| Importer of Clothes From
China Bailey Quietly Pled Guilty Now Wants
Sentencing In June
By Matthew
Russell Lee
SDNY COURTHOUSE,
April 6 – A businessman
accused of defrauding the U.S.
government of over $1 million
in customs fees on children's
clothing from China, Joseph
Bailey, on June 6 was brought
in shackles into the U.S.
District Court
for the
Southern
District of
New York Magistrates
Court. Inner City Press was
the only media there.
The
government agreed to a $1
million bond; his wife Lisa
and his nearly identical son
Morris, in the gallery, were
given his medicines in a
plastic bag.
After
that, the case was repeatedly
adjourned, with the
adjournment memo-endorseds
being virtual the only
documents in the docket: from
June to September, from
September to October, and and
October to November 13 at 3:30
pm. Inner City Press went to
this long delayed conference
before SDNY Judge William H.
Pauley, with only one other
person in the gallery, and
heard Bailey's attorney ask
for permission for Bailey to
travel to Florida for
Thanksgiving.
In mid
January Bailey quietly pled
guilty to only one of the
counts initially and more
loudly brought against him:
"Minute Entry for proceedings
held before Judge William H.
Pauley, III: Change of Plea
Hearing as to Joseph Bailey
held on 1/15/2020. Defendant
present with attorneys Sharon
McCarthy, Esq. and Michael
Sardar, Esq. AUSAs Dina McLeod
and Dominika Tarczynska
present. Court Reporter
present. Defendant withdrew
previously entered plea of not
guilty and plead guilty to
count one. Sentencing
scheduled for April 24, 2020."
Now on
April 6 Bailey's lawyers, they
say with the consent of the
government, has asked amid
Coronavirus to move his
sentencing back to June 16 or
17. Inner City Press will
continue to follow this case.
Bailey's
September 4 letter for an
adjournment referred over 16
gigabytes of discovery
material. As of 6 pm on
November 13, Bailey remains listed as CEO of
Stargate, along with Eli
Serouya; [then was the name of
a person who has written to
Inner City Press to say they
left the firm as soon as
Bailey was arrested; Serouya
and Greco have apparently
remained] and Clemy Greco:
"Joseph is 2nd generation in
the apparel industry. He
learned the business from the
ground up, including packing
boxes and loading trucks. When
he was 17 he took his first
trip overseas to learn the ins
and outs of apparel sourcing.
The Bailey family was one of
the apparel pioneers in China
and Bangladesh; before they
became major exporters. Joseph
has extensive experience in
outerwear, swim, denim,
layette and sportswear. He
also has experience in sales,
merchandising and sourcing and
travels overseas extensively
to find the best fabrics for
the best product and cost."
Cost - ah, there's the rub.
Back on June 6
there was a brief dispute
before Magistrate Judge
Gabriel W. Gorenstein about
about Bailey's passport, set
to expire in six months. His
lawyer said he might need to
hold on to it to apply for a
new one. The government did
not impose its usual "no new
applications" condition, but
did request that the still
valid but expiring passport be
turned over unless Bailey
needs it for an interview for
renewal.
He
was allowed to go renew it,
with a lawyer from Kostelanetz
& Fink.
After the
presentment the U.S.
Attorney's Office issued a
press release, including: "The
conduct in this matter was
first brought to the attention
of federal law enforcement by
a whistleblower who filed a
lawsuit under the False Claims
Act.... From in or about 2007
to in or about 2015, BAILEY
and other employees of
STARGATE engaged in a scheme
fraudulently to understate the
value of goods imported into
the United States.
During the charged time
period, STARGATE purchased
much of its merchandise from a
manufacturer located in China
(“Manufacturer-1”).
Starting shortly after
STARGATE began doing business
with Manufacturer-1 in 2007,
through approximately 2010,
BAILEY and others at STARGATE
engaged in a double-invoicing
scheme by which STARGATE would
receive two sets of invoices
from Manufacturer-1 for the
same shipment of goods.
One invoice, referred to as
the “pay by” invoice, was
significantly higher and
reflected the actual price
paid by STARGATE for the
goods. The second
invoice reflected a
significantly lower price for
the goods and was presented to
CBP. This allowed
STARGATE to pay a fraudulently
lower amount of customs
duties.
In approximately
2010, BAILEY and other
employees of Stargate began a
new variation of the customs
fraud scheme, involving
invoices for “sample” goods,
by which Manufacturer-1 would
send two separate sets of
invoices for a given shipment
that together reflected the
true price STARGATE actually
paid to Manufacturer-1 for a
particular shipment of
clothing. The first
invoice, typically entitled
the “commercial invoice,”
described the goods purchased
and was submitted to
CBP. The second invoice
purportedly reflected amounts
paid by STARGATE for “sample”
goods and was not submitted to
CBP. Sample goods are
not subject to customs
duties.
BAILEY is
charged with one count of
conspiracy to commit wire
fraud, which carries a maximum
sentence of 20 years in
prison, one count of wire
fraud, which carries a maximum
sentence of 20 years in
prison, and one count of
falsely effecting the entry of
goods into the United States,
which carries a maximum
sentence of two years.
The maximum potential
sentences in this case are
prescribed by Congress and are
provided here for
informational purposes only,
as any sentencing of the
defendant will be determined
by the judge. BAILEY,
STARGATE, and RIVSTAR are also
charged with civil claims
under the False Claims Act,
through which the Government
may recover treble damages and
civil penalties arising from
his conduct."
But how
much might the whistleblower
get? Watch this site, @InnerCityPress
and the new @SDNYLIVE.
***
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