulted in the indictments, authorities said.

According to the indictment, confidential informants and federal investigators sold food stamps in quantities ranging from $60 to $8,000 at a time to the grocery store owners for cash.

Arkow said he could not comment “on who else other than the undercover buyers was cashing the food stamps.” He did say, however, that a typical eligible food stamp recipient receives no more than about $200 in coupons a month, Arkow said.

The grocery owners, according to the indictments, allegedly made profits of up to 50% on each transaction.

On Feb. 10, 1992, for example, Evaristo Pereira allegedly bought $290 worth of food stamp coupons for $145 from a confidential informant. Two months later, the indictment states, Pereira bought $7,500 of food stamps from an undercover Department of Agriculture agent for $3,750.

The grocery owners sought to hide their cash purchases of food stamps by evading federal currency transaction reporting requirements, according to the indictment. The defendants allegedly made repeated cash withdrawals in amounts of just under $10,001 to avoid triggering their banks’ obligations to file transaction reports with the federal government.

Between 1989 and 1992, the Pereiras made 516 deposits of food stamp coupons worth $11.3 million into federal redemption accounts. The redemptions increased from $7,315 in 1989 to $8.2 million last year.

The Pereira indictment cites seven illegal purchases for $11,661 of food stamps worth $23,600.

The Rodriquez indictment cites the purchases of $10,500 worth of food stamps for $5,250 last year. According to the court papers, David and Juana Rodriguez made 325 deposits of food stamp coupons valued at $9.4 million in their federal redemption account between September, 1991, and January, 1993.

A federal study of the $13-billion food stamp program in 1989 showed that an estimated$372 million in coupons are lost nationally each year to fraud, theft and system inefficiencies.