FBI informant’s two faces
Man used by law enforcers to ensnare town official now faces trial in tax fraud scheme
Miles Bailey’s secret life as an FBI informant was about to yield results.
It was April 23, 2013, and FBI agents directed Bailey to send a text message to Halfmoon Supervisor Melinda Wormuth, requesting that she meet him for lunch.
It was an odd pairing: Wormuth was an influential town supervisor in a booming suburban county; Bailey, a street-savvy boxing aficionado who grew up in New York City and moved to Albany in 1988, carving out a living managing properties and later setting up a tax preparation business.
Bailey was a colorful figure in Albany’s underground boxing world. He promoted and trained boxers and, in interviews, touted his tacit connections to some of the sport’s notable New York figures, including Albany heavyweight Kimdo Bethel.
But when the FBI used him to target Wormuth in a bribery sting five years ago, they were apparently unaware their informant was also allegedly running a massive tax-fraud scheme right under their noses.
In the weeks that followed Bailey’s 2013 lunch meeting with Wormuth, she fell into the FBI’S trap. She took envelopes stuffed with cash in exchange for using her political connections — and official government letterhead — to lobby state officials to legalize mixed martial arts at the request of Bailey, who posed as a fight industry lobbyist and promoter.
Two years later, Wormuth pleaded guilty to multiple state and federal crimes, including grand larceny for stealing her own campaign funds. She spent about a year in federal prison; because the case never went to trial, Bailey’s role as an informant faded from view.
It remains unclear how Bailey, who moved to Albany from Queens in the late 1980s, first came to be an informant for the FBI — an arrangement that apparently stretches back decades.
“The FBI does not confirm or deny the identity of our sources,” said Sarah C. Ruane, a spokeswoman for the agency in Albany.
In the early 1990s, when he was 28, Bailey worked as a drug informant for the Albany Police Department in a case that led to the arrest of his daughter’s godmother. But Bailey regretted that she was arrested and, when he threatened not to testify against her, authorities locked
him up as a material witness, forcing his testimony.
Bailey said publicly at the time that he had wanted the police to arrest another drug dealer who had an affair with his fiancee in 1992. He claimed his daughter’s godmother, who sold him a small amount of crack cocaine, was only a middleman in the deal. Police paid him $60 for his work.
“I feel horrible because this lady is ... facing 81/3 to 25 (years), and I’m hoping the judge has some leniency,” Bailey said during an interview with the Times Union in 1993.
The case cost Bailey some of his street credibility. He said people viewed him as a “rat.”
At the woman’s sentencing, she received the punishment Bailey had feared: up to 25 years in prison. One of her many supporters in the courtroom told Bailey he should “go sit over there with your friends,” gesturing to a group of narcotics detectives nearby.
“They’re not my friends,” Bailey snapped back, according to a Times Union article.
Albany detectives said then that Bailey knew what he was doing when he signed on as their informant. They said he also had boasted about his work as an informant for the FBI and DEA, which may have begun after Bailey was arrested on an unrelated drug charge in Saratoga County that he said led to him serving a year in jail.
Two decades later, Bailey resumed working for the FBI to help them snare Wormuth, whose political connections and murky business dealings with developers had drawn the attention of law enforcement.
He was also harboring a secret.
Less than a week after he met Wormuth at a Clifton Park restaurant — handing her an envelope containing $2,500 in cash, as FBI agents recorded the illicit transaction — Bailey deposited a $4,951 tax-refund check from the U.S. Treasury into one of the many bank accounts he controlled at the time.
The check, like hundreds of others he would deposit between 2011 and 2014, was the product of what the Justice Department alleges was an elaborate fraud scheme.
In a criminal case that has not been trumpeted by federal authorities, Bailey is scheduled to stand trial Wednesday in Syracuse on charges that he and at least three accomplices, including his father, took part in the scheme to pay hundreds of drug addicts and homeless people for their personal information, including Social Security numbers, in order to secure nearly $2 million in fraudulent tax refunds.
The Justice Department did not issue any news releases when two of Bailey’s co-conspirators pleaded guilty and agreed to cooperate. Bailey, now 53, was arrested in October 2017 and has pleaded not guilty. He remains free on bond while his case is pending.
A trial brief filed by his federal public defender claims that he was duped by his conspirators and did nothing wrong.
But the government, which expects the trial to last about five days, has lined up a trove of evidence and witnesses.
“The United States will offer evidence, including bank records, summary charts, and demonstrative exhibits that will show that as part of the scheme, after depositing the stolen funds, Bailey withdrew the money, used it at retail businesses and to pay bills, or distributed the proceeds to other accounts that he controlled and/or to coconspirators,” a prosecutor wrote in a trial brief filed in U.S. District Court in Albany.
The tax returns, which “were filed using real people’s names, dates of birth and Social Security numbers,” listed fake jobs and made-up addresses, as well as fictitious incomes and dependents.
Federal authorities allege that many of the returns were filed from Bailey’s “purported tax business,” D.E. Caribe Tax Services, which he had operated from a residence along Madison Avenue in the Pine Hills section of Albany. The fact that Bailey was in the tax-return business despite his lack of an accounting background had not set off any alarms with the FBI.
But authorities said he committed other crimes as well.
A year before the Wormuth sting began, Bailey had filed for bankruptcy and listed his occupation as a “tax consultant.” But he allegedly underreported his income and perjured himself in sworn testimony during a 2012 bankruptcy proceeding.
Though he has not been charged with bankruptcy fraud, prosecutors said in their trial brief that they intend to outline the bankruptcy crimes at Bailey’s trial to give the jury a full picture of his purported schemes.
Bailey is also charged with falsifying his own tax returns — by underreporting his income — from
2011 to 2014. Prosecutors said that, once he became aware of the investigation, he amended those returns in an attempt to head off the impending criminal charges.
Bailey could not be reached for comment.
Paul Evangelista, a federal public defender appointed to defend Bailey in the criminal case, declined comment.
There is an indication that in 2014, several months after Wormuth was arrested and while her state and federal criminal cases were pending, the FBI became aware that something was going on with Bailey’s business dealings.
An employee at a Trustco Bank branch in Albany where Bailey had an account had asked him about some U.S. Treasury checks that were charged back to the government when the individuals listed on the refunds claimed they were fraudulent. Bailey, according to prosecutors, made up a story about the origin of the checks and claimed they were from “our office” in the Bronx.
That same year, an Albany FBI agent who had been Bailey’s handler said the informant had given him the same cover story and provided documents that showed he was the owner of the Albany tax preparation business, according to court records.
Although that agent is expected to testify at Bailey’s criminal trial, a person close to the case said that Bailey’s work as an informant is not expected to be disclosed to the federal jury.
A spokesman for the
U.S. attorney’s office in Albany declined to comment.
The FBI declined to provide any details on Bailey’s work as an informant, including how much he was paid. The agency’s spokeswoman also would not say when it became aware of his alleged taxfraud scheme.
“Sources and informants are tremendously important to the bureau and we go to extensive lengths to protect their identities,” Ruane said. “The FBI’S use of undercover operations and informants is done in accordance with strict guidelines and in close coordination with the Department of Justice and the United States attorney offices.”
In a criminal case that has not been trumpeted by federal authorities, Bailey is scheduled to stand trial Wednesday in Syracuse on charges that he and at least three accomplices, including his father, took part in the scheme to pay hundreds of drug addicts and homeless people for their personal information, including Social Security numbers, in order to secure nearly $2 million in fraudulent tax refunds.