NEW YORK (CNN) -- Rep. Michael Grimm, R-N.Y., failed to report more than $1 million in sales and wages at a Manhattan restaurant he once ran, using unreported cash to pay workers "off the books" to "evade taxes and keep more money for himself," a federal prosecutor said.
Grimm pleaded not guilty on Monday in federal court in Brooklyn to 20 counts, including mail fraud, wire fraud, filing false tax returns, hiring unauthorized aliens and perjury.
A former FBI agent who used to investigate fraud, Grimm wore a dark suit and was not handcuffed during the hearing.
He was released on $400,000 bond, secured by his home in Staten Island. As conditions for his release, Grimm, 44, must surrender his guns and passport.
He told reporters that he would remain in office while fighting the charges. He's up for re-election in November.
"I'm going to fight tooth and nail ... until I am fully exonerated," Grimm said.
One of his lawyers said previously that Grimm would be vindicated.
An indictment unsealed on Monday after a probe of more than two years alleges Grimm lied to investigators about his taxes after leaving the Healthalicious restaurant to run for Congress.
He "never met a tax he didn't lie to evade," U.S. Attorney Loretta Lynch said.
The charges relate to Grimm's operation of Healthalicious from 2007 to 2010, following his FBI tenure.
He was elected to the House of Representatives in 2010, representing Staten Island and parts of Brooklyn. He was re-elected two years later.
Grimm, as an accountant, attorney, former Marine and ex-FBI agent, "was poised for success as a small business owner," but "made the choice to go from upholding the law to breaking it," Lynch said in a written statement.
Much of the alleged scheme involved cash customers paid at the register, as opposed to credit or debit payments that created a paper record, Lynch said.
The restaurant, in which Grimm had a 45% partnership interest, didn't report some of the cash as income, Lynch's office said.
The restaurant also used cash to pay some workers -- some of whom didn't have legal status --and then didn't report the payments to tax authorities, Lynch's office said.
"Many employees received approximately half of their weekly pay in cash and the other half by check or through direct deposit into a bank account, while others received their entire weekly pay in cash," the statement said.
By under-reporting the restaurant's earnings and workers' wages, the business was able to dramatically underpay its sales, income and payroll taxes, Lynch's office said.
Grimm calls case 'political witch hunt'
Grimm also is charged with conspiring to commit health care fraud and obstructing an official proceeding.
Grimm said the investigation was "a political witch hunt ... to assassinate my character and remove me from office."
He told reporters that he felt "somewhat relieved" after the investigation because "today at least I get to face my accusers."
The indictment comes months after Grimm made headlines when he was shown on camera threatening to throw a reporter over a Capitol Hill balcony after an interview following the State of the Union address.
In recent months, public attention also has focused on Grimm's campaign donations after a friend and donor was charged with funneling illegal contributions to his campaign four years ago.
The investigation into campaign finance is still ongoing, U.S. officials said.