Businessman charged with fraud

06/17/2010 12:00 AM |

Douglas Dey, 53, of Southold was one of two men named in an indictment unsealed in Federal Court in Brooklyn Friday charging both with fraud in what FBI investigators called a multi-million-dollar scheme aimed at retailer A ropostale, Inc. of New York City.

Mr. Dey, owner of South Bay Apparel, Inc. in Calverton, formerly a major supplier to Aeropostale, was indicted along with Christopher Finazzo, 54, of Garden City, former executive vice president and chief merchandising officer for the specialty retailer. Headquartered in New York City, A ropostale operates hundreds of stores throughout the United States and Canada and also sells via its website and catalog.

“The indictment of Doug Dey is unfounded,” his lawyer said in an e-mailed statement. “Doug Dey is not guilty of any crime.”

The 28-count indictment charged the men with mail and wire fraud, a money laundering conspiracy and conspiracy to violate the Travel Act, one of several federal laws that makes criminal business activity a federal offense if perpetrators traveled from state to state or internationally to facilitate their illegal activity.

According to an FBI written statement, the men entered into a fraudulent scheme in which Mr. Finazzo, in exchange for a kickback, convinced A ropostale to buy more than $350 million of merchandise from South Bay; in exchange, he received approximately 50 percent of Mr. Dey’s profits. The FBI alleges that Mr. Dey paid Mr. Finazzo more than $14 million through C&D Retail Consultants, a firm Mr. Finazzo controls. The two men are alleged to have invested other profits in various joint ventures, according to the FBI.

“Finazzo and Dey allegedly entered into a sweetheart deal that was essentially a kickback scheme,” said acting assistant FBI director-in-charge George Venizelos.

Mr. Dey was arraigned Monday afternoon before U.S. Magistrate Judge Lois Bloom at the U.S. Courthouse in Brooklyn and was released on a $2.5 million bond for a court date July 2, according to Mr. Dey’s attorney, T. Barry Kingham of Curtis, Mallet-Prevost, Colt and Mosle LLP in New York.

No information was available about when Mr. Finazzo was to be arraigned, and calls to the FBI New York office went unanswered.

The relationship between Mr. Dey’s company and A ropostale ended more than three years ago, Mr. Kingham wrote in an e-mailed statement. He wrote that South Bay was named Vendor of the Year in 2004 by A ropostale chairman and CEO Julian Geiger.

“South Bay earned that honor by its excellent performance, not by any illegal conduct,” Mr. Kingham wrote. A ropostale profited and incurred no loss in its relationship with South Bay and Mr. Dey, the attorney said.

“We are confident that once the facts are fully established, the court and jury will realize there was nothing illegal about the highly successful relationship between these two companies and Doug Dey will be completely vindicated,” Mr. Kingham wrote.

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