CBS2 Investigates: Millions In LA County Welfare Money Traced To Casinos, Bars, Vacation Spots

LOS ANGELES (CBSLA.com) — Billions of taxpayer dollars are doled out for food stamps and welfare to help those unable to afford the basics. But what if that money was being spent on gambling, alcohol and vacations?

CBS2 investigative reporter David Goldstein traced millions of dollars in L.A. County welfare money to some exotic locations, including ATMs in casinos and bars and vacation spots like Hawaii and Puerto Rico.

Goldstein spoke with Whittier resident Lazette Letterman, who can only dream about going to those places.

"Can you afford to go to Hawaii?" Goldstein said.

"No," Letterman said.

The mother of six has a mental disability and receives taxpayer-funded food stamps and welfare to provide for her family. She said she can't afford luxuries or travel.

"I took the kids one time to Disneyland, one time because I can't afford it. That's been over three years. We can't even afford to do that – that's not right," Letterman said.

CBS2 obtained the database of L.A. County welfare recipients who use all of their money out of state. The  investigation turned up everything but the recipients' names. What they're doing is not illegal as long they still reside in the county. But the USDA uses this list as a tool to detect fraud.

CBS2 found those welfare recipients spent nearly $4.6 million spent out of state from January 2012 through July 2013, some of it withdrawn at ATMs in casinos in Anchorage, Alaska; Las Vegas,; Shreveport, La.; and Greenville, Miss. Taxpayer money also turned up in bars and liquor stores all across the nation.

The money comes through electronic benefit transfer cards, or EBTs,  which are re-loaded each month with the two most common forms of public assistance. The EBT card is an electronic version of food stamps, and there are strict rules on how the money can be spent. But general relief money can be turned into cash at most ATMs.

CBS2 traced it to more than 50 states.

During the 19 months in question, nearly $35,000 was spent in New York City, $15,000 in Miami, $4,600 in the Virgin Islands, $32,000 in Chicago and $12,000 in Hawaii.

But the most money traced to any one city was in Las Vegas. CBS2 found nearly one-third of all money spent out of state ended up in Sin City, ringing in at $1.5 million.

Goldstein found it withdrawn from ATMs at some very questionable locations.

One ATM doled out taxpayer cash during a withdrawal in June -- $362.50 with a $2.50 service charge – at the Rum Runner Lounge. Pool and alcohol seemed to be the big draw, although it does serve food.

Casinos were also popular. From a chain of small casinos called Dotty's to the Golden Nugget, nearly $6,000 was withdrawn from ATM's.

Of course, people can just go to the bank. More than $5,000 distributed from the ATM machines at a Wells Fargo in Las Vegas was taxpayer money.

The most egregious use of general relief money, however, was linked to an ATM in the Voodoo Tattoo Parlor. That's where CBS2 found a $203 withdrawal. Tattoos there start at $200 and the business only takes cash.

"Is there any reason why someone would come in here and use the ATM if not to get a tattoo? That's pretty much what it's there for," Goldstein asked.

"Yeah, to get a tattoo, I would say," a Voodoo Tattoo Parlor employee said.

"So someone used their LA County welfare card to get a tattoo?" Goldstein said.

"I didn't even know that was possible," the employee said.

The Las Vegas store did nothing wrong, but even the owner, Joe Cool, was upset with what happened.

"Does that upset you as a taxpayer?" Goldstein said.

"Absolutely it bothers me, because they keep raising our taxes," Cool said.

Goldstein spoke with Lashonda Diggs, who runs the L.A. County welfare program. She says her department investigates the same out-of-state data that CBS2 obtained, along with the recipients' names, to crack down on fraud.

"Is using general relief money for a tattoo, is that legal?" Goldstein said.

"It's legal, but I don't think it's the best use of county funds," she said.

"What do you say to taxpayers who are watching and see money spent in casinos, tattoo parlors, Hawaii, Virgin Islands? What do you say to these people?" Goldstein asked.

"I would say the department is doing its best to make sure we preserve the integrity of our program," Diggs said. "There is no justification for one of these electronic cards to be used at a tattoo parlor."

Rep. Ed Royce of Rowland Heights has been a critic of the welfare program. He says the state has been put on notice for the past two years about cracking down on fraud but hasn't done anything.

"Right now, with thousands of cases of abuse and no follow-up for the past two years, the word is getting out that you can get away with abusing the program," Royce said.

Not only can you get away with it, but CBS2 found you can get away to Las Vegas, and just about anywhere else.

CBS2 asked L.A. County to provide information on how many people have lost their benefits for misspending welfare money. It never responded.