grimm sentencing letter

U.S. Department of Justice

United States Attorney Eastern District of New York

DAS:JDG/NR 271 Cadman Plaza East F. #2014R00763 Brooklyn, New York 11201

June 19, 2015 By ECF The Honorable Pamela K. Chen United States District Judge United States District Court Eastern District of New York 225 Cadman Plaza East Brooklyn, New York 11201 Re: United States v. Michael Grimm Criminal Docket No. 14-248 (PKC) Dear Judge Chen: The government respectfully submits this letter in connection with the sentencing of the defendant Michael Grimm. On December 23, 2014, the defendant pleaded guilty to Count Four of the Indictment in the above-referenced case, which charged him with aiding and assisting in the preparation of a false and fraudulent tax return for his restaurant, in violation of 26 U.S.C. 7206(2). The defendant is scheduled to be sentenced on July 17, 2015 at 10:00 a.m. For the reasons set forth below, the government respectfully submits that the defendant should be sentenced to a term of incarceration within the applicable advisory United States Sentencing Guidelines (the Sentencing Guidelines or the Guidelines) range of 24 to 30 months of imprisonment. I. Background

A. Offense Conduct and the Indictment

On April 28, 2014, a twenty-count Indictment was unsealed that charged the defendant with a series of crimes stemming from his ownership and operation of Granny Sayz LLC d/b/a Healthalicious (Healthalicious), a restaurant located in New York, New York. While operating the restaurant, the defendant engaged in schemes to under-report the true amount of the restaurants earnings and the wages paid to its workers, thereby fraudulently lowering the federal and state taxes and the amount of workers compensation insurance premiums the restaurant owed and paid. Specifically, Grimm fraudulently

Case 1:14-cr-00248-PKC-RML Document 94 Filed 06/19/15 Page 1 of 14 PageID #: 514

The Honorable Pamela K. Chen June 19, 2015 Page 2 underreported the restaurants sales, concealing over $900,000 in gross receipts from the Internal Revenue Service (IRS) and the New York State Department of Taxation and Finance (the New York State Tax Department). (Pre-sentence Investigation Report (PSR) 5). Additionally, the defendant paid workers at the restaurant many of whom were not lawfully permitted to be employed within the country either wholly or partially off the books in cash, thereby fraudulently reducing restaurants federal and state payroll taxes. (PSR 6). The defendant also under-reported Healthalicious payroll to the New York State Insurance Fund (NYSIF), thereby defrauding NYSIF of workers compensation premiums. (PSR 7). To further and conceal his schemes, Grimm caused over 20 false corporate and personal tax filings to be made with the IRS and the New York State Tax Department from 2007 through June 2010. (See PSR 9). In connection with his scheme to cause false federal tax filings, the Indictment charged Grimm with impeding and obstructing the due administration of the Internal Revenue Law in violation of 26 U.S.C. 7212 (Count One), conspiring to defraud the United States of federal payroll taxes in violation of 18 U.S.C. 371 (Count Two) and aiding and assisting in the preparation of false Healthalicious tax returns in violation of 26 U.S.C. 7206(2) (Counts Three through Five). The defendant was also charged with five counts of wire fraud and three counts of mail fraud, in violation of 18 U.S.C. 1341 and 1343 (Counts Seven through Sixteen); all relating to his scheme to defraud New York State of sales tax revenue. The Indictment also charged the defendant with health care fraud in connection with his scheme to defraud NYSIF, in violation of 18 U.S.C. 1347 (Count Six). Additionally, Grimm was also charged with employing individuals who were not authorized to be employed in the United States in violation of 8 U.S.C. 1324a and 1324(a) (Count Twenty). Moreover, on January 30, 2013, Grimm testified falsely under oath during a deposition in Regino Perez and Carlos Perez v. Granny Sayz, Healthalicious, Bennett Orfaly and Michael Grimm, Docket No. 11 CIV 8736 (CM), a federal lawsuit in the United States District Court for the Southern District of New York (the Civil Action). (See PSR 11). The Civil Action had been brought by two of the defendants former employees at Healthalicious, alleging that he and others had violated federal and state labor laws while operating the restaurant. Specifically, and among other things, the defendant falsely testified that: (1) he had not paid Healthalicious employees in cash; (2) he had not generally used email in conducting Healthalicious business; and (3) that, to the extent he did use email, he had used a Yahoo email account which he could no longer access. (Id.). In fact, the defendant had accessed, and continued to access at the time of his testimony, an AOL email account which he did not identify during the deposition and which contained many emails regarding the restaurant. (Id.). The Indictment accordingly charged the defendant with two counts of perjury in violation of 18 U.S.C. 1623 (Counts Seventeen and Eighteen) and obstructing an official proceeding in violation of 18 U.S.C. 1512(c)(2) (Count Nineteen).


