Taxpayers fund special, unusual perks for Memphis welfare recipients

August 1, 2012 08:44

[P]eople on government assistance attended large-scale Broadway shows and partied at one of the city’s premiere dance clubs. Welfare recipients also bought luxury items at stores such as Best Buy and Dillards. They took advantage of Memphis hotel rooms. And when they traveled away from home, they acquired Greyhound bus tickets.


By CHRISTOPHER BUTLER at Tennessee Watchdog


According to state records, Memphis residents living on government assistance through the state’s welfare program bought tickets to Elvis Presley’s home, Graceland, courtesy of taxpayers.

The welfare recipients took advantage of other perks, as well — plenty more.

With taxpayer support, people on government assistance attended large-scale Broadway shows and partied at one of the city’s premiere dance clubs.

Welfare recipients also bought luxury items at stores such as Best Buy and Dillards.

They took advantage of Memphis hotel rooms.

And when they traveled away from home, they acquired Greyhound bus tickets.

Ask Preston Lamm, owner of the Rum Boogie Café in Memphis if his business accepts welfare as payment, and he is quick to say no.

“In 27 years, this business has never once accepted food stamps, and it never will,” Lamm said.

Technically, he is correct. His business has never taken food stamps — but it has accepted the literal equivalent — drawn from what is known as a government-issued Electronic Benefit Transfer (EBT) card.

On Nov. 2 of last year, someone entered Lamm’s establishment to make a $140 transaction with this type of card.

Lamm was caught unaware when Tennessee Watchdog informed him that state records show that the transaction occurred.

His immediate reaction — it was all “one big mistake.”

“If these benefits could be used for food, then I suppose this person could have bought a hamburger. That is food, after all, and that makes up 50 percent of our sales, so I don’t know. The truth of the matter is that I’ve never heard of an EBT card before you contacted me, so that should tell you a lot about whether we even have an official policy on accepting them.”

Lamm is not the only business owner in Memphis who had yet to realize his establishment accepts welfare.

Meanwhile, another Memphis area business owner said his employees have a hard time distinguishing between an EBT card and a regular credit or debit card.

Now, a select group of welfare recipients may use their EBT benefits to withdraw cash from ATM machines, banks, cash checking institutions, and even liquor stores. One EBT recipient made a withdrawal of $790 at a Memphis liquor store. Tennessee Department of Health and Human Services (DHS) officials, who administer the program, cannot trace what recipients do with that cash. Recipients are free to use the money however they please, completely unencumbered by any government-mandated conditions or restraints.

Tennessee Watchdog examined every EBT card transaction in the Memphis area between October and December of last year — almost 140,000 transactions in all (complete listings are available here and here). While a majority of the transactions appears legitimate (at grocery and other stores selling essential living items), a significant number of other transactions appear questionable.


According to DHS, an EBT card can offer two different types of benefits, and

Senses Nightclub in Memphis (photo courtesy of FlyingDD)

recipients can qualify for one or sometimes both.

First, recipients must use their EBT food benefits portion for food products only, as was the case with the older, more traditional food coupons and paper checks. Participants in this plan can only make purchases with their EBT cards and state rules do not permit them to withdraw cash or receive cash back.

Secondly, certain EBT cardholders may at the same time participate in what is known as Families First, in compliance with the Federal Temporary Assistance for Needy Families Program (TANF). Families qualify if they have children and report severe financial problems within their households. They receive cash benefits and use them as they see fit. DHS officials limit benefits to 60 months (or five years), although DHS officials can extend those time limits.

In total, Tennessee spends $127 million annually on this program, approximately 16 percent of which comes from state tax dollars, with the federal government covering the remainder.

As this DHS video explains, if they wish, recipients may withdraw their entire balance from their cash benefits account, although some stores may limit the amount. That portion of the video addressed cash back withdrawals at grocery stores only, but, as Tennessee Watchdog discovered, transactions took place at plenty of other types of businesses. 


Among the most questionable purchases made with EBT cards during the last three months of 2011 include, but are not limited to:

  • Graceland’s ticket office — $80 (two transactions)
  • Wolfchase Mall — Almost $500  (four transactions)
  • Airport Inn Hotel — $100
  • United States Postal Service (USPS): $360 (two transactions)
  • Senses Nightclub — $60
  • Waffle House — $120
  • AutoZone — $600 (five transactions)
  • Southland Mall — $200
  • Orpheum Theater — $120
  • Best Buy — $60
  • Dillards — $100
  • United Parcel Service (UPS) — $80
  • Sears — $87


Graceland in Memphis (Photo by CHRISTOPHER BUTLER)

Sears spokesman Dennis Couchard confirmed that the store accepts EBT cards at all locations for cash back benefits only, as long as customers make a purchase.

