A former EVP/Chief Merchandising officer at Aéropostale has been convicted of pocketing $25 million in bribes from a manufacturer after he gave them more than $350 million in sales from the apparel chain over 10 years. The jury took fewer than five hours to reach the verdict, which came after a three-week criminal trial in Brooklyn, N.Y., according to Chain Store Age.
The basic facts of the case were never disputed during Christopher Finazzo's trial. Finazzo was friends with Douglas Dey, the controlling owner of South Bay Apparel. Dey had a financial interest in the company, and Finazzo argued that he didn't understand his dealings to have been illegal. The disagreement hung on intent and the arbitrary retail definition of fair price. (Many have argued, for example, that Walmart's definition of supplier fair price is the precise number where Walmart makes money and the supplier loses money. But we digress.)
The government's argument was that Aéropostale overpaid for the South Bay products and that supposed overpayment was the loss—the fraud—that victimized the retailer. Finazzo's attorney argued in court that South Bay's prices were fair, but that "they were simply more costly than other vendors because of the company's proximity to New York City, which gave Aéropostale more control over reorders. The company could have used cheaper vendors in China, but it would have had less control over reorders, the lawyer said," according to a report in Crain's New York.
If that was the case, if Aéropostale paid a fair price for a product that in fact sold very well, then Aéropostale wasn't in fact defrauded of anything. The argument went if South Bay wanted to thank Finazzo, it wasn't illegal, as long as Aéropostale wasn't being harmed. Aéropostale certainly had the right to fire Finazzo if it felt that a thank-you check from a supplier was against company rules, but that's far from a federal felony. (Aéropostale did fire Finazzo for those reasons.)
Whether or not the jury bought into that defense, its emotions were apparently swayed by testimony about Finazzo's financial situation. During that 10-year period, Aéropostale apparently paid Finazzo roughly $20 million in salary and bonuses. "But it was not enough. He was greedy, and he wanted more," Assistant U.S. Attorney Winston Paes said in his opening statement at trial, according to the Crain's story.
Testimony spoke of Finazzo's $1.6 million house in Garden City, New York, and a high-rise apartment on Central Park West.
Beyond government efforts to paint Finazzo as rich and greedy, the case dealt with Finazzo's attorneys' efforts to paint him as unschooled in matters of law. To counter that, the government points to acts by Finazzo that they suggested indicated he knew what he was doing was wrong. If someone goes to considerable effort to hide an action, their logic said, they must understand that the action is wrong.
Testimony showed Finazzo would have Dey wire the payments to an outside consulting company. If he thought the actions were legal and acceptable, why go to that effort? The jury apparently agreed. If the conviction stands, Finazzo faces as many as five years in federal prison.
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