The Honorable Pamela K. Chen June 19, 2015 Page 3 B. The Defendants Guilty Plea and Stipulation of Facts On December 23, 2014, Grimm pleaded guilty to Count Four of the Indictment pursuant to a plea agreement with the government dated December 22, 2014 (the Plea Agreement). (PSR 1). That count charged the defendant with aiding and assisting the preparation of a false and fraudulent tax return filed with the IRS, specifically the United States Return of Partnership Income Form 1065 (Form 1065) for Healthalicious. In particular, Count Four alleged that the defendant willfully aided and assisted in the preparation of Healthalicious 2009 Form 1065 which substantially under-reported the restaurants gross receipts as well as the salaries and wages paid to the restaurants employees for that tax year. (Id.). As part of the Plea Agreement, Grimm stipulated and agreed to a Factual Basis for Guilty Plea, a stipulation of facts executed by the defendant on December 22, 2015 and incorporated in the Plea Agreement by reference (the Stipulation of Facts or Stip.). The Stipulation of Facts is attached to this letter as Exhibit A. In the Stipulation of Facts, the defendant admitted all of the conduct underlying the charges in the Indictment. Among other admissions, the defendant stipulated that he:

Oversaw the day-to-day operations of Healthalicious while a member in the restaurant from 2007 through 2009 (Stip. 1);

Concealed over $900,000 in Healthalicious gross receipts from the accountant

who prepared and filed the restaurants tax returns, who then used the false information the defendant provided to prepare and file false federal and state tax returns (Stip. 3);

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. The defendant caused the payroll processing companies to report to the IRS and the New York State Tax Department less than half of the wages Healthalicious actually paid its employees (Stip. 4);

Caused false personal federal and New York State income tax returns to be

filed with the IRS and the New York State Tax Department on his behalf (Stip. 5);

Under-reported Healthalicious payroll to NYSIF, lowering the monthly

workers compensation premium the restaurant paid to NYSIF (Stip. 6);

Caused numerous false documents to be filed with federal and state tax authorities between 2007 and 2010, including: (1) Form 941 Employers


The Honorable Pamela K. Chen June 19, 2015 Page 4

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 (Stip. 7);

Caused, in total, federal and New York State tax and NYSIF premium losses

between $80,000 and $200,000 (Stip. 8); and

Testified during the deposition in the Civil Action to things that, at the time, he knew to be false. Specifically, the defendant admitted that he falsely testified about how the restaurants workers were paid, the extent to which he used email in operating his business, and what email account he used (Stip. 10).

II. Argument For the reasons that follow, the Court should sentence the defendant to a term of incarceration within the advisory Sentencing Guidelines range of 24 to 30 months. A. Legal Standard

Sentencing courts have the authority to fashion a reasonable and appropriate sentence in each case. In so doing, a sentencing court must consider the Guidelines in formulating such a sentence. United States v. Booker, 543 U.S. 220, 259-62 (2005). The Guidelines should be the starting point and the initial benchmark when fashioning a sentence. Gall v. United States, 552 U.S. 38, 49 (2007). Next, a sentencing judge should consider all of the factors in 18 U.S.C. 3553(a) to determine the appropriate sentence in each case. Id. at 49-50. Those factors include, among other things, the nature and circumstances of the offense; the history and characteristics of the defendant; and the need for the sentence imposed to reflect the seriousness of the offense, to afford adequate deterrence to criminal conduct, and to protect the public from further crimes of the defendant. B. The Applicable Guidelines Range

For the reasons set forth below, the government respectfully submits that the Court should determine that the Guidelines range of imprisonment applicable to the defendant is 24 to 30 months, based upon an adjusted offense level of 17. (See PSR 65 (determining that the defendant falls within Criminal History Category I)).