Many other businesses that accepted these payments did not respond to requests for comment regarding their EBT card policies (whether for food-only benefits or for cash benefits), but a few (whose policies are less clear) responded with the following statements:

  • Wolfchase Mall spokeswoman Lexi Harris:  “The decision to accept EBT cards would rest in the policies of the individual retailer and not the mall.”
  • Greyhound spokesman Tim Stokes:  “Greyhound takes all major credit cards. It is not our practice to take EBT’s but I am not sure what an EBT (card) from the state of Tennessee would look like. If the card is set up with a major bank and can be used as a debit or credit card then there is a possibility it could be used to purchase a bus ticket.” – Tim Stokes
  • USPS spokesman David Walton: “We do not accept EBT cards, and we are not sure how someone was able to use one at one of our postal offices. We do give cash back to customers, but only if they make a purchase. Obviously, our machines took the card on those transactions you told us about.”
  • UPS spokeswoman Susan Rosenberg:  “If the EBT card requires a pin in order to access it then we wouldn’t accept it, but many EBT cards are issued by banks and we would accept those.”

Tennessee Watchdog surprised yet another business owner with news that his establishment accepted an EBT card.

“We do not accept EBT cards. We only accept cash and credit cards. As far as what you have just told me, how is that even possible? I didn’t even know that people could do that. I’ve certainly never heard of it happening before,” said Airport Inn Hotel owner Harry Singh.

Singh pondered whether the EBT transaction is possibly instead the result of someone’s EBT cash withdrawal using an ATM machine in the hotel’s front lobby.

Tennessee Watchdogasked John Taylor, an account executive with the

This transaction shows that someone used an EBT card to purchase $60 worth of tickets at Graceland. The physical address corresponds with the address of Graceland’s ticket office.

Memphis-based ATM Central Transactions, how a cash withdrawal from an ATM machine would appear on a financial statement.

Would an ATM withdrawal appear as a transaction at the business that houses the ATM or would it simply list the withdrawal as coming from an ATM only?

“It’s likely that this is not a case of people simply withdrawing money from an ATM machine in front of or inside a business. As it would on a bank statement, an ATM withdrawal would be documented as just that — an ATM withdrawal,” Taylor said.

Overall, Tennessee Watchdog found that some of the questionable transactions in Memphis that occurred late last year came out even, in amounts of $100, $160, or $220, for instance.

Those even-numbered transactions probably occurred because the customer requested cash back, Taylor said.

“Take the Best Buy transaction, for example (recorded as an even $60). Someone could have paid, say, $42.50 or so for an item (with their EBT card) and requested $17.50 in cash back, thus making it an even transaction.”

As previously noted in the DHS video, EBT recipients may withdraw cash benefits from a grocery store without making a purchase. Meanwhile, an employee of the Memphis Best Buy confirmed that the store offers cash back transactions, but only to customers who purchase items inside the store.


State records from the final three months of 2011 also reveal massive numbers of EBT cash withdrawals from Memphis ATM machines.

The records also show several EBT cash withdrawals from Memphis area businesses that specialize in cashing checks and debit and credit cards.

A business called Cash America completed many of those withdrawals. Attempts to reach Cash America officials at their corporate offices in Dallas were unsuccessful.

In all, records show individual EBT card recipients used their cash benefits to withdraw amounts sometimes as high as $1,000 from ATM machines, $946 from cash checking businesses, and $500 from banks.

Recipients also made purchases as high as $500 at gas station convenience stores. In one instance, Tennessee Watchdog found a $300 purchase at a Memphis Citgo convenience store that does not specialize primarily in groceries. An employee at that store said it does not offer cash back benefits but accepts an EBT card for food products only. Employees of a Memphis Exxon gas station and convenience store, where someone made a $400 EBT transaction, reported that it too does not give cash back benefits.  


Of the 140,000 EBT transactions examined (complete listings are available here and here), those that took place at liquor stores were too numerous to count. Many individual transactions exceeded $200 and, as previously noted, were sometimes as high as $790.

Without identifying its credentials Tennessee Watchdog contacted liquor stores and asked employees if it is OK to use an EBT card to purchase liquor. Clerks promptly said that they could not allow customers to buy liquor directly with an EBT card, but that the stores offered EBT cash checking services that allowed customers to withdraw money from their EBT card and purchase anything they desire.

