Tax, immigration allegations sparked probe of Atlanta-area stores

Attorney for Super Mercado Jalisco chain denies IRS allegations

The Atlanta-area chain of Hispanic grocery stores that federal agents raided last month drew the attention of investigators for allegedly hiring unauthorized immigrants and failing to report an estimated $6.5 million in wages, court records show.

The Super Mercado Jalisco stores did not report those wages between 2016-2018 while the family that owns and operates them — Sebastian Covarrubias, his ex-wife, a son and a daughter — collected $6.9 million in profits, according to an affidavit filed by the Internal Revenue Service.

Federal investigators surveilled the stores before searching them, subpoenaed their bank records and got help from an unnamed informant who worked as a store manager, as well as two other unnamed former store employees, the court records said. None has legal status here.

When they carried out search warrants at the stores on Dec. 12, IRS and U.S. Immigration and Customs Enforcement agents encountered 46 people suspected of being in the country illegally. ICE issued notices to 43 of them to appear in federal Immigration Court and then released them. It arrested three others — one Mexican and two Guatemalan store employees who had previously been deported — and officials took boxes of documents and computers.

ExploreMore: ICE: 46 suspected of being here illegally found in store search

The arrests came amid the Trump administration’s clampdown on illegal immigration. Deportations from ICE’s Atlanta area of operations — it encompasses Georgia and the Carolinas — rose 5% in the fiscal year ending in September, hewing closely to the 4% jump nationwide. In August, federal authorities executed search warrants at seven chicken processing plants across Mississippi, arresting 680 people suspected of being in the country illegally.

An attorney for the Covarrubias family and their stores denied the allegations in the IRS affidavit, said they “have always employed people who they believed were entitled to work at their stores,” and added no one has been charged with any crimes.

“We don’t think there is sufficient evidence for a criminal charge at this point,” said Jay Strongwater, the family’s attorney.

“If there is underreporting of withholding taxes, we will talk to the government about it. There are avenues to resolve underreporting civilly without criminal charges. And, as far as undocumented workers, we deny those charges. The only contacts we have had with law enforcement were with the IRS — no contact whatsoever with ICE.”

A pair of former Jalisco employees sued the store chain in 2017, alleging they were not paid overtime as hourly employees. Two months later, they filed a court notice to dismiss the case. Strongwater said he did not know if there are any connections between that lawsuit and the IRS investigation.

The IRS and ICE executed the search warrants at six Jalisco stores in Duluth, Marietta, Norcross, Lawrenceville and Roswell last month. The IRS affidavit says they were looking for federal income tax returns, payroll records, employee verification reports from E-Verify and federal work authorization documents, including copies of driver’s licenses and passports.

“Covarrubias knew that the employees hired by him were often illegal and did not have legitimate employment documents,” the IRS affidavit says about the tips it received from the informant. “If the employees did not have legitimate employment/identification documents, he would encourage them to get bogus documents.”

Spokesmen for ICE and the IRS declined to comment Friday.

Jose Luis Covarrubias, CEO of Super Mercado Jalisco, issued a statement after the IRS searched the stores last month, saying he was “disappointed in the heavy-handed tactics of the federal government.”

“Super Mercado Jalisco,” he said, “maintains the strictest standards on compliance and completion of all of the necessary paperwork required by the federal government.”