Joseph Bailey, CEO of a children’s apparel company called Stargate apparel Inc and Rivstar Apparel Inc. has been charged with participating in a scheme to defraud I.S. Customs by understating the true value of children’s apparel made in China and resulting in a loss to the United States of over $1 million in tariff revenue. The information came to light as a result of a whistleblower case filed under seal in Apil of this year. The case is being prosecuted by United States Attorney Geoffrey S. Berman U.S. Attorney for the Southern District of New York. One charge against Bailey carries a maximum sentence of 20 years in prison.
According to the allegations in the indictment, from 2007 to 2015 Bailey and his companies purchased much of its products from a manufacturer in China. The indictment says they engaged in a double invoicing scheme in which they would receive two sets of invoices from the manufacturer for the same goods. One was referred to as the “pay by” invoice and this was significantly higher and had the actual price paid by the company. The other invoice had significantly lower prices for the goods and was presented to Customs and Border Patrol. The allowed Stargate to lower the amount of customs duties. Then in 2010 Bailey and Stargate created a new scheme, says the indictment in which the fraud involved invoicing “sample” goods which the manufacturer would send two set s of invoices one with the true price and one with a lower price. The allegations assert that other manufacturers were also involved.
