Couple who owned Austin-area restaurants face tax charges

A married couple who owned several Austin-area restaurants has been charged with federal tax crimes, accused of reporting personal expenses — including a repair to their swimming pool— on their business tax returns.

An indictment that was unsealed Thursday in U.S. Western District Court accuses Michael Herman and his wife, Cynthia Herman, of depositing only a portion of receipts into business bank accounts and reporting only those deposits on business tax returns.

The Hermans owned three restaurants, all of which have closed or changed names under new ownership within the past three years. They were Cindy’s Downtown and Hasler Brothers Steakhouse, both in Bastrop, and Cindy’s Gone Hog Wild, located east of Austin on Texas 71..

The indictment says Cindy’s Downtown reported sales of $1 million in 2010, $1.4 million in 2011 and $1.2 million in 2012 but the real sales “substantially exceeded that amount.” The indictment also questions reported sales for Cindy’s Gone Hog Wild — $700,000 in 2010, $183,000 in 2011 and $949,000 in 2012.

The couple allegedly paid for personal expenses out of their business accounts, including a $1,108 pool repair, utilities for their home and the salary of a household employee. They reported those transactions as business expenses, according to the indictment. “The Hermans would and did cause tax deductions for business expenses to be overstated by paying various personal expenses with business funds, which they falsely categorized as business expenses,” the indictment reads.

Attorney General Ken Paxton’s appeal of an order blocking the controversial “sanctuary cities” ban in Senate Bill 4 will move forward at a fast clip, as an appeals court has set a Sept. 22 hearing for oral arguments.

The 5th Circuit Court of Appeals granted Paxton’s request Thursday for an expedited hearing process and also set hearings on the merits of the appeal for Nov. 6.

Paxton is challenging a federal judge’s temporary injunction order last week that blocked the implementation of SB 4 while the lawsuit over the measure plays out. Judge Orlando Garcia’s ruling came less than 48 hours before the immigration law was set to take effect.

The law would create civil and criminal penalties for local officials who adopt policies that block federal detention requests placed on jail inmates suspected of being in the country illegally. SB 4 would also fine politicians who do not “endorse” the law and would empower local police officers to investigate a person’s immigration status during routine police interactions, such as traffic stops.

Proponents of the law say it would remove criminals from the streets and assist federal authorities in enforcing immigration laws. Critics of the law — including Austin, Travis County, San Antonio, Houston and Dallas, which are all part of the lawsuit challenging it — have said SB 4 would create fear of police in immigrants communities, break up families and lead to racial profiling of Hispanics.

In the state’s emergency appeal, Paxton’s office had asked for the 5th Circuit Court of Appeals lift the temporary injunction by Thursday. However, it now appears the law will remain on hold at least until mid-November, given the hearing dates the appeals court set.

SB 4 became a flash point during this year’s legislative session after newly elected Travis County Sheriff Sally Hernandez enacted a jail policy that ignored most so-called detainer requests from Immigration and Customs Enforcement agents.

Gov. Greg Abbott vowed to hammer the county, promised to have Hernandez tossed from office and pulled $1.5 million in criminal justice grants from the county in response to the sheriff ’s new policy.

Hernandez, who is a plaintiff in the suit seeking to overturn SB 4, has said she would follow SB 4 if the law is allowed to take effect.