Michael Kehoe, of Merrick, charged in alleged $66M food stamp fraud scheme, federal prosecutors say

A Long Island man has been indicted in an alleged $66 million food stamp fraud scheme, one of the largest such frauds in U.S. history, federal prosecutors said.

Michael Kehoe, 46, of Merrick, was the alleged ringleader of the scheme, which prosecutors said began in 2019 when Kehoe orchestrated a plan to place 160 EBT terminals that process SNAP benefits — the Supplemental Nutrition Assistance Program, formerly known as food stamps — in stores in Manhattan, Brooklyn, Queens, the Bronx and Yonkers to the tune of more than $30 million.

Kehoe, who is the founder and president of a Long Island-based credit card and payment processing company, and his co-defendants allegedly submitted about 200 fraudulent applications to the USDA to obtain EBT terminals at unauthorized stores, including smoke shops, which allowed those retailers to redeem millions of dollars in unauthorized SNAP benefits, prosecutors said.

Kehoe's attorney, Brian J. Griffin, of Garden City, said his client is innocent.

"Mr. Kehoe runs a highly regarded and respected credit card processing company," he said. "The allegations are entirely inconsistent with the values and reputation of his company. He has entered a not guilty plea and we will endeavor to go through the government's allegations to independently determine exactly what occurred."

Kehoe is charged with one count of conspiracy to steal government funds and misappropriate USDA benefits, one count of theft of government funds and one count of misappropriation of USDA benefits. Also charged in the scheme is Arlasa Davis, 56, of upstate Gardiner; and Mohamad Nawafleh, 34; Omar Alrawashdeh, 37; Gamal Obaid, 39; Emad Alrawashdeh, 37, all of the Bronx. Nawafleh was released on a $75,000 bond in 2024. Earlier this year, he allegedly disabled his court-ordered electronic monitoring device and fled to Jordan, prosecutors said. 

Some of the defendants owned or controlled some of the retail stores, allowing them to receive a portion of the transactions. In other stores, the defendants allegedly extracted commissions and cash payments from the stores that housed the EBT terminals, prosecutors said. 

Prosecutors said Davis, who was a veteran USDA employee whose job was to help identify SNAP fraud, was "critical" to the scheme.

"Davis abused her privileged access to federal systems to sell hundreds of EBT license numbers enabling over $36 million in fraudulent SNAP redemptions at unauthorized stores," prosecutors said in a news release. "Davis photographed handwritten lists of license numbers intended for qualifying stores with her personal cellphone and funneled them to an intermediary who sold them to coconspirators ... who then used those license numbers to fraudulently obtain EBT terminals for stores that were not authorized by the USDA to process SNAP transactions."

Prosecutors said that in return, Davis received bribes that were disguised in their communications as "flowers" and "birthday gifts."

"Michael Kehoe and his coconspirators misappropriated tens of millions of dollars in taxpayer funds meant to help low-income families put food on the table," U.S. Attorney for the Southern District of New York Perry Carbone said in a statement. "This fraud was made possible when USDA employee Arlasa Davis betrayed the public trust by selling confidential government information to the very criminals she was supposed to catch. Their actions undermined a program that vulnerable New Yorkers depend on for basic nutrition. These charges should be a reminder that those who exploit anti-poverty programs for personal gain will be held accountable for their crimes."

By Nicole Fuller

nicole.fuller@newsday.com@NicoleFuller

Nicole Fuller is Newsday's senior criminal justice reporter. She began working at Newsday in 2012 and previously covered local government.