1. Base Offense Level

The defendant has stipulated that under U.S.S.G. 2T1.4, 2T4.1 and 1B1.3, his appropriate base offense level is 16, reflecting a tax loss of more than $80,000 and less than $200,000. (See Plea Agreement, dated December 23, 2014 (the Plea Agreement) 2; Stip. 8). The Probation Department reached the same conclusion with respect to the applicable tax loss. (PSR 18).

2. Role Enhancement Adjustment

Section 3B1.1 of the Sentencing Guidelines provides for an increase in a defendants offense level based on his role in the criminal activity at issue.1 The Probation Department determined that a four-level enhancement under Section 3B1.1(a) is appropriate in this case. (PSR 21). The defendant submitted a letter to the Probation Department dated May 26, 2015 objecting to the PSRs Guidelines calculations (the Defendants PSR Objections Letter or Def.s PSR Objections Ltr.). Among other objections, the defendant asserts that no role enhancement should apply. The gravamen of the defendants argument to the Probation Department is that he exercised no control over the individual described in the Indictment as the Manager (see Ind. 17, 33), whom the defendant contends was his equal in running the restaurant from the beginning. (Def.s PSR Objections Ltr. at 1). The defendant also contended that it was the Manager, acting on behalf of another individual, a partner of Grimms, who instructed and trained the defendant regarding operating the restaurant, including its payroll processes. (Id.). As set forth below, the government respectfully submits that a two-level role adjustment under Section 3B1.1(c) is appropriate here, consistent with the governments Guidelines estimate in the Plea Agreement, in light of the defendants control over others involved in his criminal schemes.

In United States v. Cramer, the Second Circuit has identified the criteria for the application of the two-level role enhancement pursuant to Section 3B1.1(c).

Pursuant to the Guidelines, a defendants offense level may be increased by two levels if the defendant was an organizer, leader, manager, or supervisor of a participant in a criminal activity, where that activity involved fewer than five

1 Section 3B1.1(a) calls for a four-level increase in offense level where the

defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive, and Section 3B1.1(b) calls for a three-level increase in such cases where the defendant was a manager or supervisor (but not an organizer or leader). Section 3B1.1(c) requires a two-level increase in cases where the defendant was an organizer, leader, manager or supervisor in any criminal activity other than described in [subsections] (a) or (b).



participants. U.S.S.G. 3B1.1(c). A defendant is properly considered a manager or supervisor if he exercised some degree of control over others involved in the commission of the offense or played a significant role in the decision to recruit or to supervise lower-level participants. United States v. Hertular, 562 F.3d 433, 448 (2d Cir. 2009) (internal quotation marks omitted). Moreover, a defendant need only manage or supervise one other participant to warrant a role enhancement. See United States v. Garcia, 413 F.3d 201, 223 (2d Cir. 2005). If such management or supervision is found, the adjustment is mandatory. United States v. Burgos, 324 F.3d 88, 92 (2d Cir. 2003).

United States v. Cramer, No. 14-761-cr, 2015 WL 527565, *2 (2d Cir. Feb. 15, 2015) (unpublished summary order). Here, there are ample facts to support a finding that Grimm exercised control over others involved in his criminal activity, including the Manager. Accordingly, a two-level role enhancement under Section 3B1.1(c) is warranted and appropriate in this case. The defendants email communications with the Manager and others belie any claim that he and the Manager were equals and that the defendant was not a manager or supervisor in his criminal activity involving the operation of Healthalicious. For example, the email exchange between the defendant and the Manager on January 4, 2010, attached as Exhibit B, demonstrates the nature of their relationship and the Managers role in the defendants restaurant. In the emails, the Manager thanks the defendant for letting me be a part of your business and promises to do his best to support and help [the defendant] run a successful business (emphasis added). The defendant responds by noting that he was going to draft a document adding [the Manager] officially as a 10% partner in Granny Sayz llc, and states that he is very proud and fortunate to have you as a partner and as a friend.2

