United States District Court, E.D. New York
August 1, 2014
UNITED STATES OF AMERICA,
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.
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.) 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. ( 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.)
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'"; (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.
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." 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." 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 both defendants in the Court's discretion under the VWPA.
A. Applicability of the MVRA
As noted above, the MVRA requires that the Court order restitution for any offense against property under Title 18 where an identifiable victim has suffered a pecuniary loss, which includes any offense committed by fraud or deceit. See Marino, 654 F.3d at 316 (citing 18 U.S.C. §§ 3663A(a)(1), (c)(1)). Thus, the first issue the Court must address is whether Finazzo and Dey were convicted of an offense against property within the meaning of the MVRA.
It is important to note at the outset that both Finazzo and Dey were convicted of conspiracy to violate the Travel Act, while Finazzo was convicted of additional crimes, including conspiracy to commit mail and wire fraud, and substantive counts of mail and wire fraud. The jury's special verdict further particularizes Finazzo's offense conduct. It found, for purposes of Finazzo's conviction for conspiracy to commit mail fraud, that Finazzo intended to deprive Aeropostale of both money and its right to control its assets. It further found, for purposes of both the substantive counts of mail and wire fraud, as well as the conspiracy to commit wire fraud, that Finazzo intended to deprive Aeropostale solely of its right to control its assets.
For purposes of fixing restitution, and as suggested by the Government, the Court will consider only defendants' convictions for conspiracy to violate the Travel Act, and Finazzo's conviction for mail fraud conspiracy on the theory that he intended to deprive Aeropostale of money. In doing so, the Court need not reach Finazzo's oft-repeated argument that his convictions predicated on an intent to deprive Aeropostale of its right to control do not constitute offenses against property within the meaning of the MVRA.
With the inquiry focused in this way, the Court finds that the MVRA unquestionably applies to Finazzo's conviction for conspiracy to commit mail fraud with the intent to deprive Aeropostale of money. Conspiring to commit mail fraud falls comfortably within the scope of an offense against property under the MVRA. Cf. Battista, 575 F.3d at 230; Donaghy, 570 F.Supp.2d at 421. Indeed, as Finazzo himself acknowledges, his convictions for "mail and wire fraud and a conspiracy [to commit those offenses]... are classically thought of as offenses against property." (Tr. of Hr'g held May 8, 2014, at 21.)
Whether defendants' conspiracy to violate the Travel Act constitutes an offense against property requires closer examination. For the reasons that follow, the Court concludes that it does.
The Travel Act imposes criminal liability upon "[w]hoever travels in interstate or foreign commerce or uses the mail or any facility in interstate or foreign commerce, with intent to... promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity...." 18 U.S.C. § 1952(a)(3). The Travel Act conspiracy is predicated on the underlying state crimes of Commercial Bribing in the Second Degree, in violation of N.Y. Penal Law §§ 180.00 and 20.00,  and Commercial Bribe Receiving in the Second Degree, in violation of N.Y. Penal Law §§ 180.05 and 20.00. ( See Doc. No. 62 at 7 ¶ 13(c).)
In determining whether defendants' conspiracy to violate the Travel Act constitutes an "offense against property" within the meaning of the MVRA, the central issue is whether defendants' conspiracy to violate the Travel Act was "committed by fraud or deceit" as that phrase is used in the statute. See 18 U.S.C. § 3663A(c)(1)(A)(ii). That question remains unresolved in the Second Circuit. See Battista, 575 F.3d at 230-31. Courts have disagreed as to whether "committed by fraud or deceit" refers to "the manner in which the defendant commits the offense, " Donaghy, 570 F.Supp.2d at 421, as the government urges, or instead requires the Court to look to "the elements of the offense" to determine whether an offense of conviction was "committed by fraud or deceit." United States v. Adorno, 950 F.Supp.2d 426, 429 (E.D.N.Y. 2013) (emphasis in original). This is the focus of the parties' competing arguments. For the reasons that follow, the Court concludes that the phrase "committed by fraud or deceit" refers to the manner in which a particular offense was committed.
