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United States v. Finazzo

United States District Court, E.D. New York

August 1, 2014

UNITED STATES OF AMERICA,
v.
CHRISTOPHER FINAZZO and DOUGLAS DEY, Defendants.

MEMORANDUM & ORDER

ROSLYNN R. MAUSKOPF, District Judge.

Defendants Christopher Finazzo and Douglas Dey were convicted in connection with a kickback scheme perpetrated at the expense of Finazzo's former employer, Aeropostale. Dey pled guilty to one count of conspiracy to violate the Travel Act, in violation of 18 U.S.C. §§ 371 and 1952(a)(3). ( See Doc. No. 148.) After a three-week trial, a jury found Finazzo guilty of conspiracy to commit mail and wire fraud, and to violate the Travel Act in violation of 18 U.S.C. §§ 371, 1341, 1343 and 1952(a)(3); fourteen counts of substantive mail fraud; and one count of substantive wire fraud. ( See Doc. No. 260.) The jury also rendered a special forfeiture verdict in the amount of $25, 790, 822.94. ( See Doc. No. 262.)

Now before the Court are defendants' motions related to sentencing and forfeiture: (1) Dey's request for an evidentiary hearing, (2) both defendants' challenges to the amount of restitution sought by the government; and (3) Finazzo's motion to vacate the special forfeiture verdict as unconstitutionally excessive. For the reasons that follow, the Court finds: (1) no evidentiary hearing is required; (2) restitution is appropriate in the amount of the kickbacks received by Finazzo; and (3) no constitutional infirmity undermines the jury's forfeiture verdict.

BACKGROUND

A full recitation of the facts and procedural history of this case is set forth in this Court's Memorandum and Order issued January 14, 2014 addressing Finazzo's motion to set aside the jury's verdicts as to guilt, familiarity with which is presumed. ( See Doc. No. 343.)[1] From that Memorandum and Order, for the reader's benefit, the Court provides below its prior recitation of the trial evidence.

I. The Evidence at Trial

A. Financial Interests in South Bay and its Affiliated Entities

Finazzo's former accountant and cooperating government witness, Paul Conefry, testified about Finazzo's and Dey's joint business ventures. Shortly after Finazzo was hired by Aeropostale in 1996, Conefry met with Finazzo and Dey about a new business venture they were embarking upon together - South Bay. (Transcript of Trial Proceedings ("Tr.") at 821.) Finazzo and Dey planned that South Bay would do business with Aeropostale and other companies. ( Id. ) During this initial meeting, Conefry cautioned Finazzo and Dey about their plans because "if you have a relationship with a vendor as an employee of a company it could create a problem." ( Id. ) Finazzo stated in response that he did not think Aeropostale would "go for it." ( Id. ) Nevertheless, Finazzo and Dey agreed that South Bay would serve as a vendor to Aeropostale. Dey was the sole owner of South Bay. (Tr. at 824.) Finazzo, in turned, formed C&D Retail Consultants ("C&D") in part as a means to facilitate funneling of Aeropostale's business to South Bay. ( Id. ) Finazzo used his position at Aeropostale to direct business to South Bay, and South Bay's business grew rapidly. ( Id. at 823.)

Conefry was the accountant to both South Bay and C&D. (Tr. at 822.) In that capacity, Conefry directed payments from South Bay to C&D as instructed by Finazzo and Dey and pursuant to their agreement. ( Id. at 825.) Over time, Dey and Finazzo agreed that Finazzo would receive fifty percent of South Bay's profits, paid as consulting fees from South Bay to C&D. ( Id. at 826.) Conefry also testified that Finazzo and Dey jointly owned three corporations, Vertical Line Apparel, Inc., Vertical Line Apparel II, Inc., and Vertical Line Apparel III, Inc. (the "Vertical Line entities"). ( Id. at 843.) The Vertical Line entities also served as vendors to Aeropostale. ( Id. at 342.) Dey and Finazzo also jointly owned other South Bay-named entities, including South Bay Sports Plex, South Bay Ticketing, and South Bay Knitting.[2] ( Id. at 844; see also Govt. Ex. 356.) Conefry prepared the tax returns for all of these entities as well. (Tr. at 844.)

