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Manhattan U.S. Attorney Settles Civil Fraud Lawsuit Against Clothing Companies
STARGATE APPAREL, INC. (now named EXCEL APPAREL CORP.) and RIVSTAR APPAREL, INC. have settled a civil fraud lawsuit filed by the United States. The suit alleged that the companies, along with their former CEO JOSEPH BAILEY, engaged in a scheme to defraud the government by under-reporting the value of imported clothing to avoid paying customs duties.
As alleged in the Government’s lawsuit, BAILEY, STARGATE, and RIVSTAR employed a variety of schemes to defraud the United States by submitting invoices to U.S. Customs and Border Protection (CBP) that falsely understated the true value of the clothing that they imported into the United States in order to avoid paying millions of dollars in customs duties.
Under the civil settlement approved today by U.S. District Judge J. Paul Oetken, BAILEY will pay $3.2 million to the United States, and STARGATE, RIVSTAR, and the employee stock ownership plan that currently owns the companies will together pay a total of $2.8 million to the United States.
BAILEY, STARGATE, and RIVSTAR admitted and accepted responsibility for their conduct as further described below. As part of the settlement, STARGATE and RIVSTAR (to the extent that it resumes operations) will also implement a written compliance policy that will include measures designed to ensure that they pay duties on the full, actual value of all future imports and otherwise comply with applicable customs laws and regulations.
Last year, BAILEY pled guilty and was sentenced to six months in prison for engaging in certain of the conduct related to STARGATE imports that is at issue in the Government’s civil complaint. This civil settlement is in addition to the $1,661,617 forfeiture amount that BAILEY was ordered to pay in the criminal proceedings.
The Government’s complaint alleges that in order to avoid customs duties, from 2004 through 2015, STARGATE, RIVSTAR, and BAILEY engaged in two types of ‘double invoicing’ schemes to fraudulently underpay customs duties owed to the United States in connection with the garments that they brought into the country.
Defendant/Respondent: STARGATE APPAREL, INC. (now named EXCEL APPAREL CORP.)
Criminal Charges: Misrepresenting the value of goods to avoid paying customs duties
City and State: New York, NY
Exact Date: 2019
Sentence or Outcome: BAILEY will pay $3.2 million, STARGATE, RIVSTAR, and the employee stock ownership plan will pay $2.8 million
Dollar Amounts: $3.2 million, $2.8 million, $1,661,617
Key Facts
- State: New York
- Category: White Collar Crime
- Source: DOJ Press Release â†â€â€
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