Clothing Companies, Former CEO Settle False Claims Case Over False Invoices
Stargate Apparel, Rivstar Apparel and their former owner and CEO, Joseph Bailey, settled a False Claims Act case with the U.S. Attorney's Office for the Southern District of New York over the companies' use of inaccurate invoices to underreport their clothing imports, the Department of Justice said July 28. Under the settlement, Bailey and the New York-headquartered companies admitted to engaging in the fraudulent schemes. Bailey will pay $3.2 million while the employee stock ownership plan that owns the two companies will pay a combined $2.8 million, DOJ said. Bailey and the companies led two “double invoicing” schemes 2004-2015, according to the complaint.
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In the first scheme, they filled out two invoices, one with the actual amount of goods imported, and another, submitted to CBP, that underreported the amount of imports, to avoid duties. Under the second scheme, the exporter would provide two invoices that together would amount to the actual price paid. The defendants would submit one invoice to CBP, while the other was for the same goods but claimed to be for samples or testing costs, DOJ said.
In 2020, Bailey was sentenced to six months in prison and ordered to forfeit $1.66 million (see 2012280040). U.S. Attorney Audrey Strauss said the settlement and criminal action “demonstrate that our Office will hold companies, as well as their executives, accountable when they try to evade paying the legally required custom duties on imported goods.”