Pancake Houses or Crime Dens? IHOPs Involved In Financial Fraud, Feds Say

Eighteen people have been indicted for what prosecutors say was their roles in a series of criminal schemes, including money laundering, identity theft, alien harboring, and arson, centered around seven IHOP restaurants in northwest Ohio and Indiana that resulted in losses of more than $3 million.
 
“These defendants turned pancakes houses into crime dens,” said Steven M. Dettelbach, United States 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.”
 
Among those indicted were Tarek “Terry” Elkafrawi, who, from December 2003 through the present, owned seven IHOP restaurants in Evansville, Indiana; and Holland, Toledo (two locations), Findlay, Perrysburg, and Lima, Ohio.
 
Elkafrawi, along with Autumn Lee Tangas and others, used their control of the restaurants to execute various criminal activities to fraudulently manipulate sales figures, salaries, and payrolls to evade taxes, avoid paying royalties, and illegally divert money from the IHOP franchises to themselves, according to the 64-count indictment.
 
According to prosecutors, 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. Prosecutors allege that if the worker 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.

The government asserts that Elkafrawi also arranged for managers to cash payroll checks for the illegal workers, and that 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.
 
Prosecutors also say that in 2008, the Findlay IHOP burned as the result of arson that was started by Jose Leon-Gonzales at the direction of Elkafrawi and a person identified as M.K. 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.
 
Prosecutors say that M.K., who was not charged, used two identities to split his salary from the restaurants between two paychecks, creating lower reportable income for both. Allegedly 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. M.K. and Elkafrawi created a false property company to which M.K. paid “rent” to Elkafrawi to show a lower income, according to prosecutors. Elkafrawi and M.K. sanctioned and encouraged employees to file fraudulent claims, according to the indictment.
 
The government asserts that Elkafrawi, Kelly Elkafrawi, M.K., and Tarek Eid Omar also engaged in a series of real estate transactions to hid and conceal the source of the funds derived from their schemes. Elkafrawi purchased homes at 10400 Tecumseh Drive, Newburgh, Indiana; and 14745 Prairie Lake Drive, Toledo, using laundered assets, according to the indictment.
 
Prosecutors are seeking to seize the Indiana home as well as more than $37,000 in currency, the seven IHOP franchises, a dozen bank accounts, and several vehicles, according to the indictment.