Denver Post
written by Jeremy Jojola
Tuesday February 28, 2012
Debit cards issued to provide assistance to welfare recipients were used to withdraw cash at ATMs in strip clubs, casinos, bingo halls and amusement parks, a 9News investigation found.
As a result, more than $1 million in welfare funds goes to ATM owners and banks through transaction fees every year.
"When you see the type of obvious abuses that you've shown, it says there are people on welfare that should not be," said Jon Caldara of the conservative watchdog group Independence Institute.
The 9News investigation included the review of 222,000 transactions involving Colorado Quest cards, the state-issued debit cards welfare recipients use to access cash at ATMs. The transactions occurred during a six-month period in 2011 involving a total of $8.1 million in ATM withdrawals.
While state law bans welfare transactions at liquor stores, casinos and bingo halls, it does not at strip clubs.
But the 9News investigation found numerous examples of cash withdrawals at businesses where transactions are banned — and numerous examples of high ATM fees ultimately paid by the state even where transactions are allowed.
For example, 9News calculated that more than $40,000 was withdrawn from ATMs in metro-area liquor stores between May 1 and Nov. 30.
"I think it's wrong," said Steve Ziporlin, who works at a grocery store near Josh Liquor. "The money is supposed to be used for groceries and sundries."
9News found numerous transactions at ATMs in casinos in Black Hawk.
"The state is giving them money, and to come up here and play with it, I think that's defeated them and their families," Pat Schmidt said as she left a casino. "It comes out of our pocket."
The 9News investigation also found transactions at Elitch Gardens, at Disneyland and Universal Studios in California, at a liquor store in Los Angeles, and at ATMs along the Las Vegas strip.
At strip clubs, where transactions are not banned by state law, 9News found numerous transactions, including 14 at Shotgun Willie's in Glendale for a combined amount of $1,500.
Taxpayers also covered the $6.50 ATM fee for each withdrawal.
Out of the 222,000 transactions reviewed by 9News, 80 percent occurred at ATMs that applied a fee to accounts, resulting in about $540,000 in fees.
The local banking industry says the fees are the cost of doing business.
"Annual maintenance on such a machine will be $12,000 to $15,000 per year. That's a lot of money that you have to recover," said Don Childears, president of the Colorado Bankers Association.
The Colorado Human Services Department began sending out updated fliers to welfare recipients to help them avoid surcharges on their accounts.
"The primary beneficiaries of these benefits are kids," said State Rep. Dan Pabon, D-Denver, who saw his bill killed in 2011 that would have strengthened laws against using the debit cards at strip clubs. "If there's money being pulled out at liquor stores and casinos, it makes you wonder if those benefits are going to the people that they should."
Other lawmakers said it's unfair to block welfare access at certain ATMs.
"If you place some of the limits you talk about, you place recipients at a further disadvantage," said state Sen. Betty Boyd, D-Lakewood. "Why is it that the 'haves' are always suspect of and stereotyping the 'have-nots'?"
Julie Kerksick of Colorado's Health and Human Services Department oversees the state's welfare programs. She said it's impossible to monitor every single welfare transaction but that her department is trying to curb the abuse.
"We have fewer than 1 percent of all transactions that are out of compliance," Kerksick said. "That tells me businesses are cooperating, but it also tells me that most individuals who are receiving these benefits are using them appropriately."
A new federal law signed by President Barack Obama on Wednesday will force states to ban all such transactions within the next two years or face losing federal funding.
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