N.Y. lawmaker pleads not guilty to U.S. fraud charges

NEW YORK - Rep. Michael Grimm, a Marine veteran and FBI agent who's been the target of a campaign-finance investigation, was instead charged on Monday with evading taxes by concealing more than $1 million in sales and wages while running a small Manhattan restaurant - a case he called a political witch hunt meant to drive him out of office.

Grimm surrendered to FBI agents early Monday following a two-year investigation that initially focused on alleged attempts to bypass contribution limits. He pleaded not guilty through his lawyer in federal court in Brooklyn to mail, wire, and tax fraud charges and was released on $400,000 bond secured by his Staten Island home.

The Republican lawmaker, using a World War II memorial across the street from the courthouse as a backdrop, later accused prosecutors of leaking "all kinds of innuendos and accusations to support a political witch hunt" intended to "assassinate my character." He vowed to return to work in Congress while fighting the charges.

"I know I'm a moral man, a man of integrity," he added. "And I also know I have a lot more service and leadership to provide this country, and that's exactly what I intend to do."

U.S. Attorney Loretta Lynch said investigators uncovered the restaurant fraud as they conducted the campaign finance probe. She also denied the prosecution was politically motivated and suggested more charges were possible.

"We follow the evidence and see where it goes. . . . The investigation is broader and ongoing," she said.

Grimm "was anything but an upstanding citizen," said George Venizelos, head of the FBI's New York office. "He cheated, evaded, and then lied."

The 20-count indictment alleges the tax fraud began in 2007 after Grimm retired from the FBI and began investing in an Upper East Side eatery called Healthalicious. It accused him of trying to evade payroll, income, and sales taxes by paying his workers - some in the country illegally - in cash.

Grimm "physically handed out cash payments to his employees on numerous occasions," the indictment says, with money taken from the restaurant's daily receipts.

Authorities say Grimm left the business in 2010, the same year he won his first term in Congress. Grimm, 44, made headlines in January after confronting a New York City cable news station reporter who tried to question him about the campaign finance inquiry.

After reporter Michael Scotto finished his report from a balcony in the Capitol, Grimm stormed back, leaned into him and threatened him.