Prosecutors released a searing indictment of Rep. Michael Grimm today, alleging he hid over $1 million in revenue from the IRS by paying employees–including illegal immigrant workers–in cash.
Grimm, a former FBI agent, is facing over 20 charges relating to a health food restaurant, Healthalicious, he ran from 2007-2010, including wire fraud, perjury, and obstruction of justice.
Loretta Lynch, the U.S. Attorney for the Eastern District of New York, described the alleged conduct as “breathtaking” at a press conference Monday and accused Rep. Grimm of “succumb[ing] to the allure of easy money and cheat[ing] his way to success.”
Grimm surrendered to federal authorities early Monday.
The indictment threatens the political career of the sophomore lawmaker, who has emerged as a key moderate voice in the House Republican conference. Already in the course of his short political career, Grimm has faced a litany of ethics complaints, and watchdog groups like Citizens for Responsibility and Ethics in Washington are calling for his immediate resignation.
The core of Rep. Grimm’s crime, the indictment alleges, is the insistence on paying some employees exclusively in cash and others partly in cash and partly through checks. The payroll processing companies working with Rep. Grimm would only see the payments given by check, and these were the only payments thus reported to a number of entities: his accountant, the IRS, the State of New York, the New York State Insurance Fund, and health insurance companies.
Through the unknowing accountant, Rep. Grimm hid $1.3 million in profits. This allowed him to skimp on both federal and state taxes, pay less for workers’ compensation insurance, pay less in health insurance coverage for employees, and hire illegal immigrants, who were paid exclusively in cash.
Rep. Grimm kept a set of spreadsheets showing the amount of money entering and leaving the restaurant that he shared with his accountant and payroll processing companies. He kept a second set of spreadsheets that showed the true profits of the restaurant and the true salaries of all employees.
Upon facing a congressional election, Grimm hired a manager to do much of the work he was once responsible for at the restaurant. This manager he communicated with through an AOL account. He sent the manager the second set of spreadsheets showing the restaurant’s true profits via this account– committing wire fraud, the indictment alleges.
“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,” the federal indictment alleges.
As a result of paying employees in cash, a number of parties– from the IRS to the New York state revenue office to the workers’ compensation insurance company Rep. Grimm hired– were under the impression that Healthalicious was suffering business losses, rather than significant business profits. Rep. Grimm is facing twenty criminal charges, all of which fall into the following nine categories:
- Obstructing and Impeding the Due Administration of the Internal Revenue Laws
- Conspiracy to Defraud the US
- Aiding and Assisting in the Preparation of False and Fraudulent Tax Returns (3-5)
- Health Care Fraud
- Wire Fraud
- Mail Fraud
- Obstruction of Official Proceeding
- Unlawful Employment of Aliens
There are more charges than crimes because Rep. Grimm is charged with committing some of these crimes towards a number of institutions–particularly the first count.
The indictment also accuses Grimm of lying under oath during a deposition for a lawsuit brought by former employees of Healthalicious. The employees alleged that they were being paid less than minimum wage.
When two former employees sued Grimm for being paid less than minimum wage, Rep. Grimm found his scheme dangerously close to being revealed. Then, “he 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,” the indictment claims.
In addition to the larger money hiding scheme, 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 concludes. As these individuals were not on the payroll, they did not receive health insurance–a crime of its own.
Rep. Grimm’s attorney, William McGinley, accused the government of a “politically driven vendetta against Congressman Grimm and not an independent search for the truth,” denying the allegations.
Read the full indictment against Rep. Grimm here.