Congressman From NY Indicted for Tax Fraud
BROOKLYN, N.Y. (CN) - U.S. Rep. Michael Grimm turned himself over today to face a 20-count federal indictment accusing him of failing to report restaurant workers' wages, knowingly employing illegal immigrants, and hiding more than $1 million in sales and salaries.
According to tax filings with the Internal Revenue Service, the two-term Republican congressman was a managing member and partner in Granny Sayz LLC, which was created in November 2006 and did business on Manhattan's Upper East Side as Healthalicious.
"As a former FBI agent, Representative Grimm should understand the motto fidelity, bravery and integrity," said George Venizelos, the FBI's New York assistant director in charge, in a statement. "Yet he broke our credo at nearly every turn. In this 20-count indictment, Representative Grimm honored a new motto: fraud, perjury and obstruction."
From 2007 through 2010, Grimm, a former FBI agent and Marine, delegated to the restaurant's managers the reporting of and distribution of the fast-food eatery's payroll.
"In order to increase the profitability of the restaurant, he engaged in schemes to fraudulently under-report the wages he paid his workers - many of whom did not have legal status in the United States - and fraudulently under-report the true amount of money the restaurant earned to both federal and New York State tax and insurance authorities," the 30-page indictment states.
Grimm, 44, paid his workers in cash and failed to report that money to authorities, thereby lowering the restaurant's payroll-tax costs, according to the indictment.
He is also accused of underreporting the true amount of the restaurant's payroll to the New York State Insurance Fund, which allegedly let him get lower monthly workers' compensation insurance premiums.
"In total, Grimm concealed over $1,000,000 in Healthalicious gross receipts alone, as well as hundreds of thousands of dollars of employees' wages, fraudulently depriving the federal and New York State governments of sales, income and payroll taxes," according to the indictment.
"In an attempt to conceal his schemes," the indictment continues, Grimm in January
2013 "lied under oath during a civil deposition about his role in operating the restaurant, including falsely denying that he had paid Healthalicious' workers in cash."
Between 2007 and 2010, Grimm paid a "significant portion" of Healthalicious' employees' wages in cash, "with nearly all such employees having received cash wages," according to the indictment.
"Many received approximately half of their weekly pay in cash and the other half by check or through direct deposit into a bank account, while other employees received their entire weekly pay in cash," the indictment states.
Such payments, which came from the restaurant's till, were not reported to payroll-processing companies as required, according to the indictment.
"In addition, Grimm knowingly hired and knowingly continued to employ workers who did not have legal residency status and accordingly did not have valid authorization to work inside the United States," the indictment states.
Two former Healthalicious employees who claimed that Grimm did not pay minimum wage or overtime had the congressman deposed early last year in a federal lawsuit.
"In an attempt to avoid disclosing to the plaintiffs the criminal schemes he perpetrated while operating Healthalicious, Grimm lied under oath during the deposition in response to questions concerning his actions at Healthalicious," according to the indictment, which was initially sealed on Friday and ordered unsealed Monday by U.S. Magistrate Judge Robert Levy.
Grimm, who represents Staten Island and parts of Brooklyn, has been a member of the U.S. House of Representatives since 2011. He pleaded not guilty Monday morning to the 20 counts against him, and said at a news conference that he would "not abandon my post."
Representatives for the congressman have not otherwise returned a request for comment.
Grimm made headlines earlier this year when he was shown threatening a television news reporter who inquired about campaign finances.
The 20 counts against him are: obstructing and impeding the due administration of the Internal Revenue laws; conspiracy to defraud; aiding and assisting in the preparation of false and fraudulent tax returns; health care fraud; wire fraud; mail fraud; perjury; obstruction of official proceedings; and unlawful employment of aliens.