Any interpretation of a federal statute must begin with that statute's text. See United States v. Maynard, 743 F.3d 374, 378-79 (2d Cir. 2010) (quoting City of New York v. Permanent Mission of India to the United Nations, 618 F.3d 172, 182 (2d Cir. 2010)). Absent a different definition provided by Congress, a statute is accorded its plain or common-sense meaning. United States v. Dauray, 215 F.3d 257, 260 (2d Cir. 2000) (citing United States v. Piervinanzi, 23 F.3d 670, 677 (2d Cir. 1994); Harris v. Sullivan, 968 F.2d 263, 265 (2d Cir. 1992)). The Court finds that the plain meaning of the phrase "any offense committed by fraud or deceit, " 18 U.S.C. § 3663A(c)(1)(A)(ii), refers to the manner in which a particular offense was committed rather than the actual elements of that offense. Cf. Donaghy, 570 F.Supp.2d at 421. Simply put, saying "committed by fraud or deceit" is not the same as saying that an offense contains as an element fraud or deceit. Indeed, where Congress intended to specify an element of a crime, it has done so explicitly. See, e.g., 18 U.S.C. §§ 16(a) (defining a "crime of violence" as "an offense that has as an element the use, attempted use, or threatened use of physical force against the person or property of another...."), 3559 (defining "extortion" as an offense "that has as its elements the extraction of anything of value from another person by threatening or placing that person in fear of injury to any person or kidnapping of any person"); cf. Taylor v. United States, 495 U.S. 575, 600-01 (1990) ("Section 924(e)(2)(B)(i) defines violent felony' as any crime punishable by imprisonment for more than a year that has as an element' - not any crime that, in a particular case, involves - the use or threat of force. Read in this context, the phrase... most likely refers to the elements of the statute of conviction, not to the facts of each defendant's conduct."). No such statement is found in the MVRA.
The Court's reading is supported by recent case law in the Second Circuit. In United States v. Zangari, 677 F.3d 86 (2d Cir. 2012), a case on which the parties heavily rely, the Second Circuit applied the MVRA to a conviction for conspiracy to violate the Travel Act. See id. at 89-91. While the Court of Appeals concluded that the district court had improperly calculated the amount of restitution under the MVRA, it did not question the applicability of the MVRA to the defendant's offense of conviction. Id. at 93. Moreover, as in this case, the state law offenses underlying the Travel Act charge in Zangari were the very same offenses at issue here - i.e. Commercial Bribing in the Second Degree and Commercial Bribe Receiving in the Second Degree. See United States v. Zangari , No. 10-CR-255 (JG), Doc. No. 3 at 6-9 ¶ 15 (E.D.N.Y.). As noted, those offenses lack a fraud or deceit element, yet the Second Circuit endorsed an award of restitution under the MVRA.
The Court recognizes, of course, that the court in Adorno reached a different result. See 950 F.Supp.2d at 427. But Adorno was decided on very different facts. In that case, the defendant pled guilty to a single substantive count of federal bribery. Id. The government offered no proof of fraud, deception, or loss to the victim. Id. In short, Adorno involved a defendant convicted solely of violating a statute that did not require proof of fraud or deceit, where any connection between that offense and fraud, deceit, or other property was questionable. Most significantly, unlike Finazzo and Dey, Adorno was not convicted of conspiracy. "[S]ince conspiracy is a crime distinct from its underlying predicate acts and purposes, and involves additional harms, ' restitution may be awarded for a violation of the conspiracy statute even when it could not be awarded for the underlying predicates, " Cummings, 189 F.Supp.2d at 73 (quoting United States v. Helmsley, 941 F.2d 71, 101 (2d Cir. 1991)) (alterations omitted), and even if "the objects of the conspiracy to which [the defendant] pleaded guilty do not independently authorize restitution." Cummings, 189 F.Supp.2d at 73.
Here, defendants' Travel Act conspiracy was plainly committed in a fraudulent and deceitful manner, which renders it an offense against property within the meaning of the MVRA. Their scheme to generate secret profits through illegal kickbacks co-opted Aeropostale's ability to make strategic economic decisions, concealed crucial information about the true nature of significant transactions, and redirected business relationships to their own advantage - all of which were patently fraudulent and deceitful. The evidence at trial plainly exposed that fraud and deceit by demonstrating how the conspiracy contemplated, concealed, and comprised numerous misrepresentations and secret transactions. As examples, Finazzo knowingly and willfully placed himself in a clearly conflicted position, then lied repeatedly in multiple contexts and on multiple documents to conceal his illicit double-dealing. Finazzo and Dey concocted that plan together, and disguised their illicit payments that flowed through South Bay as consulting fees when in fact they were nothing of the kind. And Finazzo aggressively defended South Bay's dominant business relationship with Aeropostale so that he and Dey could continue to profit from their illicit scheme. This offense conduct amply establishes that defendants' scheme was replete with fraud and deceit.
