By Bernard Vaughan and Aruna Viswanatha
NEW YORK/WASHINGTON (Reuters) - Republican Representative Michael Grimm from New York was indicted on fraud charges in connection with a Manhattan fast-food restaurant he partly owned, according to court documents unsealed on Monday. He faces up to 20 years in prison if convicted.
The charges follow a federal probe of Grimm's fundraising that has been going on for more than two years, and Brooklyn U.S. Attorney Loretta Lynch told reporters a "larger investigation" was ongoing.
Grimm is a former Marine who subsequently worked as an FBI agent. He was elected in 2010 with a wave of conservative "Tea Party" Republicans advocating low taxes and government spending, but built a moderate voting record.
In January, he generated headlines when he threatened to throw a television reporter off a balcony after an interview in the U.S. Capitol on the night of President Barack Obama's State of the Union address. The incident was caught on camera.
Speaking to reporters after a court hearing on Monday, Grimm vowed to return to work and "fight tooth and nail until I'm exonerated."
He notified House Speaker John Boehner in a letter on Monday that he would step down from the House Financial Services Committee "in light of recent events," but added that "upon a successful resolution of pending legal matters my intention is to resume said position as an active member of the committee."
A spokesman for Boehner said the speaker "believes Rep. Grimm's decision is appropriate under the circumstances."
Prosecutors said Grimm and the health food restaurant, Healthalicious, under-reported wages paid to workers, many of whom did not have legal status in the United States. They said many of the wages were paid in cash.
Grimm and the restaurant also concealed from federal and New York state authorities more than $1 million in gross receipts, prosecutors said.
The 20-count indictment says Grimm oversaw the restaurant's day-to-day operations between 2007 and 2010, just after he left the FBI. He subsequently sold his stake in the restaurant. The indictment also charges Grimm with lying under oath in January 2013 about his role in the restaurant.
Grimm, who represents a district that covers Staten Island and southern Brooklyn, is free on a $400,000 bond.
He appeared briefly in federal court on Monday dressed in a dark gray suit and striped blue tie. He stood with his hands folded in front of him as he responded to a judge's questions.
"As a former FBI agent, Representative Grimm should understand the motto: fidelity, bravery, and integrity. Yet he broke our credo at nearly every turn," said George Venizelos, who runs the FBI's New York office.
"Representative Grimm lived by a new motto: fraud, perjury, and obstruction," Venizelos said.
One of Grimm's fundraisers, Diana Durand, was arrested in January on charges that she illegally funneled more than $10,000 to his campaign. On Friday, a grand jury indicted Durand on charges that she made campaign contributions that exceeded federal caps in 2010.
It was the third scandal to hit House Republicans in recent months.
In April, married Representative Vance McAllister of Louisiana was caught on camera passionately kissing a married staffer in his office. He said on Monday he would not seek re-election to a second term. In January, Trey Radel of Florida resigned after pleading guilty to buying cocaine.
The nonpartisan Cook Political Report, which tracks congressional races, changed its rating on Monday of Grimm's re-election race against former New York City Councilman Domenic Recchia to "lean Democrat" from "lean Republican."
(Reporting by Bernard Vaughan in New York and Aruna Viswanatha and Thomas Ferraro in Washington; Editing by David Storey, Peter Cooney and Bernard Orr)