More generally, the emails attached as Exhibit C further underscore the defendants supervisory role. Between March and June 2010, the defendant sent eight emails to the Manager detailing payroll information for Healthalicious employees, including hours

2 It is noteworthy that these emails show that the defendant offered the Manager

a 10% ownership interest in Healthalicious in January 2010, in light of the fact that, in the defendants interview with the Probation Department, he stated that he sold his share in the restaurant for $75,000 in 2009. (See PSR 55). Moreover, at the January 2013 deposition in the Civil Action, the defendant testified under oath that he had sold his ownership interest in the restaurant in April 2009. Therefore, the defendant either offered the Manager an ownership interest that the defendant no longer owned or he lied about the date of the sale of his ownership interest during the deposition or during his interview with the Probation Department.


The Honorable Pamela K. Chen June 19, 2015 Page 7 worked, rates of pay, and significantly, the breakdown of off the books cash payments and payments made by paycheck that were sent from the defendant to the Manager. Such emails belie any claim that he did not exercise a degree of control over the Manager who participated in the defendants tax fraud schemes.

Similarly, in an April 3, 2010 email exchange attached as Exhibit D, the Manager updates the defendant on the restaurants operations and indicates that he is holding closing envelopes and the payroll journal as well as vouchers for checks. The defendant responds by thanking the Manager and tasks the Manager with follow-ups regarding Workers Comp and getting my name off the Health Dept. This is a priority. These communications are not the communications of equals, but rather of a supervisor receiving information from and directing his subordinate.

Furthermore, on February 6, 2010, in an email from the defendant to a campaign staffer discussing concerns regarding his Congressional race and attached here as Exhibit E, the defendant described his managerial role in the running of the restaurant. He wrote:

I left the FBI in 2006 and in 2007 I opened the restaurant with 2 partners. 1 partner opened 18 restaurants and had a successful chain in Manhattan that he franchised. I went in thinking that I know nothing about being in business and nothing about the restaurant business at all. So, I waited for the partners to step up and listen to the consulting chef and the people that worked for the partner's other restaurants. Nothing was getting done to my standards and finally I took over everything, even though I was originally only responsible for the accounting and legal. I learned how to cook, how to take orders and I worked like a dog to learn every aspect of the business myself and i put new systems in place. within 3 months of my deciding to take charge, we started to make money. To this day, my partner uses my systems in his other restaurant. moral of the story is that experts and consultants don't always know best for what I need to succeed. So why am I telling you this:

Because my instincts have never been wrong and in the past when I tried to do things the way others do them, I was unsuccessful and lost time and money.


The Honorable Pamela K. Chen June 19, 2015 Page 8 The defendants statement that he took over everything is consistent with the evidence supporting his supervisory role in the fraud schemes and belies any attempt to minimize the extent of his own criminal conduct.3

The Court should accordingly find that a two-level enhancement to the defendants base offense level pursuant to Section 3B1.1(c) for his role in managing the criminal schemes involving Healthalicious is appropriate.

3. Adjustment for Obstruction of Justice Section 3C1.1 of the Sentencing Guidelines provides for a two-level increase in the defendants offense level:

If (1) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice with respect to the investigation, prosecution, or sentencing of the instant offense of conviction, and (2) the obstructive conduct related to (A) the defendants offense of conviction and any relevant conduct; or (B) a closely related offense[.]

U.S.S.G. 3C1.1. The Probation Department concluded that this enhancement was applicable here based on the defendants false deposition testimony in the Civil Action in January 2013. (PSR 15, 22). In applying this enhancement, the PSR cites Application Notes 1 and 4(b) to Section 3C1.1. (PSR 15). Application Note 1 states that obstructive conduct that occurred prior to the start of the investigation of the instant offense of conviction may be covered by this guideline if the conduct was purposefully calculated, and likely, to thwart the investigation or prosecution of the offense of conviction. Further, Application Note 4(b) states that the obstruction adjustment should apply to conduct including: committing, suborning, or attempting to suborn perjury, including during the course of a civil proceeding if such perjury pertains to conduct that forms the basis of the offense of conviction. In order to apply the obstruction enhancement here, the Court must make specific findings that the defendant intentionally gave false testimony which was material to the proceeding in which it was given, that the testimony was made willfully, i.e., with the specific purpose of obstructing justice, and that the testimony was material to the instant

3 This contemporaneous email also suggests that the defendants claims to the

Probation Department that he often had pay his employees out of his own pocket and that he made no profits from the restaurant (PSR 55), are self-serving and unsubstantiated attempts to minimize his conduct.


