9Wants to Know also discovered more than $1 million in welfare is also going to ATM owners and banks through transaction fees per every year.
9Wants to Know reviewed 222,000 transactions involving Colorado Quest cards, the state-issued debit cards welfare recipients use to access cash at ATMs. The transactions occurred during a six-month period in 2011.
"When you see the type of obvious abuses that you've shown, it says there are people on welfare that should not be," Jon Caldara, of the conservative watchdog group The Independence Institute, said. "And people are throwing that away."
While current state law bans welfare transactions at casinos and liquor stores, it does not prohibit cash withdraws at strip clubs. Violating the law does not result in any penalties either.
A new federal law signed by President Barack Obama last week forces states to ban all such transactions within the next two years or face the consequence of losing federal funding. The federal ban is part of the Middle Class Tax Relief and Job Creation Act of 2012.
A person who uses welfare named Curtis was outraged when he heard about the welfare abuse.
"I think it pretty much sucks," Curtis said.
He uses the Colorado Quest card to survive.
"There are people who are getting it who shouldn't be getting it. That's backing up the system for the people who do need it," he said.
Liquor stores - Prohibited
9Wants to Know calculates more than $40,000 was withdrawn from ATMs located inside liquor stores in the Denver area between May 1 and Nov. 30, 2011.
The top three busiest locations are located Colfax Avenue
- Josh Liquor - 6569 W. Colfax Avenue - $5,880
- B&B Liquor - 7035 E. Colfax Avenue - $5,020
- E&A Liquor - 3230 W. Colfax Avenue - $3,880
"I think it's wrong," Steve Ziporlin, who works at a grocery store near Josh Liquor, said. "The money is supposed to be used for groceries and sundries."
Casinos - Prohibited
9Wants to Know found numerous transactions at ATMs inside casinos in Black Hawk. The most transactions occurred at the Wild Card Saloon Casino, with 208 transactions through its ATM for a combined withdrawn amount of around $15,000.
In one case, a welfare recipient withdrew $500 during one transaction at the casino.
9Wants to Know also found 56 transactions at the Bull Durham Casino and a handful of transactions at the Black Hawk Station Casino.
"The state is giving them money and to come up here and play with it, I think that's defeated them and their families," Pat Schmidt said as she walked out of a casino. "It comes out of our pocket."
Bingo halls - Prohibited
9Wants to Know found 29 transactions at bingo halls around the state, including in Turn 2 Bingo in Denver and Bingo World in Colorado Springs.
Strip clubs - Not Prohibited
Current state law does not prohibit welfare recipients from accessing cash from ATMs inside strip clubs.
9Wants to Know counted 14 transactions at strip club Shotgun Willie's for a combined amount of $1,500. Taxpayers also covered the $6.50 ATM fee for each transaction.
9Wants to Know found a handful of transactions at other strip clubs, including Diamond Cabaret, La Boheme and Dandy Dan's.
Elitch Gardens Theme Park - Not Prohibited
Thirty-three transactions were found inside Elitch Gardens Theme Park during the six-month period reviewed by 9Wants to Know. A handful of the transactions occurred at an ATM inside the water-park section.
9Wants to Know also identified two transactions totaling $160 at Disneyland, one transaction for $140 at Universal Studios and $1,000 worth of transactions in a liquor store in Los Angeles.
Several transactions were found at ATMs along the Las Vegas strip.
Banks and ATM owners getting a piece
Out of the 222,000 transactions reviewed by 9Wants to Know, 80 percent occurred at ATM that applied a fee to the welfare accounts.
9Wants to Know estimates ATM owners and banks collected $540,000 in fees during that six-month period.
The local banking industry in Colorado says the fees are the cost of doing business.
"Annual maintenance on such a machine will be $12,000 to $15,000 per year. That's a lot of money that you have to recover," Don Childears, president of the Colorado Bankers Association, said.
After 9Wants to Know inquired about ATM fees, the Colorado Human Services Department said it's sending out updated flyers to welfare recipients to help them avoid surcharges on their accounts.
The flyers encourage recipients to use Chase Bank ATMs, where there are no extra surcharges. Chase still collects 85-cents-per-transaction regardless of what ATM is used.
"I don't like ATM fees," Julie Kerksick, of Colorado's Health and Human Services Department, said. "But do I think it's right and that I want to see it continue? No."
State law lacks penalty
Neither welfare recipients nor businesses face a penalty under the law that bans transactions at casinos and liquor stores.
Rep. Dan Pabon (D-Denver) tried to pass a stronger law that would have included a ban on transactions at strip clubs during the 2011 legislative session. The bill was killed after some other lawmakers said it's impossible to prove cash coming out of ATMs was actually used to buy liquor or lap dances.
"The primary beneficiaries of these benefits are kids," Pabon said. "If there's money being pulled out at liquor stores and casinos, it makes you wonder if those benefits are going to the people that they should."
Other lawmakers think it's unfair to block welfare access at certain ATMs.
"If you place some of the limits you talk about, you place recipients at a further disadvantage," Sen. Betty Boyd (D-Lakewood). "Why is it that the 'haves' are always suspect of and stereotyping of the 'have nots?'"
Boyd is the chair of the Health and Human Services Committee that killed Pabon's bill.
Trying to curb abuse
"We are very concerned if people are using their very scarce resources on things beyond the basic needs," Kerksick said.
Kerksick oversees the state's welfare programs. She says it's impossible to monitor every single welfare transaction but that her department is trying to curb the abuse.
Within the past year, Kerksick says letters were sent to liquor stores, casinos and bingo halls asking business owners to comply with state law by programming ATM to block Colorado Quest cards.
"I would like to say that merchants would cooperate with us, but they don't all cooperate," Kerksick said.
"What's the point of having the rule if the vendor is not going to comply?" 9Wants to Know asked Kerksick.
"We have fewer than 1 percent of all transactions that are out of compliance. That tells me businesses are cooperating, but it also tells me that most individuals who are receiving these benefits are using them appropriately," Kerksick said.
New federal law
Obama's new law - the Middle Class Tax Relief and Job Creation Act of 2012 - will require all states, including Colorado, to come up with plan to block transactions within the next two years. States can lose federal funding if they fail to comply with the new law.
(KUSA-TV © 2012 Multimedia Holdings Corporation)