U.S. Rep. Michael Grimm was arrested Monday and pleaded not guilty to a 20-count federal indictment that includes charges of mail fraud, wire fraud and tax fraud.
The Staten Island Republican was expected to be released on $400,000 bail.
He is charged with engaging in schemes to underreport wages for restaurant workers, including some who were in the country illegally. He is accused of concealing more than $1 million in sales and wages.
Authorities said that when he was deposed by an attorney representing former employees in a lawsuit, Grimm lied under oath about his allegedly fraudulent business practices.
There was no immediate response to phone and email messages left Monday with Grimm's lawyer.
Authorities allege the fraud occurred from 2007 to 2010. Grimm, a former FBI agent who spent a decade working for the bureau before leaving in the mid-2000s to pursue private business interests, was elected in 2010 and took office in 2011.
"Rep. Grimm billed himself as a patriot and an American hero," said George Venizelos, head of the FBI's New York office. "... But Rep. Grimm was anything but an upstanding citizen. He cheated, evaded and then lied."
For two years, investigators had been examining his fundraising in the 2010 race and his involvement in the Manhattan restaurant. A House Ethics Committee announced in November that Grimm was under investigation for possible campaign finance violations.
"From the beginning, the government has pursued a politically driven vendetta against Congressman Grimm and not an independent search for the truth," Grimm's attorney, William McGinley, said in a statement Friday. "Congressman Grimm asserts his innocence of any wrongdoing."
After the House Ethics Committee announced last fall that Grimm was under investigation, the panel said it would defer its inquiry because of a separate Department of Justice investigation.
Grimm, 44, made headlines in January after confronting a New York City cable news station reporter who tried to question him about a long-running FBI investigation into campaign finance while they were on a balcony in the Capitol.
After reporter Michael Scotto finished his report, Grimm stormed back, leaned into him and said: "Let me be clear to you. If you ever do that to me again, I'll throw you off this (expletive) balcony."
During the 2010 race, Grimm acknowledged receiving $250,000 to $300,000 in contributions from followers of an Israeli rabbi, Yoshiyahu Yosef Pinto. Some members of Pinto's congregation subsequently said they made tens of thousands of dollars in illegal contributions, including gifts passed through straw donors.
Grimm has denied knowledge of any improprieties. The Israeli businessman who had served as Grimm's liaison to Pinto's followers, Ofer Biton, pleaded guilty in August to an immigration fraud charge.
Three days after that guilty plea, the FBI filed a sealed criminal complaint accusing a Houston woman named Diana Durand, who had been romantically involved with Grimm, of using straw donors to make illegal campaign contributions.
On Friday, Durand was indicted in Brooklyn on those charges. She also was charged with making false statements to the FBI when she said she didn't reimburse straw donors for their contributions to Grimm's campaign.
Grimm once was an investor in an Upper East Side health food restaurant that has been accused in a lawsuit of cheating its workers and fined by the state for failing to carry workers' compensation. He has said he sold his interest in 2009.
A House member who has been indicted does not lose any rights or privileges under federal law or the chamber's rules, according to a report by the nonpartisan Congressional Research Service.
Rules used by the two major political parties require indicted committee or subcommittee chairmen, or members of a party's leadership, to temporarily step aside. Grimm is not a chairman or a member of the leadership.