NY lawmaker pleads not guilty to US fraud charges

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U.S. Rep. Michael Grimm leaves federal court in New York, Monday, April 28, 2014. Grimm was taken into custody Monday to face federal charges following a two-year investigation of his campaign financing. (AP Photo/Seth Wenig)

U.S. Rep. Michael Grimm leaves federal court in New York, Monday, April 28, 2014. Grimm was taken into custody Monday to face federal charges following a two-year investigation of his campaign financing. (AP Photo/Seth Wenig)

Loretta Lynch, U.S. Attorney for the Eastern District of New York, stands next to a poster displaying the alleged crimes committed by U.S. Rep. Michael Grimm during a news conference in New York, Monday, April 28, 2014. Lynch announced an indictment against Grimm, who was taken into custody Monday to face federal charges following a two-year investigation of his campaign financing. (AP Photo/Seth Wenig)

Loretta Lynch, U.S. Attorney for the Eastern District of New York, speaks during a news conference in New York, Monday, April 28, 2014. Lynch announced an indictment against U.S. Rep. Michael Grimm, who was taken into custody Monday to face federal charges following a two-year investigation of his campaign financing. (AP Photo/Seth Wenig)

FILE – In this May 9, 2012 file photo, Rep. Michael Grimm, R-N.Y., speaks at a news conference on Capitol Hill in Washington. Grimm is facing criminal charges from federal prosecutors, his lawyer said on Friday, April 25, 2014. A House Ethics Committee announced in November that Grimm was under investigation for possible campaign finance violations but said it would defer its inquiry because of a separate Department of Justice investigation. (AP Photo/Jacquelyn Martin, File)

FILE – In this April 7, 2011, file photo, Rep. Michael Grimm, R-N.Y., center, accompanied by Rep. Duncan Hunter, R-Calif., left, House Majority Whip Kevin McCarthy of Calif., speaks during a news conference on Capitol Hill in Washington. Grimm’s attorney stated on Friday, April 25, 2014, that federal prosecutors in New York plan on filing criminal charges against the lawmaker. Lawyer William McGinley said Grimm is innocent and called the federal probe into the former FBI agent-turned-politician “a politically driven vendetta.†(AP Photo/Carolyn Kaster, File)

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NEW YORK (AP) — U.S. Rep. Michael Grimm, a former Marine and FBI agent who’s been the target 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. A House Ethics Committee announced in November that he was under investigation for possible campaign finance violations.

During the 2010 race, Grimm acknowledged receiving $250,000 to $300,000 in contributions from followers of an Israeli rabbi, Yoshiyahu Yosef Pinto. Some members of Pinto’s congregation subsequently said they made tens of thousands of dollars in illegal contributions, including gifts passed through straw donors.

The Israeli businessman who had served as Grimm’s liaison to Pinto’s followers, Ofer Biton, pleaded guilty in August to an immigration fraud charge. Three days after that, the FBI filed a sealed criminal complaint accusing a Houston woman, Diana Durand, who had been romantically involved with Grimm, of using straw donors to make illegal campaign contributions.

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 said: “Let me be clear to you. If you ever do that to me again, I’ll throw you off this (expletive) balcony.”

Grimm’s legal troubles, while embarrassing to his fellow Republicans, were unlikely to determine the balance of power in the GOP-dominated House. Republicans have the majority in the House by a margin of 233 to 199 seats, with three vacancies.

Democrats, meanwhile, have been eyeing Grimm’s seat. The Democrats’ favored candidate, former New York City Councilman Domenic Recchia, has been hammering Grimm over his ethics and has impressed Washington Democrats.

News of the charges drew a mixed reaction from constituents on Staten Island.

“This is supposed to be someone who respects the law and

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