Oregon welfare money being withdrawn at strip clubs, casinos

Oregon welfare money being withdrawn at strip clubs, casinos »Play Video
At least twice in the last year, people used welfare cards to withdraw money at this adult shop in Southeast Portland.

PORTLAND, Ore. - Last July, someone walked into the Fantasyland Adult Video store on Southeast Foster in Portland and used an Oregon Trail welfare debit card to withdraw $63 from the ATM inside.

Then in September, someone pulled $43 out of the same ATM.

The two transactions are just a sample of what KATU Investigators found when they examined six months of ATM transaction data provided to KATU by the Oregon Department of Human Services under a public records request.

The records reveal other troubling transactions at liquor stores, bars, tattoo parlors, casinos and strip clubs in Oregon.

“State law says cash assistance isn’t limited, that there’s no prohibition or restriction on how it’s used,” said Gene Evans, a DHS spokesman. “Under Oregon law it’s not technically fraud, but it’s waste and abuse of what the program is intended for, so yeah I think Oregonians are rightly concerned.”

The state’s Temporary Assistance to Needy Families (TANF) cash assistance program is meant for families with children to spend on critical items like rent and diapers. Though it uses the same Oregon Trail debit card as the food stamp program, the TANF cash is part of a different program.

Currently 37,337 Oregon families get cash assistance, with the average family receiving $506 per month.

The state pays out about $180 million each year, but state officials have no clear idea how much of the money is being spent at adult businesses. That’s because the state has targeted all of its fraud investigative efforts on the front end – making sure people who are not eligible to receive benefits do not get in the program.

That is why KATU On Your Side Investigators found questionable transactions over and over again while reviewing records.

$201.25 was withdrawn from an ATM at the Tigard Liquor Store. In Southeast Portland, we found 12 withdrawals from the ATM at the Mystic Strip Club for a total of $888.

The questionable use of tax money is not limited to the Portland metro area. The records reveal $202 was withdrawn twice from the ATM inside the tavern in the small town of Donald.

$121.95 was withdrawn at Lifetime Tattoos in Springfield, and $580 from the ATM at nearby Lucky Lil’s Casino.

We also found the Oregon Trail card being used all over the country, especially in California, were it has been used hundreds of times at liquor stores.

In Las Vegas, we found $102 withdrawn at the Poker Palace casino.

“Oregonians have the right to expect that when someone is getting state assistance that they're using it for what it was intended for. The temporary assistance plan is meant for people in extreme poverty," said Evans.

Under a new federal law, states have until February 2014 to crack down on welfare card transactions at adult businesses. 

Oregon is just beginning the process and hadn’t reviewed the data on ATM transactions until KATU News requested it.

Washington State is way ahead of Oregon, having already passed several laws to crack down.  Adult businesses have been told to program their ATMs so they do not accept Washington’s Quest card, which is similar to the Oregon Trail card.

As of January 1, 2012 any adult business caught allowing those transactions can lose their business or liquor license.

The On Your Side Investigators wanted to know how Washington’s new law is working. 

We requested ATM transaction data from February, which reveals ATM withdrawals still being made at adult establishments.

There is a transaction at a Seattle strip club and another showing the Washington state welfare card used at a strip club in Salem.

There are also withdrawals at tobacco stores and at bars all over the state, including in Clark County.

But it turns out the money taken out at those bars is perfectly legal. That's because the new Washington law only cracks down on businesses with specific licenses for “nightclubs” and “taverns”. 

The bars on the list have a different kind of license, meant for businesses that sell food as well.

One of those withdrawals happened in February at the Atrium Lounge in downtown Vancouver. It was a legal withdrawal.

“To be honest it bothers me,” said owner Pete Johnson. “It might be a couple of dollars in my pocket but I'm not ok with that money coming from where it's coming from to go to us.”

A Washington state report from 2010 showed 13,337 welfare recipients withdrew $1,697,519 from ATMs at casinos.

KATU’s review of Oregon transactions shows $5,505 in withdrawals at the Wildhorse Resort and Casino in Pendleton, and $15,544 at Spirit Mountain Casino in Grand Ronde.

Oregon's preliminary analysis, which Evans admits was not in-depth, puts questionable withdrawals at a much lower level than Washington, about $100-thousand a year.

"This is a tiny minority of people, but it doesn't make it ok,” said Evans.

It’s not known how much of the money being taken out at businesses meant for adults is actually being spent on questionable expenses.

For instance, casinos often have gas stations and mini-marts on the same property, which use the same address for billing. 

State regulators say it is possible a good portion of the money is being withdrawn at those other locations and is being spent on legitimate items like food and fuel.

Now armed with the new data and the new federal law looming, Oregon is promising to crack down like Washington is already trying to do. 

Washington regulators caution it is a difficult process coordinating with separate agencies to enforce the law. While one agency keeps the ATM data, separate agencies enforce liquor and gambling licenses.