Dey's own allocution underscores the deceitful nature of defendants' scheme. Dey admitted that he "understood and intended that sharing the profits of South Bay with Mr. Finazzo would influence him to help me get and keep some of the Aeropostale business, " and that defendants "entered this arrangement without the consent of Aeropostale." (Tr. of Plea Hr'g held Sept. 27, 2012, at 33.) He conceded that, in furtherance of the conspiracy, he "caused funds to be sent from South Bay to a company owned and controlled by Mr. Finazzo, " and "understood that [his] arrangement to share South Bay's profits with Mr. Finazzo was wrong." ( Id. ) Like the evidence at trial, Dey's allocution describes a crooked arrangement to secure business for South Bay by virtue of Finazzo's influence at Aeropostale, which was designed to generate profits for South Bay and a payday for Finazzo. The more South Bay (and Dey) profited, the more Finazzo profited. Dey's allocution also reaffirms the fact that defendants' conspiracy was concealed from Aeropostale, a vital element essential to achieving its goals.
The offense conduct underlying defendants' Travel Act conspiracy was marked by myriad misrepresentations, falsified documents, mischaracterized payments, and illicit agreements. It is thus abundantly clear from both the evidence offered at Finazzo's trial and Dey's allocution that defendants' offense conduct involved substantial fraud and deceit. As such, defendants' convictions for conspiracy to violate the Travel Act are offenses against property within the meaning of the MVRA.
B. Fixing Restitution Under the MVRA
The Court next turns to the requirements for fixing restitution under the MVRA. In this regard, the Court must answer two key questions. First, did Aeropostale suffer actual pecuniary harm that qualifies it as a victim of those offenses? And second, if so, is the amount of restitution sought by the government - here, the value of the kickbacks received by Finazzo - a reasonable measure of Aeropostale's actual pecuniary loss? Based on the evidence in the record and as discussed below, the Court answers both questions in the affirmative.
1. Pecuniary Harm
Restitution for an offense against property may only be awarded to "an identifiable victim, " 18 U.S.C. § 3663A(c)(1)(B); see also Marino, 654 F.3d at 316 (citing 18 U.S.C. §§ 3663A(a)(1), (c)(1)), which the MVRA defines as "persons who were directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered including, where the offense is conspiracy, any person directly harmed by the defendant's criminal conduct in the course of the conspiracy." Reifler, 446 F.3d at 135 (quoting 18 U.S.C. § 3663A(a)(2)) (internal alterations, quotation marks, and emphasis omitted). "[I]n determining whether one qualifies as a victim, a sentencing court can only consider the offense or offenses for which the defendant was convicted." Battista, 575 F.3d at 231.
The government's argument regarding direct and proximate pecuniary harm to Aeropostale is fairly straightforward. It first points out that Finazzo had final authority over orders placed with South Bay, and that he negotiated the prices that Aeropostale paid South Bay for merchandise. Like most businesses, Aeropostale sought to reduce costs, increase its gross margin, and generate greater profits. Despite being entrusted with the responsibility to secure the best deal from Aeropostale's vendors, Finazzo had a corrupt relationship with Dey, in which Finazzo directed orders to South Bay and agreed to split South Bay's profits with Dey. This corrupt arrangement directly conflicted with Aeropostale's business objectives. Additionally, because he would personally profit more by increasing the prices of goods purchased from South Bay, Finazzo was no longer motivated to seek lower prices for Aeropostale.
Moreover, drawing on testimony from several witnesses at trial, the government "highlighted particular examples in which Finazzo's conduct was influenced by the corrupt relationship such that Aeropostale suffered harm and paid higher prices for goods from South Bay." (Doc. No. 355 at 6.) Specifically, the government cites the testimony about Finazzo's refusal to place twenty-five percent of Aeropostale's t-shirt orders with overseas vendors, his directive to Jinah Jung to place more expensive fleece orders with South Bay, and his aggressive attempts to ensure a steady flow of orders to South Bay without regard for quality, price, or performance. The government identifies each instance as an example of pecuniary harm, but urges that "[t]hese examples do not represent the entirety of harm suffered by Aeropostale." ( Id. at 7.) Instead, the government argues that "[t]hey are merely instances of pecuniary harm experienced by the company during the 10-year long scheme, " and that "[t]he true measure of the harm is the amount of the kickback payments Finazzo received during that time...." ( Id. )
Based on these facts, it is clear that Aeropostale is a victim of defendants' offenses of conviction because it was directly harmed both by Finazzo's criminal conduct in the course of his conspiracy to commit mail fraud, and by defendants' criminal conduct in the course of their conspiracy to violate the Travel Act. As discussed more fully infra, in connection with fixing the amount of restitution, defendants' scheme inflated prices Aeropostale paid to South Bay for its products. And courts have found actual pecuniary harm for purposes of restitution where fraudulently extracted payments are the mechanism by which a perpetrator profits from a conspiracy. In United States v. Paul, 634 F.3d 668 (2d Cir. 2011), for example, the Second Circuit found that fraudulently-secured margin loans were "a significant part of the [defendant's] greater fraud, " and that "brokerage houses would not have made the loans to [the defendant] had they known that the collateral for the loans was the stock he manipulated." Id. at 677. On that basis, the court concluded that "[t]he loss to the brokerage houses resulted from [the defendant]'s inducement of the loans, and it is for this loss that [the defendant] must provide restitution." Id. at 678.
