Investigators say they have busted food stamp scheme in Lawrence

The convenience stores were small operations in Lawrence that sold groceries and household items on such a modest scale that their checkout space was limited and there were no carriages available to customers.

But despite their unassuming appearance, investigators said four markets across Lawrence engaged in a roughly $2.5 million fraud by allegedly letting customers exchange their government-funded food stamp benefits for cash while the stores pocketed fees for the service.

Federal and local investigators Wednesday said they broke up the alleged schemes by raiding four stores and arresting six people, including the store owners.

“This is not a victimless crime,” Essex District Attorney Jonathan W. Blodgett said. “We all pay the price when the greedy few defraud the taxpayers out of scarce public resources that are meant to feed, house, and clothe our most needy residents.”

Investigators searched three stores owned by Haverhill resident Martin Santiago, 47, and arrested him, his nephew Eleazar Gonzalez, 22, and an employee, Jose Vargas, 40, according to Blodgett’s office.

Santiago owns Gil Supermarket/Noelia Market Inc., Santiago Convenience Store Inc., and El Leon Rojo Supermarket and Grocery Store, according to prosecutors.

Police also cracked down on another operation, searching Bonao Market and arrested its owner, Cristian Pena, 44, of Lawrence, prosecutors said. Two store employees, Esperenza Ortiz, 47, and Ramon Pena, 66, were also arrested.

Santiago, Cristian Pena, Ortiz, and Ramon Pena were charged with trafficking food stamp benefits, larceny over $250, conspiracy to commit larceny, and money laundering, prosecutors said.

Cristian Pena and Ramon Pena, who are related, also face firearm charges.

Two men tied to Santiago — Gonzalez and Vargas — were charged with conspiracy to commit larceny, prosecutors said.

All six people pleaded not guilty at their arraignments Wednesday in Lawrence District Court.

Judge Holly Broadbent set bail at $500,000 for Santiago and $250,000 for Cristian Pena, said Carrie Kimball Monahan, a Blodgett spokeswoman. Bail for Ramon Pena and Ortiz was set at $50,000 and $25,000, respectively, she said.

Gonazalez and Vargas were freed on personal recognizance.

Federal investigators first learned of the possible fraud in Lawrence in 2012, according to the US Department of Agriculture.

During the investigation, authorities conducted video surveillance and made 75 undercover purchases in which they sought cash in exchange for benefits from the Supplemental Nutrition Assistance Program.

The stores sometimes deducted as much as $162 in benefits from government-issued debit cards, and then gave a portion of that sum to the customer and kept the rest, they said.

Investigators also compared the food stamp business at the targeted stores to legal transactions at a nearby Demoulas Supermarket store. Even though that store is larger, it recorded a smaller share of customers making food stamp transactions over $100 than the raided stores, investigators said.