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Former Covington Shop Owner Gets 5+ Years for Food Stamp Fraud

At last, nearly three years to the day after she was arrested, Phyllis Tyler appeared in a courtroom, admitting what she had done.

Her guilt had been so obvious that a federal prosecutor said Thursday that the U.S. government was surprised that the case went to trial.

But it did go to trial, and along the way, Tyler concocted a variety of reasons that the Covington Police raided her A&E Fashion & Beauty (or A&E All Things & More as it was also known) on the 800 block of Madison Avenue on August 1, 2014. The cops were targeting her for racist reasons, she'd say. But as one lie fell apart, another lie would be constructed.

She maintained her innocence against charges food stamp fraud and money laundering - in which she would buy customers' EBT cards for around fifty cents on the dollar and then use those cards at Kroger and Sam's Club to stock her store, a scheme that ultimately totaled more than $400,000 illegally circulating through the tiny shop and multiple Tyler bank accounts.

She was arrested after police raided the store and days later, stormed into The River City News's previous office on Greenup Street demanding that her mugshot be removed from the news story. She was innocent, she said. The Kenton County Commonwealth's Attorney's Office disagreed, and in September 2014, Tyler appeared in court where a prosecutor referred to A&E as a fraudulent business.

Months would go by before the case returned to a courtroom.

But even after the raid and after the first court appearance, Tyler maintained her innocence - and her scheme, Judge David Bunning reminded her Thursday in the U.S. Courthouse in Covington.

She would eventually open a short-lived center for homeless people across the street from A&E - a highlight of her character-supporting letters urging Bunning to be lenient. 

But of all the good things Tyler did - the bad outweighed them all. A federal prosecutor called Tyler's behavior during the investigation and the legal proceedings "destructive", and Bunning ultimately revoked her bond and ordered her to be incarcerated after she intimidated a witness in Cincinnati. The case was turned over to federal investigators - because EBT involves federal dollars - and she was indicted in December 2015, and spoke exclusively to The River City News in a 20-minute podcast interview where she still maintained her innocence.

Earlier this year, in January, Tyler was convicted on all charges.

A jury didn't buy her evolving claims about why the situation was what it was, and the judge frowned on her attempt to have a semi-homeless man who often accompanied her try to perjure himself on the stand in an effort to take the blame. "That's just horrible," Bunning said Thursday. Tyler's attempt to explain away some of the fraud as her business's purchase of bulk meat from a company she made up was called "a farce" by Bunning.

Had she simply pleaded guilty at the beginning, Tyler could have been sentenced to as little as 37 months - with the benefit of applying time already served (she's been in jail since last December) to that. Bunning said it would set a bad precedent, though, to sentence Tyler as though she had not taken her case to trial, had not intimidated a witness, had not created a fraudulent meat business to mislead the court, and had not tried to pawn off her crime on an innocent man who was shown in court as being unable to even work the EBT machine at her store.

For her crimes, Tyler was sentenced to 66 months in federal prison and will likely serve her time at a facility in Lexington.

According to the evidence at trial, from January 2, 2012 until June 26, 2015, Tyler made cash purchases of food stamp benefits from beneficiaries, paying half the value of the benefits actually on the EBT cards. She then redeemed the full benefits by conducting EBT transactions at her store, which triggered a direct reimbursement for the sale from the federal government to Tyler’s business bank account. She also used cards that she purchased for cash at other retailers, to buy items for her personal use or for inventory at her store.
 
As a result of the fraud, Tyler was responsible for causing a $408,979.76 loss to the food stamp program. On four occasions, Tyler also transferred more than $10,000 in food stamp fraud proceeds through a financial institution, in violation of federal money laundering statutes.
 
She was often able to pay cash for the cards due to the presence of money from Kentucky Lottery sales and from payments to Duke Energy, since her store had become the only go-to spot to pay a Duke bill in person.
 
She will have to serve at least 85 percent of her sentence and is also expected to pay back the stolen funds.
 
On Thursday, after having submitted a letter of confession to Judge Bunning - along with letters from local clergy, educators, friends, family, and others - Tyler's demeanor was more pleasant. She appeared to have accepted her fate, even uncharacteristically declining her opportunity to speak before the court, yielding instead to her attorney, at least the fourth to represent her since it all began. 
 
She admitted to having a gambling problem and other family issues, prompting her spiral into food stamp fraud. 
 
While the good she did in the community - including being honored at an Erlanger city council meeting not long ago - was highlighted by the judge, it was her behavior, denial, and continued fraud that will put her away longer than what would have been the case had she simply confessed at the beginning.
 
Because many of her victims would use the cash they were paid to purchase drugs, adding to the region's heroin crisis, the amount of sympathy afforded her was limited.
 
"It is a very significant crime that you were committing," Bunning told Tyler. "All of the good you were doing is more than offset by what you were doing with these EBT cards.
 
"It's a white collar case, but it's more like a blue collar case because of the individuals involved."
 
The prosecution stated Thursday that going after food stamp fraud is difficult because those who sell their cards are reluctant to admit doing so since it is a crime, too. They urged Bunning to send a message to others with Tyler's sentence.
 
Tyler, who turned and smiled at her husband as she was escorted from the courtroom to spend the next half decade behind bars, was the first to get that message.
 
Written by Michael Monks, editor & publisher
Photo: Phyllis Tyler poses in front of There Is Hope, a homeless center she briefly operated across from her retail store (RCN file)