Each year that Conefry prepared the taxes for South Bay and C&D, he cautioned Finazzo and Dey that, as South Bay's business with Aeropostale grew "bigger and bigger, " Finazzo should disclose their relationship to Aeropostale, and Conefry warned that they needed to be very careful about categorizing the payments from South Bay to C&D as consulting fees because they were not. (Tr. at 830-33.) Around the time that Aeropostale was going public, another discussion to this effect occurred and Finazzo responded to Conefry that "it's gone along so far so we will just continue." ( Id. at 832.) During a similar conversation, Finazzo at one point also said that he was going to be leaving Aeropostale soon and that it was "too late to do anything about it now." ( Id. at 839.)

The former Chief Financial Officer of Aeropostale, Michael Cunningham, testified that Finazzo failed to disclose his ownership interest in South Bay or any related-party transactions with South Bay on his director and officer ("D&O") questionnaires and his related-party transactions questionnaires that Finazzo was required to complete on a regular basis for Aeropostale. (Tr. at 79-85.) For example, the related-party transaction questionnaires asked Finazzo whether he "had a material financial interest [more than any 10-percent interest in an entity that the company transacts business with] in a transaction or a proposed transaction to which Aeropostale was or is to be a party to?" ( Id. at 90.) Finazzo consistently and falsely answered "No" to this question. ( Id. )

Similarly, the General Counsel of Aeropostale, Edward Slezak, testified that Finazzo lied on his D&O questionnaires about his relationship with South Bay. On these questionnaires, Finazzo stated he received no bribes or kickbacks or other favorable treatment from third-party vendors and that he did not partake in any financial transaction with a third-party vendor. (Tr. at 406-19.) The former Chief Executive Officer of Aeropostale, Julian Geiger, testified as well that Finazzo never disclosed his financial interests in South Bay. ( Id. at 1056.)

B. The Graphic T-Shirt and Fleece Business

Geiger testified that Aeropostale started doing business with South Bay based on

Finazzo's recommendation. (Tr. at 1010.) Aeropostale bought primarily graphic t-shirts and fleece products from South Bay. ( Id. at 1011.) Geiger testified that from 2002 to 2006, Finazzo was responsible for vendor selection and vendor pricing for merchandise. ( Id. at 1010.) Cunningham also testified that, as Chief Merchandising Officer, Finazzo was "responsible for the overall final price that was being negotiated with the vendors, " including South Bay. ( Id. at 99.) Cunningham testified that the "single most important factor in determining" Aeropostale's profitability is the cost it pays for its goods. ( Id. at 97.)

As an example of the level of control Finazzo exercised over the graphic t-shirt business, Cunningham testified that Geiger suggested to Finazzo that he move twenty-five percent of the tshirt business to overseas vendors in order to obtain a price lower by $1 to $1.50 per t-shirt, representing an approximately $5 million cost-savings to Aeropostale. (Tr. 123, 125, 126.) Finazzo said that he would look into it, but grew more and more agitated each time Geiger confronted him about it. ( Id. at 124-25.) Geiger corroborated this testimony. He believed that Aeropostale was paying about $5 per t-shirt produced domestically by South Bay and believed he could get t-shirts from overseas vendors for $3.50 each, recognizing it would take more time for overseas vendors to deliver product to the United States. ( Id. at 1040.) He asked Finazzo to move twenty-five percent of the t-shirt business to overseas vendors, and Finazzo said he would do so. ( Id. at 1041.) By moving that business overseas, Geiger estimated that Aeropostale would have earned an additional $6 million in profit. ( Id. ) Finazzo never moved twenty-five percent of the graphic t-shirt business overseas as directed. ( Id. ) Over time, as Geiger and pressed Finazzo on the issue, Finazzo became "agitated." ( Id. at 124.) During one of the last meetings on moving to overseas t-shirt vendors, Cunningham recalled that Finazzo again became "agitated" and "said this meeting is over and walked out the door and slammed the door shut and the whole room vibrated." ( Id. )

