FBI in­for­mant’s two faces

Man used by law en­forcers to en­snare town of­fi­cial now faces trial in tax fraud scheme

Albany Times Union - Sunday - - FRONT PAGE - By Bren­dan J. lyons

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.

Times Union archive pho­tos

At top, Miles Bai­ley in front of the Al­bany OTB Telethe­atre in 2009. Above, Half­moon Su­per­vi­sor Mindy Wor­muth talks with her at­tor­ney E. Ste­wart Jones in Saratoga County Court be­fore her 2015 sen­tenc­ing in an Fbi-en­gi­neered bribery sting in which Bai­ley played a key role.

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