NEW YORK -- U.S. Rep. Michael Grimm, R-N.Y., 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 Monday, unsealing a 20-count indictment.
Mr. Grimm, 44, "deliberately lied to every taxing authority to evade taxes and keep more money for himself," Brooklyn U.S. Attorney Loretta Lynch said. Mr. Grimm pleaded not guilty in federal court in Brooklyn and was freed on $400,000 bail, secured by a home on Staten Island.
The congressman was elected amid a Tea Party wave in 2010 promising to get "big government out of the way." The indictment will make it harder to hold the seat in this year's midterm elections, said Rep. Peter King, also R-N.Y., who calls Mr. Grimm a friend. "It's going to be tough to win the race," Mr. King said in an interview Monday in New York. "They tried to get him on the big stuff and couldn't, and they looked for the technicalities," he said of the FBI probe.
Mr. 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 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, federal prosecutors contend.
From 2007 to 2010, Mr. Grimm oversaw the day-to-day operations of Healthalicious, which serves protein shakes and power salads on its menu, according to the indictment. He underreported the workers' wages, many of whom were employed illegally, and is accused of wire fraud and mail fraud, among other charges. Convictions for 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," Mr. Grimm told reporters after his release Monday. He called the case "a political witch hunt."
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. "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," Mr. 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, Mr. Long said, unless he resigns and moves to a different state.
"I will not abandon my post," Mr. Grimm said Monday. "We're going to fight tooth and nail."
Mr. Grimm is a former U.S. Marine, FBI agent, U.S. marshal and financial analyst. As an FBI agent, Mr. Grimm worked undercover in a probe of a currency trading scheme.