The Honorable Pamela K. Chen June 19, 2015 Page 9 offense. United States v. Zagari, 111 F.3d 307, 329 (2d Cir. 1997). The Court therefore must find that not only was the defendants false testimony in the Civil Action was material as to that action, it must also find that it is material to this case. See id. The defendant has objected to the Probation Departments application of the obstruction enhancement. He argues that because his false testimony in the Civil Action predated the governments investigation of his crimes involving Healthalicious, there is no connection between the Civil Action and the offense conduct. (Def.s PSR Objections Ltr. at 4). The defendant therefore asserts that he had no specific intent to obstruct justice when he lied in his deposition. (Id. at 5 (claiming that the defendant did not believe, and should not have reasonably believed that his false statements in his deposition testimony would tangentially relate to the investigation that resulted in his arrest and conviction)). The defendant further argues that his lies in the deposition were immaterial to both the Civil Action and the tax fraud for which he was convicted. (Id. at 5-6). The defendants objections to the inclusion of the obstruction enhancement in the PSRs Guidelines calculation are wrong on both counts. a. The Defendants False Testimony Was Material Grimms perjury during the deposition was material to both the Civil Action and to the instant offense. The Civil Action was a collective action under the Fair Labor Standards Act brought on behalf of the plaintiffs and other similarly situated employees of the defendants restaurant alleging, among other things, that the defendant did not pay them the proper minimum and overtime wages. (See Exhibit F (Complaint filed Dec, 1, 2011 (Compl.))). Therefore any emails, such as those later obtained by the government through the execution of search warrants for the defendants AOL account, which identified other restaurant workers and their hours and rates of pay (see Exhibit C) would have been material with respect to identifying other potential class members and corroborating the plaintiffs claims that workers were not being compensates according to applicable labor laws. The defendants false statements under oath in the Civil Action regarding the extent to which he used email in operating his business and what email account he used (he claimed he used a Yahoo rather than an AOL email account (see Stip. 10)) were therefore designed to thwart discovery about material issues in the Civil Action. In addition, the Civil Action plaintiffs specifically alleged that they were paid in cash during 2010 and later in a combination of cash and check during a period in 2010 and 2011. (See Compl. 44, 58). In his September 27, 2012 Answer in the Civil Action, attached as Exhibit G, the defendant denied having sufficient knowledge or information to admit or deny the allegations in these paragraphs, and further denies any knowledge about the plaintiff Carlos Perez. (Answer 1, 44, 50-63). Had the defendant answered truthfully during the deposition, i.e., if he admitted that he paid his workers in cash, he would have been admitting certain of the plaintiffs allegations. Moreover, had the defendant been truthful, he would have identified a source of discoverable material his AOL email account


