Douglas Dey, the owner of South Bay Apparel Inc., a former major supplier of T-shirts and fleece merchandise for national teenage clothing retailer Aéropostale, was sentenced in federal court in Brooklyn, New York, to 42 months in prison, to be followed by three years’ supervised release. Dey and was also ordered to forfeit $7.5 million to the government, and pay $13,690,822.94 in restitution to Aéropostale, a publicly traded company on the New York Stock Exchange.
On September 27, 2012, Dey pleaded guilty to conspiracy to violate the Travel Act through commercial bribery for paying more than $25 million in kickbacks to Christopher Finazzo, Aéropostale’s former executive vice president and chief merchandising officer, to obtain over $350 million in business. Finazzo was convicted on all 16 counts of fraud and commercial bribery for his role in the scheme following a three-week jury trial.
Dey’s sentence was announced by Loretta E. Lynch, U.S. attorney for the eastern district of New York, and George Venizelos of the FBI.
“For over a decade, Dey used bribes and kickbacks to gain an unfair and illegal advantage for his T-shirt and fleece business. By doing so, he fleeced Aéropostale and its investors out of tens of millions of dollars and damaged the financial well-being of a publicly traded retail company. The sentence sends a strong message to those who commit corporate fraud that they will be held accountable for their crimes,” stated U.S. Attorney Lynch, who thanked the FBI and the Securities and Exchange Commission for their assistance.
Shortly after Finazzo was hired by Aéropostale in July 1996, he and Dey entered into a fraudulent scheme whereby Finazzo directed Aéropostale’s graphic T-shirt business to South Bay in exchange for splitting South Bay’s profits with Dey. From 1996 to 2006, Finazzo caused Aéropostale to buy more than $350 million in T-shirt and fleece merchandise from South Bay, often for significantly higher prices and lower quality than was available from other suppliers. In exchange, Dey paid Finazzo more than $25 million in bribes and kickbacks, equaling approximately 50 percent of South Bay’s profits. In 2005 alone, at the peak of the business between Aéropostale and South Bay, Dey paid Finazzo more than $13 million in kickbacks. The kickbacks from Dey to Finazzo were paid through C&D Retail Consultants, a shell consulting corporation set up by Finazzo, and through companies jointly owned by Finazzo and Dey.
The sentence was imposed by U.S. District Judge Roslynn R. Mauskopf.
This prosecution was the result of efforts by President Obama’s Financial Fraud Enforcement Task Force, which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.