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Importer of Clothes From China Bailey Quietly Pled Guilty Now Delays Sentencing to Dec 7

By Matthew Russell Lee

SDNY COURTHOUSE, Oct 23 – A business man 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."

 On April 6 Bailey's lawyers,  with the consent of the government, asked amid Coronavirus to move his sentencing back to June 16 or 17.

And now on October 23, this: "Re: United States v. Joseph Bailey  19 cr. 412 (WHP) Dear Judge Pauley: We represent the defendant, Joseph Bailey, in the above-captioned matter. We write to respectfully request an adjournment of the November 5, 2020 sentencing hearing currently scheduled for this matter. We are requesting this adjournment because we understand that the Court would be unable to hold an in-person hearing on November 5, 2020 in light of the COVID-19 pandemic and because Mr. Bailey is presently dealing with a family health issue that requires his attention. We understand that the Court’s calendar can currently accommodate a sentencing hearing for this matter on December 7, 2020 at 11 a.m. and ask that the sentencing hearing be adjourned to then. Assistant United States Attorney Dina McLeod has advised us that the Government consents to this request." 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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