Geiger also testified that, whenever Finazzo was questioned about the relatively low profit margins that Aeropostale earned on its graphic t-shirt business, Finazzo reacted strongly: "On many occasions, he would take his hands and hit them against the table and basically say why are people looking so closely at this? At one point... he told me, I wasn't allowed to ask him any questions about graphic t-shirts for a month." (Tr. at 1036.) Geiger testified further that while he was the Chief Merchandising Officer, Finazzo had the final say on the number of orders for graphic t-shirts that Aeropostale placed. ( Id. at 1055-56.)

Additionally, many former and current employees of Aeropostale who worked under Finazzo during the relevant time period testified about his level of control over the graphic t-shirt business, specifically as it related to South Bay. For example, Jennifer Heiser, who reported directly to Finazzo, testified that she tried to place graphic t-shirt orders with vendors in Singapore but Finazzo discouraged her from doing so. (Tr. at 193.) Instead, she placed ninetyseven to ninety-nine percent of her graphic t-shirt orders with South Bay. ( Id. at 192.) Similarly, John DiBarto, who ran the entire men's division at Aeropostale and reported directly to Finazzo, testified that Finazzo negotiated the prices for graphic t-shirts with South Bay. DiBarto stated he rarely attempted to negotiate prices with South Bay because "that was Chris' thing. He controlled production... [T]hat was his baby from the beginning, so we're really, you know, we did whatever he wanted" for graphic t-shirts. ( Id. at 644-45, 652.) DiBarto further explained that "every now and then" his team would ask for discounted prices on graphic t-shirts from South Bay, but never sought an overall reduction in price of a dollar or more because when he tried to "mess with [the prices] a little bit, it wasn't worth it, Chris would get angry.... It caused a lot of stress." ( Id. at 682-83.)

With respect to Finazzo's control over the fleece business, an employee of Aeropostale, Jinah Jung, who worked under Finazzo, offered testimony about the prices Aeropostale paid for South Bay fleece. Specifically, Jung testified about an e-mail she sent to Finazzo in February 2005, where she wrote:

Hi, Chris. I just left you a voicemail regarding the South Bay woman's [sic] graphic fleece program for 450, 000 units. Maria Peakes advised that you agreed upon $6.85, which I think is really high, because I know I can get it for a low $6 range. For 450, 000 units, I feel that we can do better. I will not argue for it if it's something you've already committed to. However, we could have saved approximately $300, 000. Please advise if you'd still like to proceed with the $6.85, and I'll put it to bed. Thanks.

(Tr. at 605-06; Govt. Ex. 261.) Finazzo responded to Jung's email, stating, "Yes, that is the price I agreed with Doug [Dey] on. He did not make any money last holiday, and he is a valued partner, so good callout. As we get closer to holiday, we can discuss. This is his program." (Tr. at 607-08, Govt. Ex. 261.)

South Bay's graphic t-shirt business with Aeropostale was lucrative to both Finazzo and Dey. They carried out their agreement to split South Bay's profits on a fifty-fifty basis. An FBI agent, Michael Braconi, testified regarding the amount of money that Aeropostale paid to South Bay and the Vertical Line entities, and in turn the amount of money South Bay paid to C&D, over the course of Finazzo's employment at Aeropostale. First, Braconi testified that Aeropostale paid South Bay and the Vertical Line entities $267, 078, 261.41 between June 2002 and November 6, 2006, the day before Finazzo was terminated. (Tr. at 1516; Govt. Ex. 121.) During that same period, South Bay paid C&D $21, 223, 831.41. (Tr. at 1517; Govt. Ex. 122.) Payments from South Bay Apparel to the other South Bay-named entities totaled $2, 959, 520 during that same period. (Tr. at 1520; Govt. Ex. 124.) From January 2004 to November 6, 2006, South Bay paid the Vertical Line entities $6, 174, 463.60. (Tr. at 1519; Govt. Ex. 123.) The sum of the latter two amounts - payments from South Bay to other South Bay entities and to the Vertical Line entities - totaled $9, 133, 983.60. (Tr. at 1522; Govt. Ex. 125.) Half of that amount - or fifty percent of that amount - was $4, 566, 991.80. ( Id. ) Thus, the sum of the payments from South Bay to C&D and the payments from South Bay to other South Bay-named entities and the Vertical Line entities was $25, 790, 822.94. (Tr. at 1523; Govt. Ex. 127.)

