Former United States Congressman Michael Grimm Sentenced To Eight Months For Tax Fraud

Earlier today in federal court in Brooklyn, former United States Congressman Michael Grimm was sentenced to a term of incarceration of eight months of incarceration in connection with his conviction for aiding and assisting the preparation of a false tax return.  Grimm served as a member of the United States House of Representatives representing New York’s 11th Congressional District, which includes the borough of Staten Island and parts of the borough of Brooklyn, from January 2011 to January 2015.  Grimm was sentenced by the Honorable Pamela K. Chen, United States District Judge, Eastern District of New York.  The Court also sentenced the defendant to 200 hours of community service.[1]

The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office, and Richard Weber, Chief, IRS- Criminal Investigation.

“This prosecution and sentence should be a reminder to those in positions of trust that we and our partners in the FBI and IRS will vigorously pursue whomever commits fraud,” said Acting U.S. Attorney Currie.  Mr. Currie expressed his grateful appreciation to the Public Integrity Section of Department of Justice, the Northern Criminal Enforcement Section of the Tax Division of the Department of Justice, the New York State Insurance Fund, the New York State Department of Taxation and Finance, and the New York State Department of Labor for their assistance in the investigation.

FBI Assistant Director-in-Charge Rodriguez stated,  “Grimm didn’t serve his community with honor; he instead engaged in criminal activity to the detriment of the public trust.  Today’s sentence should send a message that this type of behavior will not be tolerated, especially when public officials break the law. The FBI and our partners at the IRS will continue our efforts to identify fraudulent practices carried out by elected representatives and free the system from the consequences of their actions.”

“Former Congressman Grimm made a conscious decision to break the law and benefit personally by underreporting $900,000 in restaurant gross receipts and lowering payroll taxes through 'off-the-book' payments, then lying under oath to conceal his criminal activity,” said IRS-Criminal Investigation Chief Weber.  “Tax crimes are not victimless crimes and Grimm’s actions harmed the very citizens he was elected to serve.  We expect all taxpayers to follow the law—whether you are a business owner, individual, or elected official—we all must play by the same rules.”

In connection with his guilty plea on December 23, 2014, Grimm entered into a stipulation of facts acknowledging the scope of his criminal conduct.  As part of that stipulation of facts, Grimm admitted that:

• From 2007 through 2009, Grimm was a member in Healthalicious, a Manhattan restaurant.  During that time period, Grimm oversaw the day-to-day operations of the restaurant, which included the reporting and distribution of the restaurant’s payroll.
• Grimm under-reported the true amount that Healthalicious earned, using a portion of those unreported receipts to pay the restaurant’s workers “off the books” in cash.  With Grimm’s knowledge, the restaurant employed those who were not lawfully admitted to the United States and who were not authorized to work in this country.
• In total, Grimm concealed over $900,000 in Healthalicious’ gross receipts from the accountant who prepared and filed the restaurant’s tax returns.  That accountant used the false information provided by Grimm to prepare and file false federal and state tax returns for Healthalicious.
• Grimm also failed to report the “off the books” cash wages he was paying to Healthalicious workers, which resulted in the restaurant paying lower federal and state payroll taxes.  Some Healthalicious employees received at least half of their wages in cash, while other workers were paid entirely in cash.  Grimm tracked these payments in electronic spreadsheets, but failed to provide accurate information about the restaurant’s payroll to the payroll processing companies employed by the restaurant.  As a result, Grimm caused the payroll processing companies to report to the IRS and the NYS Tax Department less than half of the wages Healthalicious actually paid its employees.                        
• Additionally, Grimm under-reported Healthalicious’ payroll to the New York State Insurance Fund (“NYSIF”), lowering the monthly workers’ compensation premium the restaurant paid to NYSIF.
• As part of his scheme, Grimm caused numerous false documents to be filed with federal and state tax authorities between 2007 and 2010.  In total, Grimm’s conduct caused federal and New York State tax and NYSIF premium losses between $80,000 and $200,000.

• While a Member of Congress in January 2013, Grimm was deposed under oath by the attorney of a former employee in connection with a civil lawsuit relating to the labor practices at Healthalicious in which Grimm was a defendant.  The lawsuit was pending in the United States District Court for the Southern District of New York.  Grimm admitted to testifying during the deposition to things that, at the time, he knew to be false.  Specifically, Grimm testified during the deposition that Healthalicious employees had not been paid in cash, when he knew that restaurant employees had in fact been paid “off the books” in cash.  Similarly, Grimm testified that, to the extent he used email in operating Healthalicious, he used a Yahoo account to which he no longer had access.  Grimm also admitted that, at the time of the deposition, he in fact had access to an AOL account which he had used for Healthalicious related business and which contained many emails related to the restaurant.

 The government’s case is being prosecuted by the Office’s Public Integrity Section.  Assistant United States Attorneys James Gatta and Nathan Reilly are in charge of the prosecution.

The Defendant:

MICHAEL GRIMM
Age: 45
Staten Island, New York

E.D.N.Y. Docket No. 14-CR-248 (PKC)