Grocery Owner Charged in $300,000 Coupon Scam

If you’re going to commit coupon fraud, it helps to be the one with access to all the coupons.

The owner of four Shop ‘n Save grocery stores in the Pittsburgh area is facing several felony charges related to an alleged coupon scam that apparently had been going on for years.

59-year-old Michael Mihelic is accused of instructing his employees to clip coupons out of inserts from unsold Sunday newspapers, mixing them in with coupons that were actually redeemed by customers, submitting them for reimbursement, then keeping the extra cash for himself and his accused accomplices.

Mihelic surrendered yesterday to detectives with the Allegheny County District Attorney’s Office, in connection with the case that they began investigating more than a year and a half ago.

Investigators say a former employee at one of Mihelic’s stores first blew the whistle back in August 2017. According to the criminal complaint, the employee told detectives that Mihelic “orders his employees to remove coupons from newspapers received in his stores, collect these coupons from his office managers and turn them into the manufacturers for reimbursement as if they were used by customers”. The employee said he had witnessed co-workers clipping coupons and bringing them to the back office, and he said the store’s accounting manager would even take coupons home to clip and sort after work.

The process began every Sunday, the employee said. When setting out the Sunday newspapers for sale each week, he said his former boss ordered employees to collect any “extra” inserts that arrived with the papers. By the end of the day, Mihelic would allegedly tell those same employees to remove and collect the coupon inserts from all of the newspapers that had not been sold.

The investigators followed up by interviewing other current and former employees. One former office manager told them the accounting manager who was apparently taking coupons home would show up at work with a stack of coupons all cut out and tied into a neat bundle, with a total face value of exactly $500. She said her store would regularly and methodically enter into their system $500 worth of extra coupons each and every week, with the equivalent amount of cash withdrawn to offset the value of the coupons.

Detectives then interviewed the store’s accounting manager. She told them that all of this was originally the idea of Mihelic’s father, who owned the stores until his death in 2014. When his son took over the business, he allegedly continued the scheme. Acting on her boss’ orders, she said, she would submit the extra coupons to the store’s wholesale supplier Supervalu, which in turn submitted them to coupon processor NCH Marketing, which would reimburse the company on behalf of the manufacturers whose coupons had been fraudulently submitted.

For her troubles, she said she would receive an envelope full of cash every month or so, worth 20% of the value of the coupons she had submitted. Her boss allegedly kept the other 80%.

Finally, detectives spoke with another store’s office manager, who told a similar tale. She said she would also submit extra coupons at her store, in exchange for 20% of the proceeds. As one former employee told investigators, “Everyone knows what they are doing is wrong, but they do it because they were always told they had to do it.”

Back in October, investigators carried out four simultaneous search warrants in all four of Mihelic’s stores. They carted off business records, which they say showed that a total of $306,550 worth of coupons had been fraudulently submitted. And that was only since Mihelic took over ownership of the stores. If the scheme had indeed been going on for years before that, the total proceeds could easily have reached into the millions of dollars.

Mihelic was arrested yesterday on felony charges of theft by deception, receiving stolen property and dealing in the proceeds of illegal activity. He’s been released from custody, pending a preliminary court hearing on February 27th. If ultimately convicted, he faces a maximum 10-20 years in prison and a $25,000 fine, plus potential restitution for the full $306,550. There is no record as yet of any charges being filed against his alleged accomplices, who claim they were unwitting participants but apparently regularly and happily managed to pocket a 20% cut of the proceeds.

So if you shop at one of Mihelic’s stores and notice your cashiers scrutinizing your coupons a little more closely than usual, it’s understandable. Now that their boss is in trouble with the law, a whole lot of people will be scrutinizing all of the coupons that come through those stores – a lot more closely than they used to.

Image source: Shop ‘n Save