C. Finazzo's Termination

Aeropostale learned about Finazzo's undisclosed interests in South Bay after undertaking an investigation into an allegation that Finazzo had instructed an Aeropostale employee to purchase an additional 100, 000 units of product from a vendor who had supplied a hotel room in Las Vegas for Geiger's children. (Tr. at 1056.) During the investigation, Aeropostale obtained a copy of an email sent to Finazzo's work account from his personal attorney. The email, dated August 24, 2006, attached a list of Finazzo's assets that his attorney had prepared. (Tr. at 342; Govt. Ex. 356.) In the email, the attorney asked Finazzo to review the values listed in the attachment and indicated that she would produce "revised wills" based upon them. ( Id. ) The email attachment was entitled "Christopher Finazzo family assets" and below the title read, "Corporations (50 percent) interests." ( Id. ) The attachment then listed Finazzo's assets in which he held a fifty-percent interest. The named entities included the three Vertical Line entities, South Bay Knitting, South Bay Ticketing, South Bay Peru, and Sports Plex Inc. (Govt. Ex. 356.) Finazzo was terminated on November 7, 2006.

The termination meeting was recorded and played for the jury. Geiger and Slezak confronted Finazzo about his ownership in the South Bay-named entities and the Vertical Line entities. Attempting to explain, Finazzo stated that he lent money to Dey to set up a factory in Peru for South Bay Peru and that the Vertical Line entities were real estate holding companies and that he did profit from them. (Govt. Ex. 20A.) Finazzo also stated that he "never did anything that was against Aeropostale. I always had Aeropostale's best interest in mind." ( Id. ) Finally, Finazzo said that while he did not know what South Bay's profit structure was, South Bay was "competitive with everyone." ( Id. ) Nevertheless, Geiger explained that Finazzo was being terminated for cause for having personal financial interests in, and serving as an officer of, entities affiliated with South Bay. ( Id. )

D. Finazzo's Financial Interests with South Bay and Related Entities

Many witnesses testified that it was important for Aeropostale to know about any financial or other interest that Finazzo had in South Bay and its related entities. For example, Cunningham testified that Aeropostale had to know whether its employees had an ownership interest or a relationship with one of its vendors because the company has to "make sure that all employees are acting with the best interest of the company.... If an individual is either getting money or has a significant ownership stake in a vendor... without disclosing it to us - we don't know, we don't have the opportunity to understand, are we getting the proper value for the money, or is it benefiting that individual in a way that we don't know?" (Tr. at 80.) He also stated that if an employee is "receiving a benefit and if that employee is also involved in transacting business with that vendor, the prices that we pay may not be the best price or the fair market value for that product or service." ( Id. at 85.) Cunningham further testified that the company was specifically concerned about Finazzo's relationship with South Bay when it finally learned of it in 2006 because they did not know if Finazzo was "acting in the best interest [of] Aeropostale but in his own interest and therefore we had no way of knowing if this was the best possible price we could get for T-shirts overall." ( Id. at 137.)

Slezak testified that with a related-party transaction, the company is concerned because the employee may be on "both sides of a transaction, " meaning the employee had a "conflict of interest." (Tr. at 324.) Aeropostale wanted to know about such conflicts of interest because "you want to make sure that the company is getting the best possible deal, the best benefit of the bargain and if someone is on both sides of a transaction, you have to do an analysis to make sure you feel comfortable that the company is getting a good deal or a fair deal." ( Id. at 324-25.)

