Charges Include Mail Fraud and Wire Fraud
BROOKLYN, N.Y., June 14 /PRNewswire-USNewswire/ -- A 28-count indictment was unsealed Friday in Brooklyn federal court charging Christopher Finazzo, the former executive vice president and chief merchandising officer of Aeropostale Inc., a national mall-based specialty clothing retailer headquartered in Manhattan, and Douglas Dey, the owner of South Bay Apparel Inc., previously a major supplier of Aeropostale, with mail and wire fraud, money laundering conspiracy, and conspiracy to violate the travel act. Finazzo is also charged with causing Aeropostale to make a false statement in a report that was filed with the Securities and Exchange Commission. Finazzo's initial appearance and arraignment took place before U.S. Magistrate Judge Steven M. Gold. Dey's initial appearance and arraignment is scheduled today before U.S. Magistrate Judge Lois Bloom, at the U.S. Courthouse in Brooklyn. The case has been assigned to U.S. District Judge Roslynn R. Mauskopf.
The indictment was announced by Loretta E. Lynch, U.S. Attorney for the Eastern District of New York, and George Venizelos, Acting Assistant Director-in-Charge of the FBI, New York Field Office.
As alleged in the indictment, Finazzo and Dey entered into a fraudulent scheme in which Finazzo caused Aeropostale to buy more than $350 million in merchandise from South Bay in exchange for payments from Dey of approximately 50% of South Bay's profits. Dey allegedly paid Finazzo more than $14 million through C&D Retail Consultants Inc., a company controlled by Finazzo, and the balance he invested in joint ventures with Finazzo. According to the indictment, the defendants concealed their scheme from Aeropostale and its employees, and Finazzo falsely stated in numerous company questionnaires that he was not engaged in any related-party transactions – which resulted in Aeropostale falsely reporting in its SEC filings that the company did not engage in related-party transactions.
"The defendants allegedly entered into a fraudulent arrangement to steal millions of dollars from Aeropostale while at the same time causing Aeropostale to make false statements to its shareholders," stated U.S. Attorney Lynch. "We will aggressively pursue and prosecute those who use their positions of influence and trust in senior management to steal from their companies and the companies' shareholders." Ms. Lynch thanked the Securities and Exchange Commission for its assistance.
"Finazzo and Dey allegedly entered into a sweetheart deal that was essentially a kickback scheme – Finazzo funneled a third of a billion dollars in purchases to Dey's company and personally got millions in return," said FBI Acting Assistant Director-in-Charge Venizelos. "What was a very lucrative deal for Finazzo wasn't necessarily a good deal for Aeropostale or its shareholders. The FBI is unyielding in its commitment to ensuring that corporations and their shareholders are not victimized by their own corporate officers."
If convicted, the maximum term of imprisonment for each count of mail fraud, wire fraud, money laundering conspiracy, and making a false statement is 20 years.
The government's case is being prosecuted by Assistant U.S. Attorneys Winston M. Paes, William E. Schaeffer 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 charges announced today are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
SOURCE U.S. Department of Justice