TOLEDO, Ohio – Eighteen people were charged Wednesday morning in a criminal scheme involving seven IHOP restaurants in northwest Ohio and Indiana that resulted in losses of more than $3 million. The charges follow a joint investigation by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), the FBI, the Internal Revenue Service, the Ohio Bureau of Worker's Compensation and the Toledo Police Department.
All eighteen people were indicted for their roles in a series of criminal schemes, including money laundering, identity theft, alien harboring and arson.
"Collaboration with law enforcement at all levels is a powerful tool in the fight against organized criminal groups," said Brian M. Moskowitz, special agent in charge for HSI Michigan and Ohio. "HSI is committed to leveraging its unique statutory authorities and investigative expertise to bring down groups involved a myriad of criminal activities as have been alleged in this case."
"These defendants turned pancakes houses into crime dens," said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio. "This indictment lays out a menu of crimes ranging from harboring undocumented workers, to identity theft, to money laundering to insurance fraud."
Stephen D. Anthony, Special Agent in Charge of the FBI's Cleveland field office said, "Today's arrests are the culmination of years of joint investigative work by the FBI and its partners to root out the corporate fraud outlined in the indictment. The investigation of fraudsters who chose to operate their businesses through the manipulation of financial reporting, money laundering and other illegal methods, will continue to be a top FBI priority."
Among those indicted are Tarek "Terry" Elkafrawi, who from December 2003 through the present owned seven IHOP restaurants in Evansville, Indiana, and Holland, Toledo, Findlay, Perrysburg and Lima, Ohio.
According to the 64-count indictment, Elkafrawi, along with Autumn Lee Tangas and others, used their control of the restaurants to fraudulently manipulate sales figures, salaries and payrolls to evade taxes, avoid paying royalties and illegally divert money from the IHOP franchises to themselves.
Additionally, Elkafrawi employed about 200 illegal immigrants to work at his restaurants, most of whom used fraudulent or stolen identities while working. He and others employed several people to arrange for the arrival of the workers. If the workers had false paperwork or documentation, the manager would accept it without verification. If they did not have documentation, Elkafrawi and others would arrange for Carlos Gamboa, Jose Leon-Gonzales and others to obtain fraudulent documentation for the workers, according to the indictment.
Elkafrawi also arranged for managers to cash payroll checks for the illegal workers. Elkafrawi and others assigned second identities to workers to avoid paying overtime wages and reduce the restaurants' payments to the Ohio Bureau of Workers Compensation. They were also able to underpay the undocumented workers because they knew the workers would not complain or report them to law enforcement, according to the indictment.
Overall, Elkafrawi and others were able to generate $1.2 million in unreported income by manipulating wages and underreporting income of undocumented workers, according to the indictment.
In 2008, the Findlay IHOP restaurant burned as the result of arson. The fire was started by Jose Leon-Gonzales at the direction of Elkafrawi and Mazen Khdeer to facilitate an insurance fraud scheme. Elkafrawi claimed approximately $1.3 million in fraudulent insurance claims, based in part on inflated payroll claims, lost income and invoices, according to the indictment.
Khdeer, not charged herein, used two identities to split his salary from the restaurants between two paychecks, creating lower reportable income for both. Using those identities, he claimed approximately $140,000 in Medicaid payments and $35,000 in food stamps and welfare benefits from the state of Ohio. Khdeer and Elkafrawi created a false property company to which Khdeer paid "rent" to Elkafrawi to show a lower income. Elkafrawi and Khdeer sanctioned and encouraged employees to file fraudulent claims, according to the indictment.
Elkafrawi, Kelly Elkafrawi, Khdeer and Tarek Eid Omar also engaged in a series of real estate transactions to hide and conceal the source of the funds derived from their schemes. Elkafrawi purchased homes at 10400 Tecumseh Drive in Newburgh, Indiana, and 14745 Prairie Lake Drive in Toledo, using laundered assets, according to the indictment.
Prosecutors are seeking to seize the Indiana home, as well as more than $37,000, the seven IHOP franchises, a dozen bank accounts and several vehicles, according to the indictment.
This case is being prosecuted by Assistant U.S. Attorneys Duncan T. Brown and Gary D. Arbeznik.
An indictment is only a charge and is not evidence of guilt. The defendants are entitled to a fair trial in which it will be the government's burden to prove guilt beyond a reasonable doubt.