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United States of America v. Christopher Finazzo and Douglas Dey

February 19, 2013

UNITED STATES OF AMERICA,
v.
CHRISTOPHER FINAZZO AND DOUGLAS DEY, DEFENDANTS.



The opinion of the court was delivered by: Roslynn R. Mauskopf, United States District Judge.

MEMORANDUM AND ORDER

Christopher Finazzo is charged by second superseding indictment ("S-2") with multiple counts, including (i) conspiracy to commit mail fraud and wire fraud and conspiracy to violate the Travel Act (Count One); (ii) mail fraud (Counts Two through Fifteen); (iii) wire fraud (Count Sixteen); and (iv) making a false statement in a report required to be filed with the United States Securities and Exchange Commission (Count Seventeen). (Doc. No. 62.) Finazzo moves in limine for an order precluding the government from introducing at trial an allegedly privileged e-mail and from using any information derived from its improper disclosure. (Doc. No. 103.) For the reasons that follow, Finazzo's motion is DENIED.

BACKGROUND

The Court assumes the parties' familiarity with the factual background and procedural history of the case, and will address only those aspects that are relevant to the instant motion. In the second superseding indictment, filed September 6, 2011, the government charged a "[f]raudulent [s]cheme" in which Finazzo, an executive at the clothing retailer Aeropostale, Inc. ("Aeropostale"), secretly received a portion of the profits from certain transactions between Aeropostale and South Bay Apparel, Inc. ("South Bay"), a clothing vendor controlled by Douglas Dey. (S-2 at ¶¶ 4, 8.) The second superseding indictment charges that Finazzo "defrauded" Aeropostale by, "(1) depriving Aeropostale of the opportunity to make informed decisions, thereby preventing Aeropostale from seeking lower prices for merchandise it purchased from South Bay and the opportunity to select other vendors based upon price, quality and timely delivery; and (2) causing Aeropostale to pay higher prices on merchandise it purchased from South Bay than were available from other vendors, thereby increasing South Bay's profits and the amounts Dey paid Finazzo." (S-2 at ¶ 9.)*fn1

I.Discovery of the Siegel E-mail and Finazzo's Termination

Although the indictment charges that the scheme began in 1996, Aeropostale appears not to have learned of its existence until some point after early November of 2006. (S-2 at ¶ 8.) In 2006, during an unrelated internal investigation, Kroll, Inc. ("Kroll"), an investigative firm hired by Aeropostale, uncovered an e-mail in Finazzo's Aeropostale work account from his personal attorney, Angela Siegel. Def's. Mem. (Doc. No. 103-1) at 3.) The e-mail, dated August 24, 2006, attached a list of Finazzo's assets that his attorney had prepared for the purpose of creating a will. (Ex. A to Zito Decl. (Doc. No. 103-3) ("Siegel e-mail").) In the e-mail, Siegel asked Finazzo to review the values listed in the attachment and indicated that she would produce "revised wills" based upon them. (Id.) The assets listed in the e-mail attachment included several companies Finazzo co-owned with Dey, including South Bay, a company that served as a primary vendor of Aeropostale merchandise. (Id.; S-2 at ¶ 6.) Although Finazzo admits that he "may have," prior to the Siegel e-mail, corresponded with Siegel via his Aeropostale e-mail account, he denies having ever "asked or authorized" her to send "any information or written materials of a confidential, sensitive or privileged character" to his Aeropostale e-mail address.

(Finazzo Decl. (Doc. No. 115-1) at ¶ 5.) He asserts that, when he received the e-mail, he "forwarded it to a non-Aeropostale email account, deleted the email from [his] inbox and . . . instructed Attorney Siegel to send confidential information only to another email address [he] had previously given her and not to [his] Aeropostale email address." (Id. at ¶ 8.)

Upon learning that Finazzo had undisclosed ownership interests in companies owned by one of Aeropostale's primary vendors, Aeropostale decided to terminate Finazzo for cause. (Def.'s Mot. in Limine (Doc. No. 103-1) at 3.) On November 7, 2006, Aeropostale's Chief Executive Officer, Julian Geiger, and General Counsel, Edward Slezak, summoned Finazzo to a meeting in order to inform him of his termination. (Ex. A to Zito Decl. (Doc. No. 109-2) ("Finazzo Tr.").) Geiger began the meeting by presenting Finazzo with a set of materials, including a schedule of assets that had been set forth in the Siegel e-mail, and telling him "[y]ou need to explain it to us." (Finazzo Tr. at 1.) Finazzo then went, virtually line-by-line, through the list of assets attached to the Siegel e-mail. He admitted joint ownership of assets with Dey and explained what each entry in the Siegel e-mail's attachment represented. (Id. at 1-4.) Finazzo expressed surprise when Geiger and Slezak told him that his failure to disclose the joint-ownership interests with Dey violated company policy and would require Aeropostale to restate its SEC filings. (Id. at 3.) After this short initial discussion, and in response to Finazzo's question about what he should "do now," Geiger informed Finazzo that he was being "terminated for cause." (Id. at 4-5.)

The meeting continued for some time after Finazzo was informed of his termination. During the ensuing conversation, Finazzo insisted that he had merely made an honest disclosure mistake (id. at 7 (". . . I always had Aeropostale's best interest in mind. . . . I didn't think I was doing anything incorrect.")), and encouraged Aeropostale to continue purchasing from Dey (id. at 17 ("I don't want anything to happen to [Dey], that'll hurt [Dey]. . . . I don't think that he's done anything that has been inconsistent with the best wishes of Aeropostale.")). It is clear that Aeropostale was unaware of the kickback scheme now alleged in the indictment. (Id. at 12 ("Slezak: So like when we bought from Vertical Line you didn't get any dividends or distributions or anything like that? Finazzo: No, No."), 20 ("Geiger: I would bet my reputation on Chris never having overpaid or overbought anything from Doug.").) Indeed, that appears to be the precise purpose of most of Finazzo's statements during the meeting. (See, e.g., id. at 20 ("Have I ever done anything at Aeropostale to ruin our integrity or buy something intentionally. Never, would never do that.").)

At one point during the meeting, Finazzo also volunteered additional context about the Siegel e-mail and its attachment. As he was reviewing the attachment, Finazzo attempted to downplay the values it listed for various properties he owned together with Dey, saying "I'm not sure where the value of all this is coming from but if it was this value I wouldn't be working [at] Aeropostale." (Id. at 11.) Slezak told Finazzo that it came from Finazzo's own Aeropostale e-mail account; he stated, "This was an email that came to you." (Id.) Finazzo responded, "Oh, this is, this is from um, this is from a lawyer right? Angela Seagal [sic], from the uh, properties for the will. . . . these numbers are not real numbers, this was done for a will in case something happened." (Id. at 12.) Finazzo made explicit that the schedule of assets "is what Angela Seagal [sic] sent to me." (Id. at 14.) Finazzo elaborated as follows:

[W]hat [Siegel] said was that you have so many loose ends with so many things that are not like, yours but not yours. What happens if something happens to you, what happens with these properties, with 660 Mass Avenue, and even your property in Queens, what happens with that because it's in, in your name and Annie's parents live there and they don't pay any rent so what do you, what do you do. I mean pretty much, how do you, what do you do. I said that's a good point so she said list all the things that you would have, you know, and [] email them to me and then she spoke to [] Paul Conefry and Paul said well I think [], these are rough estimates about what maybe they'll be worth when you know Chris dies, if Chris dies in the next 10 years it might be worth this money but those are just guestimates. There are things on there that aren't even closed yet, like the condo and the and the property on Central Park West, they're not even closed yet . . . . (Id. at 19-20.)*fn2

The overall tenor of the meeting was that of three very close co-workers, making the best of a difficult situation. Although some parts of the meeting were somewhat confrontational, (id. at 1 ("Sit down Mr. Finazzo")), the general tone of the meeting was friendly. Before Finazzo began discussing the assets listed on the Siegel e-mail, Geiger indicated that "[T]here's a group of evidence here that's very damaging to you. . . . I need your help to figure out what the hell is going [on] . . . . You need to explain it to us." (Id. at 1.) After Finazzo began explaining the assets, Geiger told him "You are the sweetest man I've ever met in my life, and you know that. . . . And you know, I've always said you are my brother. What you've done is shown terrible judgment [sic]." (Id. at 2-3.) When it came time to tell Finazzo he was being terminated, Geiger again was empathetic:

I mean the words coming out of my mouth can't even come out, you're my brother. . . . Chris, I'm your brother. I love you. Have I ever steered you wrong. . . . I mean my heart is broken. . . . I don't know what to do. We've been fighting to see if there's anything we could do. (Id. at 4-5.)

At one point Geiger even calls Finazzo "my key partner and key friend in life" and begins to cry. (Id. at 16, 18.) And when the meeting ends, the transcript indicates that it "sounds like they are exchanging hugs." (Id. at 32.)

II.Aeropostale's Technology Policies

Because the Siegel e-mail was sent to Finazzo's Aeropostale address, much of this motion, as discussed in some detail below, will turn on Finazzo's expectation of privacy in that account. Relevant to that expectation are Aeropostale's policies regarding the use of its e-mail accounts. Therefore, the Court will briefly summarize the record as established by the parties.

Aeropostale had policies governing its employees' use of company e-mail as early as 1999. The government has offered into evidence a number of those policies, as they have evolved through the years. In 1999, Finazzo signed one such policy, which was entitled "Electronic Technologies Agreement." (Ex. A to Govt.'s Mem. in Opp'n (Doc. No. 105-1) ("1999 Policy").) The agreement defined "Company Systems" as including "email." (Id. at 1.) It provided, in pertinent part:

Systems are provided to serve business purposes only and are considered assets of the Company.

You should have no expectation of privacy when using Company Systems. All information on the Systems may be monitored, accessed, deleted or disclosed at any time without your permission. The Company further has the right to limit, block, track, remove and/or record access by any employee when using Company Systems and when accessing any information on the Internet or Intranet. (Id. at 2.)

In addition, the policy set out certain standards for the use of "Web/Internet Email." In pertinent part:

The Web/Internet Email may be used for Company business only. Any limited exceptions to this rule must be approved through the MIS department. In any event, no personal ...


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