Washington state slashes welfare fraud at strip clubs, casinos

By   /   March 4, 2013  /   News  /   4 Comments

Part 2 of 15 in the series Welfare Abuse
Could Washington's fraud monitoring program be a model for other states?

FRAUD: Could Washington’s fraud monitoring program be a model for other states?

By Shelby Sebens | Northwest Watchdog

PORTLAND –  In just seven months last year, 60 welfare recipients in Washington state withdrew government supplied cash at casinos and strip clubs.

To taxpayers, that’s 60 too many, but it’s a far cry from 2010 when, according to an investigation by King 5 , a Seattle based television station, 13,000 welfare recipients took out millions at casinos.

The investigation led to 2012 legislation that limits where welfare recipients can use Electronic Benefit Transfer Cards – also known as a Quest Card. It’s used like a debit card to purchase food items or access cash benefits.

The law also defined how people could spend the money.

A monitoring program set up to track possible Quest Card fraud, say officials with Washington’s Department of Social and Health Services, has led to  fewer welfare recipients using the money in places such as strip clubs and casinos.

“All we know is there is a significant downward trend in people using and misusing,” said Steve Lowe, senior director of Washington’s Office of Fraud and Accountability.

Responding to nationwide reports of similar abuses, Congress in February 2012 restricted the use of Temporary Assistance for Needy Families money at strip clubs, liquor stores and casinos. States, which often use TANF money to fund the EBT cards, must conform to the law by 2014.

They could look to Washington state as a model. Lowe said he has already received calls from two states.

“Other states that have not done it are looking at doing it,” Lowe said.

How it works in Washington

Washington officials decided to focus on businesses where the money was being misused. The new law requires strip clubs, casinos, tattoo parlors, liquor stores and other businesses to alter their ATMs and point-of-sale machines so they will not accept the Quest Cards. If the businesses don’t comply, they risk losing their license.

The state worked with agencies that license businesses, such as the gambling commission, and came to an agreement with the tribal casinos.

“Even without the enforcement hammer they are very cooperative,” Lowe said of the incentive for business to cooperate or lose their license. No businesses so far have lost their license for lack of cooperation.

The state set up a database using U.S. Postal Service address data to match clients’ cards to where they are being used.

Kathy Spears, DSHS media relations manager, said most businesses want to participate.

“It’s more of a society-wide issue, too,” she said. “Now the businesses are taking some responsibility for the use of state services. Now businesses have a stake in it. The community has a stake in it.”

The Glitches

But Washington’s program has hit some bumps, which shows monitoring and, in effect cutting down on the abuse, isn’t easy.

Strip clubs in Washington are not required to be licensed. So Lowe works with law enforcement and zoning officials to track them down and add them to a new database of locations. If you’re a strip club and in the database, state officials are going to ask you to upgrade your ATM . Though the clubs are often transient, the state has gotten a better handle on where they are — and the businesses are complying. It can also be difficult to determine whether clients are using their cards for the prohibited businesses, as ATMs may be near in an adjoining strip mall.

Shortly after Washington’s welfare fraud law passed, the state changed its liquor laws, going from state control to privately run.

“We’re struggling with that piece,” Lowe said.

Legislation is pending in the Washington Legislature to require that stores with sales mostly from liquor not accept Quest Cards. The bill includes an amendment that would prohibit the Q cards from being used to buy marijuana or paraphernalia, now that the drug is legal in Washington.

There is also no way to monitor how welfare recipients are spending their money. If a client buys something that’s on the prohibited list, say cigarettes or a lottery ticket, that can be only tracked by complaints. Businesses, by law, are not supposed to sell restricted items to Q card holders.

A cost-benefit analysis that shows the new law is paying off doesn’t exist. After King 5’s investigation, the state hired Lowe and six additional investigators to address fraud issues. Spears said the additional staff was for the entire OFA program, which goes beyond where the money for Quest Cards is spent. The state has 30 investigators.

Washington officials could not provide the cost of monitoring Quest Card use, but Lowe said it’s done with an existing staffer who also works on other projects.

The clients who abused the system last year get a stern warning and could face a minor civil infraction. They spent $1,860 at adult entertainment venues and $4,740 at gambling spots. Data is on a three-month lag, but officials say there were only five cases of abuse in November. OFA reported two clients using the cards at adult entertainment venues, and three at gambling establishments. But the actual amount is still being calculated.

Though fraud still exists and its unclear what’s happening at liquor stores, Washington officials are optimistic the program is paying off.

Lowe said each month the list of prohibited businesses where Q cards are getting swiped “gets smaller and smaller.”

Contact Shelby Sebens at [email protected], and follow her on Twitter @ShelbySebens. For more Northwest Watchdog updates, visit NWWatchdog on Facebook and Twitter.

Part of 15 in the series Welfare Abuse


Shelby formerly served as staff reporter for Watchdog.org.

  • All I really see is an attack on the poor, the state authorizes these businesses in the first place, anyway sad story, victory for the government only.

  • tom

    I don’t work all week so you can go to a strip club on my dime!

  • no but I worked for 18 years to have money the government would have to help me if and when I needed it …. so why can’t I do what I want with money that was mine if the government is going to give it back?

  • Serving the USA

    Quest should be used for basic necessities …. Vegetables/Rice/Meat/Bread/Milk. It was not created as income to live on from cradle to grave.
    Entitlement in this country is pathetic……………. and is only getting worse.