INDIANAPOLIS (Jan. 22, 2015) – The grand jury investigation of the El Rodeo restaurant chain in central Indiana began when a police officer paid for lunch.
"Our Tippecanoe County Prosecutors Office became involved when a detective from the West Lafayette Police Department ate at our local El Rodeo and he noticed as he paid for his lunch the cash drawer was never opened," said Prosecutor Pat Harrington. "No one rang up his sale and he was returned his cash back out of another drawer."
That detective had been trained to spot money laundering and payment of his lunch tab turned into a probe that resulted in the guilty pleas of three owners to multiple counts of theft and $4.5 million in forfeiture.
Francisco Salagado and Jose Melendez each pleaded guilty to ten counts, Abel Bustos to two counts, and each man faces ten years in prison.
Their initial hearings are set for February 2 in Marion Superior Court.
"The owners of those restaurants systematically skimmed cash from those restaurants in order to avoid paying sales tax and food and beverage tax on their sales," said Marion County Prosecutor Terry Curry. "In Indiana you would anticipate that 40-60% of the deposits into a restaurant's operations accounts would be cash deposits. As set forth in the probable cause, in looking at the 26 restaurants, 7.25 percent of the deposits were cash."
Curry said the chain underreported its sales by $22,780,000 while underpaying its taxes by $1.86 million.
"We understand that this practice goes on and one of the things we hope to demonstrate by this investigation and this resolution is we're watching," said Curry. "This practice is widespread and to the extent that we learn of other restaurants and businesses that engage in this sort of skimming and failure to live up to their obligations to the state and correspondingly gain an unfair advantage over competitors, we will investigate those cases."
The complex investigation lasted more than two years.
"We actually had three vans full of documents and business records that fortunately for us the auditors at the Department of Revenue were able to crunch those numbers and lead us to the evidence," said Harrington.
Curry said the investigation covered 26 restaurants throughout central Indiana from 2010-2012.
The chain will remain open and under the scrutiny of state tax auditors.
Investigators could have seized and closed down the restaurants but chose not to.
Curry said there are no other investigations of El Rodeo being conducted at this time.