3 El Rodeo owners pleading guilty to theft

Three owners of El Rodeo and El Jaripeo Mexican restaurants who are accused of underreporting about $22.7 million in restaurant sales are pleading guilty to multiple theft charges, prosecutors announced Thursday.

El Rodeo owners Francisco Salgado and Jose Melendez are each pleading guilty to 10 counts of theft. A third defendant, Abel Bustos, is pleading guilty to two counts of theft. All charges are Class D felonies.

The charges resulted from a months-long grand jury investigation of business practices at 26 restaurants in 10 counties, including Marion and Tippecanoe.

Prosecutors said Thursday that the owners will forfeit about $4.5 million to state and local authorities. Of that, about $1.8 million will be paid as restitution to the Indiana Department of Revenue for unpaid sales, food and beverage taxes. The rest will be divided among law-enforcement agencies involved in the investigation. The forfeiture will come from funds seized during a raid in November 2013.

According to a probable cause affidavit, more than 25 percent of restaurant sales from 2010 to 2012 were not reported to the state. An auditor with the Department of Revenue estimated that the restaurants' total sales during that time period were about $88.2 million, but only $65.4 million was reported to the state.

That means, according to court documents, that the restaurant chain did not pay nearly $1.6 million in sales taxes and about $274,000 in food and beverage taxes.

Prosecutors allege employees used several methods to avoid recording sales. For instance, according to court documents, a cashier may put the total in the cash register, and then "zero out" that total and open the cash drawer to make the change. Undercover detectives also observed cashiers using calculators, instead of cash registers, to calculate change — a practice known as skimming.

"To summarize this investigation in a couple of minutes doesn't do justice to the magnitude of this case," Marion County Prosecutor Terry Curry said at a news conference with Tippecanoe County Prosecutor Pat Harrington.

The investigation began in May 2013, when El Rodeo Mexican restaurants and other businesses outside the chain became the target of a multi-jurisdictional grand jury investigation. Harrington said the probe involved the review and audit of "a massive amount of financial records" — documents that he said filled three vans.

Police raided El Rodeo locations in Indianapolis, as well as Tippecanoe and Wayne counties. Indiana State Police also searched at least one El Jaripeo Mexican Restaurant — in New Palestine — which is part of another chain owned and operated by El Rodeo principal Francisco Salgado, Indianapolis, and secretary, Jose Melendez, Fortville.

Last February, prosecutors from Marion and Tippecanoe counties filed civil forfeiture lawsuits against El Rodeo and dozens of interconnected restaurants and business entities. The lawsuits initially listed 30 defendants.

The value of the forfeitures total more than $5 million. Investigators seized more than $2.7 million in U.S. currency, two vehicles that are the equivalent of $1.1 million in foreign currency, 15 Mexican gold coins and one unknown gold coin.

Curry said the vehicles have been returned to the defendants.

According to the plea agreements filed Thursday, none of the defendants will have to serve time in the Indiana Department of Corrections. The plea deal allows for time to be served at Marion County Jail or in the Marion County Community Corrections program.

Salgado's and Melendez's plea deals with prosecutors call for a sentence of not more than 10 years. Bustos' plea deal caps his sentence at four years.

None of the three has been sentenced. All three, who are not in custody, are scheduled to appear for a hearing at 9 a.m. Feb. 2 in Marion County Criminal Court 15.

Curry acknowledged that such illegal activities are widespread.

"We will continue to investigate leads regarding those businesses which fail to remit sales tax, and we will prosecute those who fail to pay their fair share," he said in a news release.

The investigations did not involve drugs or illegal immigration. Curry said all the restaurants remain open.

Star reporters John Tuohy and Justin Mack contributed to this story.

Call Star reporter Kristine Guerra at (317) 444-6209. Follow her on Twitter: @kristine_guerra.

The 20 El Rodeo Mexican restaurants that were investigated are located at:

• 140 Frontage Road, Suite 5, Lafayette

• 3611 E. Main St., Richmond

• 2606 N. High School Road, Indianapolis

• 11677 Fox Road, Indianapolis

• 4000 W. 106th St., Suite 185, Carmel

• 500 Town Center Drive North, Mooresville

• 2404 National Road West, Richmond

• 2203 N. Ind. 9, Greenfield

• 9546 Allisonville Road, Suite 127, Indianapolis

• 140 Howard Avenue, West Lafayette

• 14160 Mundy Drive, Suite 900, Noblesville

• 11452 Olio Road, Fishers

• 8128 E. U.S. 36, Avon

• 109 Beck Lane, Suite 120, Lafayette

• 7411 Heathrow Way, Indianapolis

• 3113 W. Smith Valley Road, Suite A, Greenwood

• 6673 E. Ind. 334. Zionsville

• 5501 W. 86th St., Indianapolis

• 5635 Mutual Lane, Indianapolis

• 250 S. Meridian St., Indianapolis

The six El Jaripeo Mexican restaurants that were investigated are located at:

• 30 Washington Pointe Drive, Indianapolis

• 2330 N. Lebanon St., Lebanon

• 2685 E. Main St., Suite 121, Plainfield

• 3020 Ind. 32 East, Westfield

• 2000 E. Wabash St., Frankfort

• 38 W. Main St., New Palestine