“You can then buy liquor that way. Whatever you do with that cash is your own business,” one clerk said.

Tennessee Watchdog later contacted many of those businesses and asked to speak to their owners for on-the-record remarks. Only about half of the liquor storeowners listed as having accepted EBT transactions answered the phone.

This document shows that someone used an EBT card to make a $790 transaction at the Highway 51 Liquor Store in Memphis.

Those who did answer the phone all said the same thing — they never allow

This document shows that someone used an EBT card to make a $790 transaction at the Highway 51 Liquor Store in Memphis.

customers to purchase alcohol with the food benefits portion of an EBT card — and they have a strong incentive to say that. State officials will penalize any liquor storeowner caught making a sale involving an EBT (food benefits only) card. State officials, in contrast, do not penalize liquor storeowners who give cash back to customers who then use that money to buy alcohol.

Do customers withdraw cash benefits and immediately buy alcohol? Is the potential there?

Storeowners said customers generally come in to receive cash benefits from their EBT cards but do not buy alcohol — but exceptions exist.

“I’d say 99 out of 100 customers I get take the cash and leave. Every once in a while, someone will withdraw their cash benefits to buy alcohol,” said Harry Cardosi, owner of Uncle Harry’s liquor store in Memphis.

“These are just people who live in the neighborhood and want money off of their cards. Maybe they pay their rents with that money. I don’t know.”

Other businesses are nearby and offer the same cash checking services. Why Cardosi’s customers prefer his liquor business is unknown.

“Oh lord, there are grocery stores across the street from me. There are two more service stations within a block of me. They can get their EBT (cash benefits) at those places (if they want).”

Chris Flynch owns Louis Liquors, where the largest number of EBT transactions occurred. He said he trains his employees how to distinguish between an EBT card and a regular debit or credit card.

“They look just like credit cards. Our employees are trained well, though. We adhere to the law, and we don’t allow any liquor ring-ups. The honest liquor store guys don’t want trouble, so we play it strictly by the book.”

“To tell you the truth, though, I believe abuses go on in other liquor stores. Knowing this drives me crazy. There is no tracking what goes on.”

Many other transactions were made at F&G Liquor Store in Memphis. Owner Cory Minga said customers on EBT benefits flood his store on the first day of every new month.

“People come in here and ask if they can use their cards to buy liquor, but my machine would decline it. I didn’t know until I got this store that people on EBT get a food balance and a money balance at the same time — but if people are using their cash benefits, then I suppose it’s their money to do as they wish. You can rightfully say they are using government money to do that, though.”

“Unfortunately, there is no way to trace this (cash benefit) money.”


Penalties exist for people who participate in the TANF (cash benefits) program and abuse their benefits, said DHS spokeswoman Valisa Thompson.

“Given the limited resources, the (DHS) Department has maintained a primary focus on participant progress toward exiting the program. The Department imposes sanctions and terminates benefits with participants who are not in compliance with program components that will ultimately position them to no longer need or qualify for the program. The emphasis to date has been on moving participants off the program successfully,” Thompson said.

The Orpheum Theater in Memphis. (Photo courtesy of PHOTOBUCKET)

She also said that the recently passed Middle Class Tax Relief and Job Creation Act of 2012 is designed to prevent TANF recipients from abusing their benefits.

According to Thompson, the Act will prevent EBT transfers from taking place in liquor stores, casinos, and gaming and adult-oriented entertainment establishments after July 2014.

According to the information provided in the Act, EBT recipients could still use their TANF benefits at Best Buy, Graceland, nightclubs and make other non-essential transactions.

Because the states administer the program, several states have passed laws limiting the use of EBT cards to essential items. Thus far, 10 states have placed limitations on the types of purchases that can be made using EBT cards.

Until then, Dinga remains upset at the way the system works.

“It does piss me off that they (the recipients) are in here getting their money, and whatever they do with it is their business. They don’t buy liquor at my store, but there is always the potential for them to get cash benefits and buy liquor somewhere else,” he said.

Christopher Butler is the editor of Tennessee Watchdog and the Director of Government Accountability for the Beacon Center of Tennessee. Contact him at 

(EDITOR’S NOTE: Christina Weber contributed to the research of EBT transactions necessary for this story)

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• The cash benefits are conditional, as recipients must participate in a work-training and personal responsibility program.

• Thirty percent of those receiving the benefit are also employed and therefore are taxpayers. In these cases, the wages are not at a level whereby they no longer qualify for the benefit.

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