Rep. Michael Grimm, R-N.Y., who last month easily won easy re-election, Tuesday pleaded guilty to one count of tax evasion.
In April, the former FBI agent was accused in a 20-count indictment of concealing wages and revenue at a restaurant he co-owned.
In return, federal prosecutors dropped 19 other counts against Grimm, but only after he signed a statement admitting to the conduct underlying the other charges. That required Grimm to acknowledge effectively keeping two sets of books while running a Manhattan restaurant to conceal $900,000 in receipts.
As part of his admission, Grimm also conceded that he lied under oath while deposed in 2013 in a civil suit filed by a former employee.
Tuesday, he appeared in federal court in Brooklyn and pleaded guilty to one count of aiding in the filing of a false tax return.
"While operating a restaurant, we underestimated the gross receipts and used some of the money to pay employees off the books and some other expenses," Grimm said, according to Reuters. Sentencing was set for June 8.
He is sure to face pressure to resign from his congressional seat, as have most other members of Congress convicted of felonies. But the message Grimm sent through his lawyer set a defiant tone.
“At this time, Mr. Grimm will not be stepping down,” Stuart N. Kaplan said in an emailed statement. “He is committed to serving his constituents who recently reaffirmed their support for him in the November election.”
What remains to be seen is how much prison Grimm will face and, if he refuses to quit on grounds that his constituents knew of his indictment when he was reelected, whether his House colleagues will vote to reprimand, censure or expel him.
“We won't have any announcements until the Speaker discusses the matter with Mr. Grimm,” said Michael Steel, spokesman for House Speaker John Boehner of Ohio. There was no word on when that might occur.
Even before his plea, House Democratic Leader Nancy Pelosi of California Tuesday said, "Now that the election is over, Congressman Grimm is finally admitting the truth to his constituents. "Clearly, Speaker Boehner must insist that Congressman Grimm resign immediately."
Josh Schwerin, Democratic Congressional Campaign Committee spokesman, agreed.
“Speaker Boehner and Republican leaders' continued complicity in letting Michael Grimm stay in Congress despite his guilt of felony tax evasion is a disservice to the people of Staten Island and Brooklyn and a stain on the institution of the United States House of Representatives,” he said.
“After Speaker Boehner abetted Grimm's lies to voters about his guilt in this past election, he owes it to the constituents and the Congress to make sure Michael Grimm doesn't serve in this next Congress."
Grimm, first elected in 2010, also attracted public notice when he threatened in January to toss a reporter over a Capitol balcony. Democrats saw him as a vulnerable target, but their candidate, former City Councilman Domenic Recchia, lost by 13 percentage points.
The guilty plea also puts a notch in the belt of Loretta Lynch, the U.S. attorney in Brooklyn who is awaiting Senate confirmation to become the nation’s first female African American attorney general.
“Michael Grimm has admitted that while running his business he chose lies and deception over honest dealings with federal and state authorities as well as his own employees,” Lynch said in a statement.
After the plea, the Justice Departement provided details. In a statement, Richard Weber, chief of the IRS’ criminal investigations unit, said, “The public expects their elected officials to meet their tax obligations before they take office, while they hold office and when they leave office. Today, Mr. Grimm admitted to breaching the public's trust by fraudulently underreporting $900,000 in restaurant gross receipts and lowering payroll taxes through 'off-the-book' payments.”
Justice said that in connection with the guilty plea, Grimm “entered into a stipulation of facts, filed with the court today, that acknowledged the scope of his criminal conduct.”
As part of that stipulation, Justice said,Grimm admitted that:
From 2007 through 2009, Grimm was a member in Healthalicious, a restaurant located in Manhattan. 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, including: (1) Form 941 Employer’s Quarterly Federal Tax Returns for Healthalicious; (2) Form 1065 U.S. Return of Partnership Income tax returns for Healthalicious; (3) Forms W-2 reported annual wages of Healthalicious employees; (4) his Form 1040 U.S. Individual Income Tax Returns and Form IT-201 Resident Income Tax Returns; and (5) New York State Form ST-100 Quarterly Sales and Use Tax Returns.
In total, Grimm’s conduct caused federal and New York State tax and NYSIF premium losses between $80,000 and $200,000.