For three years, Tortilleria Jalisco has operated on a bustling corner of northwest Rochester.
Except for a modest dispute about obtaining a 3.2 liquor license, the Mexican restaurant has been described as a well-run business and conscientious neighbor, one successful enough that an expansion is planned.
But in the basement, federal authorities say, a different kind of operation has been going on. There, and in nearby Susan’s Boutique, banks of computers were used to file more than $1 million worth of fraudulent tax returns, they say. The customers, hundreds of Mexican nationals and other illegal workers from nearby meat processing plants, lined up at the doors.
Many customers, who often spoke little English, never received the refunds that were filed for them. Anyone who complained was paid off or threatened with violence or with exposure as an illegal to immigration authorities.
The scale of the operation known as the Mercedes Maldonado Rodriguez Organization, named for the matriarch of the family and the owner of Tortilleria Jalisco, is revealed in papers recently unsealed in U.S. District Court in Minneapolis. No charges have been filed, but members and associates could face federal charges of identity theft, mail fraud and money laundering.
Federal investigators contend the restaurant and boutique, run by Rodriguez’s daughter, were covers for the illegal tax preparation business. For Susan’s Boutique alone, which authorities say generated few legitimate sales for its baby shower gifts and clothes, the scheme generated as much as $500,000 a year.
The services weren’t advertised in the non-Hispanic community but became known through word of mouth among Hispanics, particularly Mexicans, the court papers say.
The organization used false Social Security numbers and false Individual Taxpayer Identification Numbers (ITIN), which are used by workers who are not eligible to have Social Security numbers. It misstated and inflated the number of dependents claimed on tax returns, often receiving Mexican birth certificates in bulk to support applications for new ITINs through an uncle of a connection known only as “Sinaloa,” a state in Mexico that’s home to a powerful drug-trafficking, money-laundering and organized crime syndicate.
Such frauds can easily go undetected because the ITIN application review process is so lax, according to a 2012 audit by the Treasury Department’s inspector general for tax administration.
Although their tax returns claimed thousands of dollars in refunds, the tax filers often were given less than $500. In some weeks, $40,000 to $50,000 was received from the false tax preparation operation, the documents said.
In one case, a customer came to Rochester police and told them of having his tax returns prepared in a backroom of Susan’s Boutique and finding out that the endorsements for checks for several years of returns had been forged. Before going to police, the customer said he confronted Mercedes Rodriguez, who said she had made a mistake and gave him what was supposed to be $16,000 in cash, bound with rubber bands. The customer later discovered the stack had one $100 bill on the top and on the bottom and a stack of $1 bills in the middle.
When he confronted Rodriguez again, the customer told police she told him not to report anything because he would be deported; her nephew stood by menacingly.
As a method of laundering the money, the sophisticated operation allegedly used a courier known as “Gordo” to shuttle checks to Mexican grocery stores in Iowa and Albert Lea for cashing, often operating out of the parking lot of the restaurant as a base.
From March 2008 to December 2012, 424 U.S. Treasury checks worth $2.1 million were mailed to three businesses and four residences connected to the case, documents show. From March 2011 to early January 2013, the small roadside grocery store in Albert Lea cashed over $1.3 million in tax refund checks.
Tortillas from scratch
Tortilleria Jalisco has operated quietly since opening in 2011. Reviewers have praised its salsa bar and its tortillas made from scratch.
In June 2012, the criminal records of Mercedes Rodriguez and members of her family came under scrutiny during a hearing in front of the Rochester City Council over an application for a 3.2 percent beer and wine license. Minutes of the meeting show that Rochester police reported Rodriguez had been convicted of several offenses since 1991, the most recent a disorderly conduct conviction in Red Wing in 2011. But there were no felony convictions, they said. There was no mention of a 1995 guilty plea in federal court to charges related to tax fraud.
Rodriguez’s daughter, Susana Garcia, told the council the family wanted to continue to expand the business, and Council Member Michael Wojcik pointed out that none of the convictions was connected to the operation of the business. The council approved a provisional permit by a 4-2 vote.
A spokeswoman for the U.S. attorney’s office declined to comment. In court papers it sought to keep 72 pages of documents outlining the investigation sealed to “minimize the chances of jeopardizing the ongoing investigation.”
A former employee who has been cooperating in the investigation has had his vehicle broken into twice, the court documents say. Other witnesses say they are concerned for their safety, claiming Rodriguez has contacted some of them and advised them to go back to Mexico, according to court papers.
The restaurant remained open on Tuesday, and an employee who answered the telephone said he was unaware of any federal investigation. No one returned a message left at the restaurant or at Susan’s Boutique.