As to Finazzo's specific interest in South Bay, Slezak also testified that Finazzo was in a clearly conflicted position because he directed "what we made, how much we made, who got it, you know, who got the orders, who made the product." (Tr. at 364.) "And then he is also acknowledging that he is profiting on the other side by getting profit, as he used here, from South Bay, South Bay entities, whatever it might be." ( Id. ) Slezak continued, "what I felt was that he was on both sides of those transactions. There is no way that we got - we as Aeropostale got the benefit of the bargain or got the best market prices or got the best, you know, engagement with our vendor that we could possibly get. Honestly, I felt that every penny that Chris ever got from South Bay should have been ours." ( Id. at 365.)

Geiger further testified that "relationships such as these could easily reduce our profitability and how much money we made." (Tr. at 1070.) In Geiger's view, these relatedparty transactions jeopardized Aeropostale's ability to make an arm's length deal and maximize its profitability. ( Id. at 1071.) Moreover, Finazzo profiting directly from the Vertical Line entities, which served as vendors to Aeropostale, "would directly diminish Aeropostale's ability to maximize its profits because monies were going elsewhere that could have gone to the company." ( Id. at 1073.) To put a finer point on it, Geiger testified that "any profits that [Finazzo] would have gotten... would have accrued to the company increasing its profitability, the value to the shareholders and made Aeropostale stronger." ( Id. at 1078.)

Notwithstanding the importance of disclosure, Geiger and others testified that relatedparty transactions in and of themselves are not necessarily problematic. For example, Slezak testified that:

Related-party transactions can be okay if they are disclosed. If our board of directors, if it's raised to the right executives in the company, CEO, CFO, general counsel, things like that, to make an analysis and then our board approves it and say it's not detrimental to the company, maybe it's beneficial to the company, whatever, and you disclose it, it's okay. You know, the problem is that if you don't disclose it, you have what happened here.

(Tr. at 373.) Slezak then further explained that, when an employee discloses a related-party transaction to him, Slezak would analyze both sides of the transaction, talk to the parties on each side of the transaction, and "get a full understanding of and disclosure about all of the terms and conditions of this whatever transaction might be." ( Id. at 404.) Then, he would present his findings to the other executive officers, who would in turn, if they so decided, present the terms of the transaction to the board of directors. ( Id. at 405.) The board of directors would then decide whether to move forward with the transaction. ( Id. ) Slezak explained that "you'd want to have your full board sign off unanimously and say they felt comfortable with allowing this type of relationship to go forward." ( Id. ) Slezak then stated none of this process ever occurred with respect to Finazzo's relationship with South Bay. ( Id. )

Similarly, Cunningham testified that, while related-party transactions are not criminal or inherently flawed, the fact that one exists "means it needs to be evaluated to ensure that there is nothing wrong about the transaction." ( Id. at 142, 143.) Cunningham also testified that publicly traded companies often engage in related party transactions. ( Id. at 143.)

II. The Jury's Verdict As to Guilt

The jury found Finazzo guilty on all counts. (Doc. No. 260.) With respect to each mail fraud and wire fraud count and the related conspiracy counts, the jury was asked to render a special verdict indicating whether its verdict was "on the basis of intent to deprive Aeropostale of money" and/or "on the basis of Aeropostale's right to control use of its assets." ( Id. ) As to conspiracy to commit mail fraud, the jury found Finazzo guilty on the basis of an intent to deprive Aeropostale of both money and its right to control its assets. ( Id. ) With respect to the conspiracy to commit wire fraud, and each substantive mail and wire fraud count, the jury found Finazzo guilty only on the basis of an intent to deprive Aeropostale of its right to control. ( Id. )

