N.Y. Congressman Grimm Paid Off-Books and Lied, U.S. Says

U.S. Representative 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 yesterday. Grimm pleaded not guilty in federal court in Brooklyn and was freed on $400,000 bail, secured by his home on Staten Island.

The congressman, 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 tougher to hold the seat in this year’s midterm elections, said U.S. Representative 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 in an interview in New York. “They tried to get him on the big stuff and couldn’t and they looked for the technicalities,” King said of the Federal Bureau of Investigation probe.

Grimm was investigated last year by the House ethics committee 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 ethics panel suspended the investigation at the request of the Justice Department.

Investigation Continuing

“There is a larger investigation that is still ongoing,” Lynch said at yesterday’s news conference. “We can’t comment on what we may or may not do with regard to other charges.”

Grimm stepped down from his seat on the House Financial Services Committee, which oversees Wall Street, in a two-sentence letter to House Speaker John Boehner, an Ohio Republican. Grimm said he intends to resume the position “upon a successful resolution of pending legal matters.”

“I think all members should be held to the highest ethical standards,” Boehner told reporters in Washington today. “Mr. Grimm is under indictment, he’s resigned from his committee assignment and I think he’s made the right decision.”

Grimm 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.

Healthalicious Operations

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. He called the case “a political witch hunt.”

His lawyer, Elizabeth Kase, in a statement 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 the timing of the charges appeared “suspicious” because they came right after a deadline for changes to the ballot.

‘Tough Battle’

“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. “We’re going to fight tooth and nail.”

Grimm is a former U.S. Marine, FBI agent, U.S. marshal and financial analyst. As an 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.

‘Cheated, Evaded’

“Representative Grimm billed himself as a patriot and an American hero,” said George Venizelos, assistant director in charge of New York’s FBI office. “But Representative Grimm was anything but an upstanding citizen. He cheated, evaded, and then lied.”

“Representative Grimm should resign immediately,” Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, a government watchdog group, said in an e-mailed statement yesterday.

Grimm attracted national attention in January when he physically threatened a New York television reporter who asked him about the federal investigation into his campaign.

The interview followed President Barack Obama’s State of the Union speech. As reporter Michael Scotto’s camera still rolled, Grimm walked away, then returned saying, “Let me be clear to you. If you ever do that to me again, I’ll throw you off this f---ing balcony.”

“Why?” Scotto countered. “I just wanted to ask you. It’s a valid question.”

‘Man Enough’

“No,” Grimm said. “No. You’re not man enough. You’re not man enough. I’ll break you in half. Like a boy.”

Grimm issued a statement later apologizing about the incident, saying Scotto “knew that I was in a hurry and was only there to comment on the State of the Union, but insisted on taking a disrespectful and cheap shot at the end of the interview.”

The case against Grimm was unsealed less than two weeks after the guilty plea of New York hotelier Sant Singh Chatwal, a donor to Hillary Clinton. Chatwal had admitted to using straw donors to raise at least $188,000 for three candidates for federal office from March 2007 to August 2011.

The candidates, whose names weren’t specified in court documents, were not found to have engaged in any wrongdoing, according to the Brooklyn U.S. Attorney’s Office.

In January, conservative political commentator and author Dinesh D’Souza, who made the film “2016: Obama’s America,” was charged in Manhattan federal court with illegally directing $20,000 in contributions to a candidate for U.S. Senate from New York in 2012. He pleaded not guilty.

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

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE