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Restaurant owners charged with money laundering, tax evasion

By AMANDA BROWNING - Daily News

 GREENSBURG — Six part owners in a chain of southeastern Indiana Mexican restaurants have been charged with multiple felonies following an Indiana State Excise Police investigation which began in February 2016.

According to court documents, Sarbelio Leon, 42, of Rushville; Juan Montanez, 35, of Lawrenceburg; Felipe Montanez, 37, of Brookville; Gregoria Montanez, 37, of Lawrenceburg; Joel Leon, 31, of Brookville; and Jose Leon, 42, of Liberty, were all investigated for criminal activity said to have occurred at the restaurants in which the men are all part owners.

The locations in question are Los Primos Mexican Restaurant in Bright (Dearborn County), El Reparo Mexican Restaurant in Greensburg, Liberty (Union County), Rushville and Brookville (Franklin County); and Mezcal Bar and Grill in Rushville.

The Greensburg location is owned by Sarbelio Leon (75 percent) and Gregorio Leon (25 percent), though the ownership interest changed in 2017.

According to a probable cause affidavit filed in Dearborn Circuit Court Feb. 7, the charges include:

• Corrupt Business Influence, level 5 felony

• Conspiracy to Commit Corrupt Business Influence, level 5 felony

• Theft, level 5 felony

• Conspiracy to Commit Money Laundering, level 6 felony

• Perjury, level 6 felony (Does not apply to Gregorio, Joel, or Jose)

• Taxpayer Record Keeping Requirements: False Entries, level 6 felony (Does not apply to Joel or Jose)

• Failure to Remit Add-Back Deduction, level 6 felony (Does not apply to Joel or Jose)

Indiana State Excise Police Officer Christopher Strouse’s report states the restaurant owners all operated in a similar manner, which included an “ongoing pattern of criminal activity” through undocumented cash sales, sales tax collected and not remitted to the Indiana Department of Revenue, and numerous employees using fraudulent Social Security numbers in their employment records.

In May 2018, Strouse received a report from Special Agent Mary Ralston of the Office of Inspector General stating 223 invalid Social Security numbers were used by employees at the various restaurants to file tax documents with the Indiana Department of Revenue from 2013 through 2017. Ralston’s report identified 53 Social Security numbers which are not on file or were never issued. The remaining 170 Social Security numbers on the list include names which do not match the issued number.

Local, state, and federal authorities raided the restaurants in question in June 2018, executing 25 search warrants in the five counties involved in the investigation.

A total of 15 people were detained by United States Immigration, Customs Agents, and the Department of Homeland Security on the day of the search.

Evidence seized in the June 2018 raid included bank records, tax records, food receipts, alcohol invoices, cash register receipts, tape receipt rolls, guest checks, and daily ledgers.

Strouse said the records were not complete and that “all the businesses failed to maintain guest checks and other source documents as required by statute.”

Using the restaurant industry benchmark cost of goods markup ratio, it was determined that a total of $491,794.93 in unpaid state sales tax was amassed at all locations from 2015 through 2017. The Greensburg location owes $135,202.03, according to the report.

Additionally, a review of the restaurants’ income tax records showed a failure of an income tax add-back for workers hired without the legal eligibility to work in the United States. While examining W-2 and employment records, investigators determined a large number of the restaurants’ employees were using invalid Social Security numbers. Further investigation showed three of the owners using Social Security numbers which were not assigned to them.

Indiana code states the wages paid to workers are not deductible on income tax returns and should be included as an add-back on Indiana tax documents. Strouse’s report indicates the underreported amount from not reporting this was $3,967,884 in income. This resulted in $192,292 of additional Indiana state and county income tax.

More charges and arrests are expected in this case.