News and Press Releases

Former Chief Merchandising Officer of Aéropostale, Inc. Found Guilty of Receiving More than $25 Million in Kickbacks

FOR IMMEDIATE RELEASE
April 25, 2013

Christopher Finazzo, the former Executive Vice President and Chief Merchandising Officer of Aéropostale, Inc., a national mall-based specialty clothing retailer headquartered in Manhattan, was convicted today by a federal jury in Brooklyn on all sixteen counts for defrauding Aéropostale and receiving more than $25 million in kickbacks from Douglas Dey, the owner of South Bay Apparel, Inc. (“South Bay”), previously a major clothing supplier of Aéropostale. The jury’s verdict followed a three-week long trial in United States District Court in Brooklyn, New York, before the Honorable Roslynn R. Mauskopf. Finazzo was convicted of one count of conspiracy, fourteen counts of mail fraud, and one count of wire fraud. On Monday, April 29, 2013, the government will present its case to forfeit more than $21 million, two investment accounts, and four pieces of real property from Finazzo. Co-defendant Douglas Dey pleaded guilty on September 27, 2012, to conspiracy to bribe Finazzo.

Finazzo’s verdict and Dey’s guilty plea were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George C. Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.

The evidence at trial established that Finazzo and Dey entered into a fraudulent scheme in which Finazzo caused Aéropostale to buy more than $350 million in t-shirt and fleece merchandise from South Bay in exchange for payments from Dey of approximately 50% of South Bay’s profits. Finazzo was Aéropostale’s head merchant from July 1996 until his termination by Aéropostale on November 7, 2006. While receiving approximately $20 million in salary, bonus, and stock options for the approximately 10 years that Finazzo worked at Aeropostale, Finazzo received more than $25 million in kickbacks from approximately June 2002 through November 2006 from Dey through C&D Retail Consultants, Inc., a company controlled by Finazzo, and through other companies Finazzo jointly owned with Dey. In 2005 alone, at the peak of the business between Aéropostale and South Bay, Finazzo received more than $13 million in kickbacks from South Bay. Throughout the course of the scheme, Finazzo and Dey concealed the kickbacks from Aéropostale and its employees, causing Aéropostale to lose profits and negatively impacting employee bonus amounts. Additionally, because Finazzo falsely stated in numerous company questionnaires that he was not engaged in any related-party transactions, Aéropostale falsely reported in its SEC filings that the company did not engage in such transactions. Aéropostale is a publicly traded company on the New York Stock Exchange.

At trial, the government proved that Finazzo defrauded Aéropostale by preventing Aéropostale from seeking lower prices for merchandise it purchased from South Bay, preventing Aéropostale from selecting other vendors who had better price and quality, and by causing Aéropostale to pay higher prices on merchandise it purchased from South Bay. For example, Finazzo’s unyielding commitment to placing t-shirt orders with South Bay caused him to repeatedly rebuff Aéropostale’s CEO’s direction that 25% of the t-shirt orders be placed with overseas vendors at a much lower cost. Finazzo did this to maintain his illegal kickbacks from South Bay.

“We have all heard the saying ‘money does not buy happiness,’ and today’s verdict is case in point for that maxim. Christopher Finazzo had a great job that paid him millions of dollars, but this honest living was apparently not enough to satisfy his greed. As the evidence at trial showed, he schemed to steal from Aéropostale and to receive more than $25 million in illegal kickbacks from a supplier,” stated United States Attorney Lynch. “As today’s verdict shows, we will vigorously pursue corporate fraudsters who double-deal to enrich themselves and bring them to justice.” Ms. Lynch extended her grateful appreciation to the FBI and the Securities and Exchange Commission for their assistance.

When sentenced by Judge Mauskopf, Christopher Finazzo faces a sentence of up to 20 years’ imprisonment for each of the fourteen counts of mail fraud and the one count of wire fraud, and up to five years’ imprisonment for the conspiracy count. Co-defendant Douglas Dey faces a maximum sentence of five years’ imprisonment.

The government’s case is being prosecuted by Assistant United States Attorneys Winston M. Paes, John P. Nowak, and Claire Kedeshian.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The Defendants:

CHRISTOPHER FINAZZO
Age: 57

DOUGLAS DEY
Age: 56

 


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