By John Estridge
The following article is about charges filed against 11 individuals in Dearborn County Circuit Court. The people charged are innocent until proven guilty in a court of law.
Eleven people who include local restaurant owners and others affiliated with the restaurants have been charged with numerous felonies in Dearborn County having to do with allegedly stealing Social Security numbers, tax evasion and human trafficking.
On June 21, 2018, search warrants were served on numerous Mexican restaurants in five area counties including El Reparo restaurants in Franklin and Union counties. Those search warrants were part of an investigation that dated back to Feb. 11, 2016 and involved Homeland Security, Indiana State Excise, Indiana Internal Revenue Service and the Social Security Administration among others.
The lead agent on the investigation is Indiana State Excise Officer Christopher Strouse with District Four located in Seymour. He filed the Information and Amended Affidavit of Probable Cause in the Dearborn County Circuit Court.
According to the Information, those charged include: Sarbelio Leon, 44, Rushville; Juan Montanez, 36, Lawrenceburg; Felipe Montanez, 38, Brookville; Gregorio Montanez, 39, Lawrenceburg; Joel Leon, 32, Brookville; Jose Leon, 43, Liberty; Gregorio Leon Sr., 65, Greensburg; Rosendo Leon, 54, Rushville; Oracio Leon, 33, Rushville; Jessica Leon, 23, Liberty; and Ricardo Leon, 20, Liberty.
Not everyone was charged with the same felonies. Among the felony charges listed are: Corrupt business influence, as a Level 5 Felony; Conspiracy to commit corrupt business influence, as a Level 5 felony; three counts of Theft, as Level 5 Felonies; three counts of Conspiracy to commit theft, as Level 5 Felonies; three counts of Money laundering, as Level 5 Felonies; three counts of Conspiracy to commit money laundering, as Level 5 Felonies; Perjury, as a Level 6 Felony; Conspiracy to commit perjury, as a Level 6 Felony; Forgery, as a Level 6 Felony; Conspiracy to commit forgery, as a Level 6 Felony; Conspiracy to commit human trafficking, as a Level 5 Felony; Taxpayer record keeping requirement, as a Level 6 Felony; two counts of Failure to remit add-back deduction, as Level 6 felonies; and Conspiracy to destroy taxpayer records, as a Level 6 Felony.
Ownership of the various restaurants was explained in the Affidavit of Probable Cause.
Los Primos, of Bright, is owned by four people who each have 25 percent interest. They include: Sarbelio Leon, Juan Montanez, Felipe Montanez and Gregorio Montanez. El Reparo, of Brookville, is owned by Sarbelio Leon, 44 percent; Jose Leon, 43 percent; and Joel Leon, 13 percent. El Reparo, of Liberty, is owned by two men, each with 50 percent ownership. They are Sarbelio Leon and Jose Leon. El Reparo, of Greensburg, is owned by two men. They are Sarbelio Leon, 75 percent; and Gregorio Leon, 25 percent. El Reparo, of Rushville, is owned by three men. They are Sarbelio Leon, 46.7 percent; Rosendo Leon, 33.3 percent; and Oracio Leon, 20 percent; and Mez Cal, of Rushville, is owned by two men. They are Sarbelio Leon, 50 percent; and Rosendo Leon, 50 percent.
Strouse initiated the investigation when he subpoenaed records from the Indiana Department of Revenue of Mexican restaurants Los Primos, Mezcal Bar and Grill and El Reparo. He allegedly found numerous employees with possible fraudulent Social Security numbers.
Strouse’s next step was to contact the Social Security Administration/Office in the form of Special Agent Marcy Ralston. They compiled a list of all the associated SS numbers. Prior to the search warrants being served in June 2018, Ralston sent a report to Strouse on May 31, 2018, The list alleged there were 223 invalid SS numbers used on IDR tax documents. Fifty-three of the SS numbers were not on file, which means they have not been issued to anyone while 170 of the SS numbers did not match the names of the people to whom the numbers were issued.