The Honorable Pamela K. Chen June 19, 2015 Page 10 which contained emails that, among other things, included payroll spreadsheets sent to the Manager that included both the names Carlos and Regino, and listed rate of pay for those two individuals as $4.60 per hour: $0.05 per hour less than the plaintiffs alleged in the Complaint. (See, e.g., June 8, 2010 and June 15, 2010 emails from Grimm to the Manager attaching payroll spreadsheets, attached hereto as part of Exhibit C). These spreadsheets also showed that Carlos and Regino were being paid in cash. The defendants current claims that his false statements designed to avoid damning admissions and obfuscate discoverable material that corroborated central claims by the plaintiffs and made plain that the defendant was not been truthful in his filed Answer were not material to the Civil Action are accordingly wholly without merit. Furthermore, it is clear that the defendants false deposition testimony was material to his offense conduct. The defendants maintenance of an off the books cash payroll was central to his tax fraud. It enabled him to evade taxes on the wages paid to his workers and hide the existence of his workers from NYSIF. Far from being tangential to his offense conduct, the defendants cash payroll and his associated opaque recordkeeping was a centerpiece of his criminal fraud scheme. b. The Defendant Intended to Obstruct Justice Grimms perjury in the deposition was also intended to obstruct justice. Application Note 1 to Section 3C1.1 expressly contemplates that obstructive conduct prior to the start of the investigation of the offense conduct may be covered by the guideline if purposefully calculated, and likely, to thwart the investigation or prosecution of the offense of conviction. The defendant was well aware that he was the subject of a government investigation in advance of his deposition in the Civil Action. Press accounts from 2012 support this conclusion. In one article, attached as Exhibit H, the defendants then-counsel in connection with the investigation was quoted regarding the defendants ownership interest in the restaurant, approximately four months before the defendants deposition in the Civil Action. (See Exhibit H at p. 2). Simply put, it strains credulity that the defendant, a former law enforcement agent, attorney and a sitting member of the House of Representatives, did not believe that admitting criminal conduct or identifying discoverable materials in the Civil Action that would reveal his criminal conduct would likely result in an investigation or otherwise influence an existing government inquiry. Accordingly, the defendants conduct was willfully designed both to frustrate and obstruct the civil plaintiffs lawsuit and to thwart investigation into his conduct at the restaurant conduct which ultimately became the subject of the instant investigation. The Court should find that the defendants perjury during the Civil Action was material to both that action and this case, and that his lies were the product of his intent to obstruct justice. Accordingly, the two-point obstruction enhancement to the defendants Guidelines offense level set forth in Section 3C1.1 is applicable here.



* * * For all of the foregoing reasons, the Court should apply a two-level role enhancement pursuant to U.S.S.G. 3B1.1(c) and a two-level obstruction enhancement pursuant to U.S.S.G. 3C1.1, resulting in an adjusted offense level of 17 and a Guidelines sentencing range of incarceration of 24 to 30 months. C. Section 3553(a) Analysis

For the reasons below, a consideration of the sentencing factors set forth in Title 18, United States Code, Section 3553(a) supports imposition of a term of incarceration within the advisory Guidelines range.

1. Nature and Circumstances of the Offense

Grimm chose lies and deception over honest dealings with authorities and his

employees quarter after quarter, and year after year while he owned and operated Healthalicious. His fraud, in which he hid over $900,000 in the restaurants gross receipts, was designed to conceal his income and enrich himself. The defendant admitted that he hired unauthorized workers whom he paid off the books in cash, took deliberate steps to obstruct the federal and state governments from collecting taxes he properly owed, cheated New York State out of workers compensation insurance premiums, caused numerous false business and personal tax returns to be filed for several years, and that he lied under oath about his crimes. The defendants fraudulent conduct was not by happenstance or unexpected opportunity. It was fraud by design. It involved tracking workers hours, for which workers were paid entirely off the books, versus those paid only partially in cash, and ensuring that his weekly cash payroll was prepared and distributed. The defendants schemes required him to take the step of fabricating his restaurants monthly gross receipts in e-mails to his accountant. Had the defendant simply printed out the sales reports from his cash register, his fraud would have been exposed.

When called to account for his actions in running Healthalicious, the defendant lied under oath. He lied to frustrate the Civil Action being pursued by his former employees and lied in the hope that his extensive fraudulent conduct at the restaurant would escape the attention of investigators. The defendants offense is serious precisely because it reveals a pattern and repeated practice of fraud and deception. The defendants criminal conduct involves years of fraudulent statements and, when confronted with his fraud, his considered course of action was to cover up his crimes with additional lies. Accordingly, the serious nature of the defendants offenses weighs in favor of an sentence of incarceration within the applicable Guidelines range. See 18 U.S.C. 3553(a)(1), (a)(2)(A).



2. History and Characteristics of the Defendant

Grimms history and characteristics also favor a sentence within the Guidelines range. See 18 U.S.C. 3553(a)(1). There is no doubt that the defendants history of public service as a member of the United States Marine Corps, an FBI special agent, and a member of the House of Representatives, is laudable and deserves consideration by the Court. The defendant, however, was not a simple small businessman overwhelmed by the complexity of the tax laws or one confused by the accounting necessary to run a restaurant. He is sophisticated. He graduated from law school and was admitted to practice in New York and Connecticut. (PSR 50). He conducted fraud investigations on Wall Street during his time as a FBI special agent. (PSR 7). Even now, in the wake of his conviction, he earns $10,000 per month as a consultant to start-up companies. (PSR 52).