III. The Jury's Special Forfeiture Verdict

Following the jury's verdict as to guilt, the government presented additional evidence in support of its forfeiture allegations against Finazzo. The government called Michael Braconi, an FBI agent, who testified about Aeropostale's payments to the South Bay and the Vertical Line entities, as well as South Bay's payments to C&D during Finazzo's employment at Aeropostale. Agent Braconi testified that from June 2002 to November 6, 2006, Aeropostale paid South Bay and the Vertical Line entities a total of $267, 078, 261.41. (Tr. at 1516; Gov't Ex. 121.) During that same period, South Bay paid $21, 223, 831.41 to C&D, (Tr. at 1517; Gov't Ex. 122); $2, 959, 520 to the other South Bay-named entities, (Tr. at 1520; Gov't Ex. 124); and, from January 2004 to November 6, 2006, $6, 174, 463.60 to the Vertical Line entities. (Tr. at 1519; Gov't Ex. 123.) Dey and Finazzo stuck to their agreement to split the profits equally, and Finazzo's cut totaled $25, 790, 822.94. (Tr. at 1523; Gov't Ex. 127.) On April 29, 2013, the jury rendered a special forfeiture verdict specifying several specific assets deemed subject to forfeiture, and finding that $25, 790, 822.94 "constitute[d] or [wa]s derived from proceeds traceable to the offenses in the [i]ndictment" of which Finazzo was convicted. (Doc. No. 262.)

DISCUSSION

Although they overlap in certain respects, many of the outstanding issues related to restitution and forfeiture are somewhat involved and best addressed seriatim. Part I of this discussion quickly disposes of Dey's request for an evidentiary hearing as the concerns as raised will not affect sentencing. In Part II, the Court addresses more complex issues relating to restitution, concluding that it may be ordered as to both defendants under the Mandatory Victim Restitution Act, 18 U.S.C. § 3663A, or in the alternative, under the Victim and Witness Protection Act, 18 U.S.C. § 3663, in the amount of the kickbacks received by Finazzo. Finally, in Part III, the Court computes Finazzo's applicable Sentencing Guidelines calculation for purposes of sentencing and, using that Guideline calculation in part as required in its analysis, rejects Finazzo's constitutional challenge to the jury's forfeiture verdict.

I. Dey's Request for an Evidentiary Hearing

Dey seeks, "[i]n addition to any restitution hearing required under 18 U.S.C. § 3664(e), " a hearing as to (1) "the allegation... that South Bay Apparel's receipt of orders and payments from Anchor Blue was part of any unlawful scheme'";[3] (2) "the government's claim that South Bay's prices were above-market for the goods and services South Bay provided"; (3) any claim "that the quality of South Bay's goods was inferior"; and (3) any claim "that delays in fleece shipments were excessive." (Doc. No. 347 at 1.) An evidentiary hearing is unnecessary as the Court does not intend to rely on any evidence against Dey related to the Anchor Blue scheme. Moreover, as is evident by the Court discussion of the defendants' offense conduct throughout this Memorandum and Order, the Court does not rely on the characterizations of the evidence alleged by the government and about which Dey complains.

Moreover, it is important to note that as to Dey, the Court may rely on the evidence in the trial record when sentencing both defendants. See United States v. Wisky-Mota, 226 F.Appx. 45, 46-47 (2d Cir. 2007) (rejecting a claim that the sentencing court erred by basing its sentence in part on evidence presented at a co-defendant's trial); United States v. Granik, 386 F.3d 404, 414 n.7 (2d Cir. 2004) (holding that a sentencing court may rely on any information known to it at sentencing); United States v. Carmona, 873 F.2d 569, 574 (2d Cir. 1989) (rejecting a due process challenge to a sentencing court's reliance on evidence from a trial at which the defendant was not a party); see also United States v. Martinez, 413 F.3d 239, 242 (2d Cir. 2005) ("[T]he right of confrontation does not apply to the sentencing context and does not prohibit the consideration of hearsay testimony in sentencing proceedings.")