On the day the search warrants were served, United States Immigration and Customs agents, as well as agents from the Department of Homeland Security, detained several people. That included: Oscar Montanez-Chavez, 36, Gregorio Montanez-Chavez, 39, 25 percent owner; Juan Montanez-Chavez, 36, 25 percent owner; Manuel Wilmer-Hosbel, 20, and Mario Ramirez-Valey, 22, from the Los Primos Mexican Restaurant at Lawrenceburg; Gustavo Gabriel-Matias, 30, and Damaso Aguilon-Tomas, 42, from the Brookville El Reparo Restaurant; Filemon Bermudez-Cano, 37, at the Liberty El Reparo Restaurant; Jesus Ixtepan-Malaga, 30, Hector Xolio-Toto, 39, Guadencio Mezo-Mazaba, 23, and Rocael Sebastian-Ramos, 25, at the Greensburg El Reparo Restaurant; Ober Jimenez-Agustin, 23, and Fernando Perez-Serrano, 26, at the Rushville El Reparo Restaurant; and Martin Lara-Cornelio, 26, at the Rushville MezCal Bar and Grill.
Agents also seized five vehicles: a 2015 Chevrolet City Express utility van, a 2015 GMC Denali 2500 truck, a 2015 Chevrolet Suburban, a 2016 Chevrolet 1500 truck and a 2014 Toyota Sienna van. All of the vehicles were registered to different restaurants.
Following the serving of the search warrants, tax auditors with the Indiana Department of Revenue went over the paperwork. Sarbelio Leon allegedly told investigators guest check tickets were routinely destroyed. The only guest check tickets found were for the month of June 2018 from the Rushville restaurant, and Strouse said they were found at the home of Sarbelio Leon.
Using those guest check tickets, they were compared with credit card receipts and cash register tapes. Strouse said the following discrepancies were found: several guest check tickets were not entered into the cash register, credit card tickets were not entered into the cash register and guest check tickets were missing when arranged in sequential order.
Strouse also said when the credit card receipts were compared with the cash register rolls for Reparo Brookville, Inc., The Leones, Inc. of Rushville and the Montanez Group of Bright, auditors found credit cards were routinely not being entered into the cash register.
According to Strouse, there are problems with the restaurants’ goods markup ratio. According to smallbusiness.chron.com, the goods markup ratio is the ratio of gross profit to sales price. For instance, if one has an item that costs $4 and it sells for $8, the gross profit is $4, which is the markup. The markup percentage equals the gross profit divided by the sales price, or four divided by eight, which is .5, or 50 percent.
Strouse said the restaurants’ goods markup ratio “was found to be between 1.84 and 2.81, which is well below the anticipated markup ratio of between four and six for restaurants selling Mexican cuisine.”
Two IDOR auditors ate at Centinela, Inc. in Greensburg on Feb. 4, 2018. When paying their bills for the meals, they noticed the cash register drawer was left open between transactions. They surmised the cash register was not recording at least one of the meals that night.
The auditors allege the under recording of transactions was happening at all of the affected restaurants, which would lead to the underpayment of sales tax.
Using a formula, auditors determined the restaurants in Brookville, Rushville, Greensburg, Liberty and Bright under reported sales from 2015-2017, and a total of $491,794.93 in sales tax is due to the state. According to the Affidavit of Probable Cause, this is considered theft.
With income tax, auditors allege the restaurants “failure of an income tax add-back for workers hired without legally being eligible to work in the United States.”
An Indiana Code is quoted in the affidavit: “add the amount of any trade or business deduction allowed under the Internal Revenue Code for wages, reimbursements, or other payments made for services provided in Indiana by an individual for services as an employee, if the individual was, during the period of service, prohibited from being hired as an employee under 8 U.S.C. 1324a.”
According to the Affidavit for Probable Cause, a large portion of the employee Social Security numbers listed on the employee W2s affiliated with the restaurants were not assigned to those employees. Two owners – Felipe Montanez-Chavez and Gregario Montanez — also allegedly used Social Security numbers that were not assigned to them.
“Many of the workers and/or owners would file their tax returns using a federally assigned Individual Taxpayer Identification Number and did not use the Social Security number listed on their W-2 on their tax returns,” according to the affidavit.
Per law “each of the (restaurant) owners has signed state and federal documents declaring them to be true and correct. These include: IT-65 and/or IT-20S, and/or W-2s and/or I-9s and/or UC-1 and/or ATC forms,” according to the affidavit.
Auditors determined the under reported amounts from not applying the add back is $3,967,884, meaning the owners allegedly owe an additional $192,292 in Indiana state and county income tax, according to the affidavit.
Then, the investigators allegedly found records resulting in charges of human trafficking.
