White Collar Crime News

Three Indicted in Multi-Million Dollar Fraud Scheme June 14, 2010

A 28-count indictment was unsealed Friday afternoon in federal court in Brooklyn charging Christopher Finazzo, the former Executive Vice President and Chief Merchandising Officer of Aéropostale, 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 Aéropostale, with mail and wire fraud, money laundering conspiracy, and conspiracy to violate the travel act. Finazzo is also charged with causing Aéropostale 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 on Friday afternoon before United States Magistrate Judge Steven M. Gold, at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York. Dey’s initial appearance and arraignment is scheduled this afternoon before United States Magistrate Judge Lois Bloom, at the U.S. Courthouse in Brooklyn. The case has been assigned to United States District Judge Roslynn R. Mauskopf.

As alleged in the indictment, Finazzo and Dey entered into a fraudulent scheme in which Finazzo caused Aéropostale 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 Aéropostale and its employees, and Finazzo falsely stated in numerous company questionnaires that he was not engaged in any related-party transactions—which resulted in Aéropostale 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 Aéropostale while at the same time causing Aéropostale to make false statements to its shareholders,” stated United States Attorney Lynch.