N.Y. congressman faces 20 counts

Said to evade taxes as businessman, Grimm pleads innocent

U.S. Rep. Michael Grimm, center, greets supporters as he leaves a news conference outside federal court in New York, Monday, April 28, 2014. The Staten Island Republican was arrested earlier in the day and pleaded not guilty to a 20-count federal indictment that includes charges of mail fraud, wire fraud and tax fraud. (AP Photo/Seth Wenig)
U.S. Rep. Michael Grimm, center, greets supporters as he leaves a news conference outside federal court in New York, Monday, April 28, 2014. The Staten Island Republican was arrested earlier in the day and pleaded not guilty to a 20-count federal indictment that includes charges of mail fraud, wire fraud and tax fraud. (AP Photo/Seth Wenig)

U.S. Rep. Michael Grimm, a New York Republican up for re-election this year, paid workers at his Manhattan restaurant off the books to skirt state and federal taxes and lied about it, federal prosecutors said, unsealing a 20-count indictment.

Grimm, 44, “deliberately lied to every taxing authority to evade taxes and keep more money for himself,” Brooklyn U.S. Attorney Loretta Lynch said Monday. Grimm pleaded innocent in federal court in Brooklyn and was freed on $400,000 bond, secured by a home on Staten Island.

The congressman, who was elected amid a Tea Party wave in 2010 promising to get “big government out of the way,” is the only Republican member of New York City’s congressional delegation. The indictment will make it harder to hold the seat in this year’s midterm elections, according to U.S. Rep. Peter King, a fellow Republican from New York, who calls Grimm a friend.

“It’s going to be tough to win the race,” King said Monday. “They tried to get him on the big stuff and couldn’t and they looked for the technicalities,” King said of the FBI probe.

Grimm was investigated last year by the House Committee on Ethics over whether he solicited and accepted prohibited contributions, caused false information to be included in campaign-finance reports, and helped a foreign national gain legal residency in exchange for soliciting donations.

The congressman was a partner in Granny Sayz LLC that did business as Healthalicious restaurant on Manhattan’s Upper East Side. He held a 45 percent stake in Granny Sayz, kept two sets of books and concealed the under-the-table payments from payroll-processing companies, hiding more than $1 million in earnings, the U.S. said.

Grimm oversaw the day-to-day operations of Healthalicious, which serves protein shakes and power salads on its menu, from 2007 to 2010, according to the indictment. He underreported the workers’ wages, many of whom were employed illegally, and is accused by the U.S. of wire fraud and mail fraud, among the other charges. Convictions of wire fraud and mail fraud each carry a maximum sentence of 20 years in prison.

“This vendetta was designed to overturn the will of the people,” Grimm told reporters after his release Monday. He called the case “a political witch hunt.”

His lawyer, Elizabeth Kase, in a statement Monday accused prosecutors of an “abuse of power, the distortion of facts and the targeting of political opponents.”

Mike Long, the state’s Conservative Party chairman, said that the timing of the charges appeared “suspicious” because they came right after a deadline for changes to the ballot.

“My hope is he will be vindicated and proven innocent, but it’s a real tough battle for him having this hanging over his head with his constituents, I’m sure,” Long said. “Last week was the last opportunity to make any changes to the ballot, so he’s sort of locked in.”

No other candidates can run in his stead unless he resigns and moves to a different state, he said.

“I will not abandon my post,” Grimm said Monday. “We’re going to fight tooth and nail.”

Grimm is a former U.S. Marine, FBI agent, U.S. marshal and financial analyst. Asan FBI agent, Grimm worked undercover in a probe of a currency-trading scheme.

The probe, called “Operation Wooden Nickel,” resulted in charges against 45 traders at UBS AG, JPMorgan Chase & Co. and 16 other firms. They were accused of cheating investors out of millions of dollars through rigged trades in 2003.

Dubbed “Mikey Suits” by his colleagues, Grimm infiltrated a foreign-exchange boiler room called Madison Deane in the World Financial Center in Lower Manhattan. It was allegedly used by corrupt sellers of foreign-exchange futures contracts.

“The case is U.S. v. Grimm, 1:14-cr-00248, U.S. District Court for the Eastern District of New York. (Brooklyn).

Information for this article was contributed by Esme E. Deprez of Bloomberg News.

Front Section, Pages 3 on 04/29/2014

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