According to the affidavit, Strouse stated in previous similar investigations, it has been found “undocumented aliens are often brought to the United States to work in Mexican Restaurants. Generally, expenses are paid to facilitators known as coyotes to bring undocumented aliens across the border. Typically, the expense of the Coyote and other expenses related to travel and securing false documentation is advanced on behalf of the undocumented alien who then works off the debt at the restaurant involved.” (Note capitalization is that of the document.)
Strouse said during the course of analyzing the evidence taken during the issuance of the search warrants, he located and examined a composition notebook at the Liberty El Reparo. The name Ricardo Leon was handwritten on the front of the notebook.
“One of the sheets of the notebook contained the name of ‘Gabriel’ at the top of a page and included handwritten dates and dollar amounts together with a brief description of the money entries on the sheet. The handwritten entries related to reimbursement of travel expenses and other personal expenses paid on behalf of ‘Gabriel.’ Expenses documented included travel and lodging expenses, dental expenses, a cell phone purchase and the purchase of an I-9 resident card and Social Security card. The expenses were totaled on the page and amounted to $12,919.
“Receipts for the handwritten expenses paid were located inside the composition notebook. Receipts were found covering money sent to Mexico and Texas through MoneyGram, Western Union and Wal Mart Money transfers. Jose Leon, Jessica Leon Angel and Ricardo Leon were all listed as senders of money matching the transactions recorded in the notebook.
“The dates of the handwritten entries in the notebook matched the dates on the receipts,” according to the affidavit. “Inside the notebook, a yellow piece of paper was also located containing four handwritten entries for payments which appear to have been made by ‘Gabriel’ as reimbursement for the money forwarded to bring him to the United States. These payments totaled $2,045 through May 21, 2018. Another sheet of paper was located inside the back cover of the notebook which contained handwritten entries wherein the payments made through May 30, 2018, leaving a balance due of $10,874.49.”
One of the ledger entries was for Dental Care in Oxford, Ohio. Strouse went to that business and found the services for a male with the first name Gabriel was paid by credit card, and Jose Leon’s name was on the credit card receipt.
Strouse then checked the employee records from El Reparo of Liberty and found there was an employee by the name Gabriel whose last name matched the name of the one who received dental service at Dental Care in Oxford, Ohio. Strouse got a copy of that employee’s Permanent Residence Card and Social Security number.
These were sent to the Social Security Administration where it was allegedly determined there is no record of that Social Security number. However, W-2 records indicate that employee was employed at El Reparo in Liberty.
Charges
Sarbelio Leon, Juan Montanez, Felipe Montanez, Gregorio Montanez, Joel Leon, Jose Leon, Gregorio Leon Sr., Rosendo Leon and Oracio Leon: Corrupt business influence, as a Level 5 Felony; Conspiracy to commit corrupt business influence, as a Level 5 Felony; three counts of Theft, as Level 5 Felonies; three counts of Conspiracy to commit theft, as Level 5 Felonies; two counts of Money laundering, as a Level 5 Felonies; and two counts of Conspiracy to commit money laundering, as Level 5 Felonies.
Sarbelio Leon, Juan Montanez and Felipe Montanez: Perjury, as a Level 6 Felony and Conspiracy to commit perjury, as a Level 6 Felony.
Sarbelio Leon, Juan Montanez, Felipe Montanez and Gregorio Montanez: Forgery, as a Level 6 Felony; and Conspiracy to commit forgery, as a Level 6 Felony.
Sarbelio Leon, Jose Leon, Jessica Leon and Ricardo Leon: Conspiracy to commit human trafficking, as a Level 6 Felony.
Sarbelio Leon, Rosendo Leon, Oracio Leon, Jose Leon, Joel Leon, Juan Montanez, Felipe Montanez and Gregorio Montanez:, Taxpayer record keeper requirement, as a Level 6 Felony.
Sarbelio Leon, Felipe Montanez, Juan Montanez and Gregorio Montanez: Failure to remit add-back deduction, as a Level 6 Felony.
Sarbelio Leon, Gregorio Montanez, Rosendo Leon, Oracio Leon and Joel Leon: Failure to remit add-back deduction, as a Level 6 Felony.
Sarbelio Leon, Rosendo Leon, Oracio Leon, Jose Leon, Joel Leon, Felipe Montanez, Juan Montanez and Gregorio Montanez: Conspiracy to destroy taxpayer records, as a Level 6 Felony.
In Indiana, if convicted of a Level 5 Felony, a person can receive a sentence of one to five years in prison. The sentence for a Level 6 Felony conviction is between six months and two-and-a-half years in jail.