The defendant chose to run his business fraudulently from its inception. His business practices were designed to hide the restaurants income and his subsequent and repeated lies were designed to conceal the fraud from federal and New York State authorities. Further, when confronted, the defendants first and consistent instinct has been to lie. He lied under oath in the Civil Action. When he was indicted, he feigned indignation at being the target of an improper government investigation. (See Exhibit I at 4 (describing the governments investigation as a vendetta and a witch hunt)). Even his statements to the Probation Department in advance of sentencing, which sought to diminish his criminal conduct and place the responsibility for his crimes on others (see supra, pp. 6 n.2 and 8 n.4), illustrate that he has failed to fully come to terms with his criminal conduct. 3. Need to Promote Respect for the Law, Provide Just Punishment and Afford Adequate Deterrence

Moreover, a sentence of incarceration within the Guidelines range would be sufficient, but not greater than necessary, to meet the goals of sentencing. As discussed above, such a sentence is appropriate given the nature of the criminal conduct and the defendants characteristics. Further, it will serve the goals of specific and general deterrence. See 18 U.S.C. 3553(a)(2).

The defendants offense conduct is particularly troubling in light of the fact that he held positions as an FBI special agent and as a member of Congress in which he swore an oath to support and defend the laws of this country. As such, a term of incarceration within the applicable Guidelines range will promote a respect for the law that the defendants conduct has revealed is plainly absent in him.

Furthermore, a Guidelines sentence will have a meaningful deterrent effect. A significant prison sentence will make clear to the defendant that engaging in a pattern of lying and cheating will be met with a meaningful punishment. An incarceratory sentence


The Honorable Pamela K. Chen June 19, 2015 Page 13 will also signal to other business owners that engaging in similar fraudulent conduct will be met with significant consequences. III. Restitution Pursuant to the terms of the Plea Agreement, the defendant agreed to pay restitution to the IRS and the New York State Tax Department in connection with Healthalicious and his personal federal and state tax liabilities, plus interest and penalties, to be calculated at the time of sentencing. The defendant also agreed to pay restitution to NYSIF in connection with the restaurants workers compensation insurance premiums for the years 2007 to 2010 in an amount to be calculated at the time of sentencing. (Plea Agreement 6). The government respectfully requests that the Court order restitution in the following amounts: (i) $6,700 in unpaid premiums to NYSIF, (ii) $78,211 to the IRS (consisting of lost personal income tax revenue and lost employment tax revenue) and (iii) $110,304.90 to the New York State Tax Department (consisting of lost personal income tax revenue and lost sales tax revenue). In accordance with the Plea Agreement, the government requests that the Court order the defendant to pay interest and penalties on the amounts due to those entities.4

4 Both the IRS and New York State Tax Department have informed the

government that it is their standard procedure to determine interest and penalties on the loss amounts, in consultation with the defendant and his counsel, subsequent to the imposition of judgment.


The Honorable Pamela K. Chen June 19, 2015 Page 14 IV. Conclusion For the foregoing reasons, the government respectfully submits that the Court should sentence Michael Grimm to a term of incarceration within the applicable advisory Sentencing Guidelines range of 24 to 30 months.

Respectfully submitted,

KELLY T. CURRIE Acting United States Attorney

By: /s/

James D. Gatta Nathan Reilly Assistant U.S. Attorneys

cc: Defense Counsel (by ECF) Clerk of the Court (PKC) (by ECF) Patricia Sullivan, Senior U.S. Probation Officer (by e-mail)


Case 1:14-cr-00248-PKC-RML Document 94-1 Filed 06/19/15 Page 1 of 7 PageID #: 528

EXHIBIT I


grimm sentencing letter

Documents

new york state tax department

defendant michael grimm

state taxes

state payroll taxes

count indictment

false federal tax filings

restaurants federal

sentencing guidelines