In addition, a district court is "not required, by either the Due Process Clause or the federal Sentencing Guidelines, to hold a full-blown evidentiary hearing in resolving sentencing disputes." United States v. Phillips, 431 F.3d 86, 93 (2d Cir. 2005) (quoting United States v. Slevin, 106 F.3d 1086, 1091 (2d Cir. 1996)); United States v. Midyett, No. 07-CR-874 (KAM), 2010 WL 1423951, at *2 (E.D.N.Y. Apr. 7, 2010). Rather, "[a]ll that is required is that the [C]ourt afford the defendant some opportunity to rebut the Government's allegations." Phillips, 431 F.3d at 93 (quoting Slevin, 106 F.3d at 1091); see also United States v. Mena, 342 F.Appx. 656, 658 (2d Cir. 2009) (finding that "because [the defendant] was afforded an opportunity to rebut the government's allegations, including a specific invitation for [the defendant] to present testimony on the issue, the district court appropriately applied the enhancement without conducting a Fatico hearing").

Dey has received ample notice of all proposed sentence enhancements through his PSR and its addenda, and he has had multiple opportunities to respond through objections, at hearings, in sentencing memoranda, and in letters to the Court. Those opportunities, of which he has taken full advantage, are sufficient to afford him the process to which he is due. Cf. United States v. Guang, 511 F.3d 110, 122 (2d Cir. 2007) (finding that the combination of the district court's observations of witnesses at trial, the PSR, letter briefs disputing the Probation Department's Guidelines calculation, and sentencing submissions afforded defense counsel an adequate opportunity to challenge proposed sentence enhancements); United States v. Capri, 111 F.Appx. 32, 35 (2d Cir. 2004) (finding that the district court did not abuse its discretion in denying the defendant's request for a Fatico hearing as to a dangerous weapon enhancement because "[c]ounsel [had] opposed the enhancement in written submissions and in oral argument"). Likewise, in two hearings and voluminous submissions to the Court, Dey has offered comprehensive arguments on all relevant aspects of the issues pertaining to restitution. There is "no reason to question the reliability of material facts having in the [Court]'s view direct bearing on the sentence to be imposed, " United States v. Fatico, 603 F.2d 1053, 1056 n.9 (2d Cir. 1979), nor "[a]ny dispute as to the proper amount or type of restitution, " 18 U.S.C. § 3664(e), that necessitates further proceedings. Accordingly, no further evidentiary hearing is required.

II. Restitution

The Court next turns to the issues pertaining to restitution. Aeropostale has requested restitution in a Victim Impact Statement submitted to the Probation Department. ( See Doc. No. 293.) "The goal of restitution, in the criminal context, is to restore a victim, to the extent money can do so, to the position he [or she] occupied before sustaining injury.'" United States v. Battista, 575 F.3d 226, 229 (2d Cir. 2009) (quoting United States v. Boccagna, 450 F.3d 107, 115 (2d Cir. 2006)). Laudable though that goal may be, federal courts have no inherent power to order restitution, United States v. Pescatore, 637 F.3d 128, 139 (2d Cir. 2011), and may do so only to the extent authorized by statute. United States v. Varrone, 554 F.3d 327, 333 (2d Cir. 2009) (quoting United States v. Bok, 156 F.3d 157, 166 (2d Cir. 1998)); United States v. Cummings, 189 F.Supp.2d 67, 72 (S.D.N.Y. 2002). Additionally, the Court "may award restitution only for losses directly resulting from the conduct forming the basis for the offense of conviction.'" United States v. Germosen, 139 F.3d 120, 131 (2d Cir. 1998) (quoting United States v. Silkowski, 32 F.3d 682, 688 (2d Cir. 1994)). The government bears the burden of demonstrating the amount of any loss sustained by a victim, see 18 U.S.C. § 3664(e); United States v. Reifler, 446 F.3d 65, 122 (2d Cir. 2006), and all disputes as to the proper amount or type of restitution are resolved by a preponderance of the evidence. United States v. Bahel, 662 F.3d 610, 647 (2d Cir. 2011) (citation omitted); United States v. Skowron, 839 F.Supp.2d 740, 743 (S.D.N.Y. 2012), aff'd, 529 F.Appx. 71 (2d Cir. 2013).

