How (Not) To Turn $10 T-Shirts Turn Into $350 Million Fraud

You may think of the teen clothing company Aéropostale as a cheaper alternative to Abercrombie to buy t-shirts for your fourteen year old, but it turns out that the company was also the focus of a $350 million fraud scheme.  A federal jury in New York last week convicted the former Executive Vice President and Chief Merchandising Officer of the clothing company Aéropostale, Christopher S. Finazzo.  He was accused of orchestrating a massive, ten-year kickback scheme with a clothing supplier.

Finazzo was indicted in 2010 of 28 counts, including mail and wire fraud, money laundering, making false statements to the SEC, conspiracy to violate the Travel Act and conspiracy to commit mail and wire fraud. He was indicted with Douglas Dey, who was the owner of the Aéropostale vendor, South Bay Apparel, Inc.  The pair fought the indictment for two years before Dey pleaded guilty in September 2012 to bribing Finazzo. How did the scheme supposedly work?

The scheme was fairly simple: Finazzo would ensure that Aéropostale would purchase more than $350 million in t-shirts and fleece clothing from South Bay.  Dey would then overcharge the company, and Dey and Finazzo would split the profits between them.  The scheme lasted approximately 10 years, from 1996 to 2006, when the company terminated Finazzo after learning of his interest in South Bay.  The prosecutor noted that Finazzo had profited by about $25 million from the scheme, and had engaged in it even though he had a job that paid him “millions of dollars” already.  Finazzo had argued at trial that his actions did not harm the company in any way and that it had reached record profits.

Finazzo and Dey will be sentenced by Judge Roslynn Mauskopf of the Eastern District of New York.  Sentencing is not yet scheduled.  Dey faces up to five years in prison, while Finazzo faces up to 20 years for each of the 15 counts of mail and wire fraud and up to 5 years for the conspiracy count.

The case is United States v. Finazzo et al., No. 1:10-cr-00457 (E.D.N.Y.).

This entry was posted in Conspiracy, Conviction After Jury Trial, Criminal Investigation, Mail Fraud, Travel Act, Wire Fraud and tagged . Bookmark the permalink.

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