By Matthew Russell Lee
SDNY COURTHOUSE, June 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, was brought in shackles into the U.S. District Court for the Southern District of New York Magistrates Court on June 6. 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.
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. Interview?
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.
In other SDNY news, a young woman who was pimped out and forced to quit high school testified on June 5 in a disturbing prostitution prosecution case proceeding before Judge Paul G. Gardephe.
In a courtroom with an otherwise empty gallery, a witness whom Inner City Press will not name testified to being forced into oral sex by a pimp, whom she called Jay, who fired a gun from his roof and threatened her Irvington, New Jersey parents.
On June 6 the trial continued, with a Special Agent Nelson testifying about IP addresses from which Backpage.com advertisements were taken out. The case is USA v. Claudius English a/k/a Jay Barnes a/k/a Brent English, 18-cr-492 (PGG).
The conduct at issue - the shooting of a gun from the roof, the forced sex, the buying of advertisements and re-sale of Shitsu dog - took place in an apartment building on Davidson Avenue in The Bronx. The payments were made through Comerica Bank.
The witness, called Victim-1 in the initially sealed Complaint, for a time took the NYC subway and the PATH train to her high school in New Jersey, then stopped. She was forced to have sex with men, and was attacked for dating boys her own age. She lost her Shitsu dog.
The defense, doing its job, ended June 5 questioning the quality of disclosure, no 3500 material about the witnesses interviews with prosecutors in The Bronx. Judge Gardephe told the US Attorney's Office to look into it.
Later on June 5 Assistant US Attorneys Michael Krouse and Ni Qian wrote to Judge Gardephe that they had "spoke[n] by phone to the two relevant former Bronx ADAs, Lauren Di Chiara and Meagan Powers. Both stated they met with Sarah W. before she testified in the grand jury, but that they do not believe they took notes."
Perhaps they should have - in the state case against him, Claudius English got part of the search warrants against him quashed, see NYS decision here. Perhaps it emboldened him to go to trial on the Federal charges rather that plea bargain. As the trial nears its end, the wisdom of that decision will soon be seen. Watch this site.
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