Two statutes, the Mandatory Victim Restitution Act ("MVRA"), 18 U.S.C. § 3663A, and the Victim and Witness Protection Act ("VWPA"), 18 U.S.C. § 3663, are potentially applicable in this case. As its name implies, "[u]nder the MVRA, restitution is mandatory for certain crimes." Battista, 575 F.3d at 230; see also United States v. Marino, 654 F.3d 310, 319 (2d Cir. 2011) ("Most significantly, the MVRA partially superseded the VWPA insofar as it made restitution that was previously discretionary mandatory as to certain offenses...."). In particular, the MVRA provides that "[n]otwithstanding any other provision of law... the court shall order... that the defendant make restitution" for "an offense against property under [Title 18]... including any offense committed by fraud or deceit" where "an identifiable victim or victims has suffered a physical injury or pecuniary loss."[4] 18 U.S.C. § 3663A(a)(1), (c)(1)(A)-(B).

Because the purpose of the statute "is primarily to restore the victim to his or her prior state of well-being, and to that end to require federal criminal defendants to pay full restitution to the identifiable victims of their crimes, '" United States v. Amato, 540 F.3d 153, 156-57 (2d Cir. 2008) (quoting S. Rep. No. 104-179, at 12-13 (1995), reprinted in 1996 U.S.C.C.A.N. 924, 925-26), "[r]estitution is required without regard to the defendant's economic circumstances, though terms of payment may take into account the financial needs of the defendant and his or her family." United States v. Agate, 613 F.Supp.2d 315, 321 (E.D.N.Y. 2009) (citing 18 U.S.C. § 3664(f)(1)(A)). The amount of restitution must be a "reasonable approximation of [a victim's] losses supported by a sound methodology." United States v. Gushlak, 728 F.3d 184, 196 (2d Cir. 2013), cert. denied, 134 S.Ct. 1528 (2014)

The VWPA provides that "the [C]ourt, when sentencing a defendant convicted of an offense under [Title 18]... may order... that the defendant make restitution to any victim of such offense...." Id. § 3663(a)(1)(A) (emphasis added). Based upon a consideration of certain enumerated statutory factors, see 18 U.S.C. § 3663(a)(1)(B)(i)(I)-(II), the Court has discretion under the VWPA to order restitution. See Battista, 575 F.3d at 230. And unlike the MVRA, the VWPA does not ask whether a crime is an "offense against property." Compare generally 18 U.S.C. § 3663(a)(1)(A) with 18 U.S.C. § 3663A(c)(1)(A)(ii).

Those differences - the requirement under the MVRA that a crime be an offense against property and the discretionary nature of the VWPA based on enumerated statutory factors - are the key distinctions between the two statutes. In all other relevant respects, "the provisions of the VWPA and the MVRA are nearly identical in authorizing an award of restitution."[5] Battista, 575 F.3d at 230 (quoting United States v. Serawop, 505 F.3d 1112, 1118 (10th Cir. 2007)) (internal quotation marks omitted). Both statutes are "intended to compensate victims only for losses caused by the conduct underlying the offense of conviction, " Hughey v. United States, 495 U.S. 411, 416 (1990); United States v. Donaghy, 570 F.Supp.2d 411, 424 (E.D.N.Y. 2008), and explicitly limit restitution to the actual losses sustained by a victim or victims. See 18 U.S.C. §§ 3663(a)(1)(B)(i)(I) and 3663A(c)(1)(B); see also United States v. Catoggio, 326 F.3d 323, 326 (2d Cir. 2003) (noting that 18 U.S.C. § 3663A(c)(1)(B) requires a showing of physical injury or pecuniary loss to an identifiable victim); United States v. Abbey, 288 F.3d 515, 519 (2d Cir. 2002) (noting that 18 U.S.C. § 3663(a)(1)(B) requires a showing of actual loss). And both statutes utilize the same procedure for issuing and enforcing a restitution order. See 18 U.S.C. §§ 3663(d), 3663A(d).

Guided by these principles, and for the reasons discussed in the sections that follow, the Court finds that restitution must be ordered as to both defendants under the MVRA, and in any event, may be ordered as to ...


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