3OYS: Mothers suspected of 'milking' system, cashing in on govt. baby formula

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By Tami Hoey By Tami Hoey

PHOENIX  -- 40,000 babies in Arizona supposedly got baby formula last month courtesy of the government. But baby formula is a big ticket item on the black market, and It brings in fast cash.

But as 3TV discovered, some of the suspects are mothers. The deals go down in broad daylight, and often in public paces.
UNDERCOVER: "So you want ten for a can?"
SELLER: "Yeah."

According to Darin Fredrickson, who works organized retail crime cases with Subrosa Investigations, the item in high demand on the black market is baby formula. "We noticed over the months that there were repeat sellers of baby formula that appear to be getting it through the WIC program," says Fredrickson.

He says it's common for financially strapped families to buy baby formula using government issued WIC checks and then sell can after can. "A large majority of them are all WIC re-sellers, WIC recipients that are just re-selling it," he says. "It's easy money."

To show just how easy it is, 3 On Your Side went undercover. Our cameras caught seller after seller not only peddling baby formula, but also bragging about getting more.

UNDERCOVER: "I'm curious, though. Do you get a lot of it? Because its expensive."
SELLER: "Yeah, she gets it all the time. She has other ones too."
SELLER: "She buys them from, my sister gets them from somewhere, I don't even know, but her and her sister got something going on. But she gets them all the time."

This woman even boasts that she gets formula for free.

UNDERCOVER: "Can I get more at some point?"
SELLER: "And I have a lot. I have coupons so I get a bunch of it for free."  

3TV brought our undercover video to Karen Sell, the director of WIC. "It is frustrating but it is something we take very seriously," she says.

So seriously, the Department of Health Services allocates hundreds of thousands of dollars to investigate fraud and even conducts extensive surveillance operations. But Sell admits, catching offenders isn't easy. "Investigating anything is extremely difficult. You need to invest time and resources to determine that you are correct," she says.

What's worse, Sell believes the internet is fueling the black market demand for baby formula. Sell explains, "Unfortunately, when you go on web-based sites, that's the first thing that you see."

Fredrickson agrees, "All you have to do is go through Craigslist, Facebook, Swip Swap and other online sites and there are offers to buy it all over those sites. There are many offers to sell it."

Fredrickson cautions that online postings like "My baby is allergic" or "My baby throws this one up" could actually be parents abusing the system. "When you see half of retail value it's either stolen or it's WIC formula."

As for the black market sales that are going on, Fredrickson is frustrated. "It's the taxpayers who are paying for it," he says.

And until buyers are caught cheating the system, Fredrickson is confident, deals like these will continue to take place.

UNDERCOVER: "I'll just remember in case I need more."
SELLER: "Yeah, ok, you can save my number."
UNDERCOVER: "Ok, thanks.

The Director at WIC cautions against buying baby formula from anyone who is not a distributor, as there is no quality guarantee.

If you know of someone committing fraud, you can report it via the internet or call the USDA's Office of Inspector General at (800) 424-9121.

You can also email: usda.hotline@oig.usda.gov,  or send a letter to USDA, OFFICE OF INSPECTOR GENERAL, PO BOX 23399, WASHINGTON, DC 20026.