Likewise, in United States v. Archer, 671 F.3d 149 (2d Cir. 2011), the Second Circuit held that clients' payments to an immigration lawyer convicted of visa fraud, "like the margin loans in Paul, were the mechanism through which [the defendant] profited from his conspiracy and, thus, were an integral part of the single scheme he devised." Id. at 172. Further, in United States v. Skowron , the court recognized that "[t]he necessary causal nexus unquestionably exist[ed]" where a subsidiary of the victim corporation was the "vehicle" or "mechanism" through which the defendant committed his crimes, and where those crimes deprived the corporation of the honest services of an employee, injured the corporation's reputation, wasted valuable resources, and caused the corporation to incur significant investigatory costs. 839 F.Supp.2d at 744-45.
As in those cases, here the evidence demonstrates that Aeropostale suffered pecuniary harm well within the causal sphere of defendants' offense conduct. At bottom, defendants' offense conduct duped Aeropostale into paying millions of dollars in kickbacks to its own senior executive. Finazzo's undisclosed kickbacks were drawn directly from Aeropostale's payments for South Bay's goods, and constituted the mechanism by which defendants profited from their conspiracy. Aeropostale "would not have made th[ose] payments to the defendant[s] had they known about the fraudulent scheme." Paul, 634 F.3d at 677; Archer, 671 F.3d at 171. And defendants' offense conduct also occasioned breaches of fiduciary duties by Finazzo, injury to Aeropostale's corporate reputation, and wasted resources - e.g., through internal investigations, vendor modifications, litigation costs, and personnel changes. Aeropostale thus sustained pecuniary harm that flowed directly from defendants' conduct in the course of the conspiracies for which they were convicted. Cf. United States v. Desnoyers, 708 F.3d 378, 390 (2d Cir. 2013) (ordering restitution of payments for fraudulent tests that "were necessary to the overall scheme" even though they were not "integral to the offense of conviction" because the victims here would not have paid for the tests had they known they were fraudulent); United States v. Ebrahim, No. 12-CR-471 (JPO), 2013 WL 2216580, at *2 (S.D.N.Y. May 21, 2013) (finding that AT&T was directly and proximately harmed by "an employee and fiduciary" who "participated in a scheme to deprive AT&T of the exclusive use of its intangible property....'") (internal citation omitted).
Defendants' arguments that their offense conduct did not result in pecuniary harm to Aeropostale are unavailing. It is not, determinative that their conspiracy to violate the Travel Act was premised only on the payment of bribes or an agreement to split South Bay's profits. The proper inquiry is whether defendants' offense conduct in furtherance of that conspiracy - and, for Finazzo, the mail fraud conspiracy as well - caused Aeropostale to sustain a pecuniary loss. The answer is yes.
For example, United States v. Bengis demonstrates that the scope of harm contemplated under the MVRA is significantly broader than defendants urge here. There, the Second Circuit held that the Republic of South Africa was a victim entitled to receive restitution in connection with a conspiracy to illegally import lobsters to the United States. 631 F.3d at 40-41. The defendants in Bengis argued that "even if South Africa had a property right in the lobsters, it [wa]s not a victim of the conspiracy because the conspiracy to which the defendants pleaded guilty did not involve the illegal harvesting of the lobsters" and concerned only "their importation to the United States with the knowledge that the lobsters had been obtained in violation of South African law." Id. at 40. The Second Circuit disagreed. Acknowledging that "the conspiracy to which the defendants pleaded guilty did not involve the illegal harvesting of the lobsters, " the court explained that the defendants' "conspiracy to conceal their illegal trade in lobster deprived South Africa of money it was due, " id., and "facilitated" illegal conduct in South Africa "by providing access to the United States market and enabled the poaching to go undetected by the South African government." Id. at 41.
Drawing the parallel here, Finazzo and Dey directly harmed Aeropostale through their criminal conduct in the course of their conspiracy because their agreement to exchange bribes and split South Bay's profits deceived Aeropostale into forgoing other business transactions, inflated the prices Aeropostale paid to South Bay for its products, and caused Aeropostale unwittingly to pay millions of dollars in kickbacks to its own senior executive. In short, the government has sufficiently demonstrated that defendants' criminal conduct caused Aeropostale to sustain actual pecuniary harm. The question then becomes to what extent. In that regard, the Court must consider whether the value of the kickbacks and received by Finazzo is a reasonable measure of the actual pecuniary loss Aeropostale sustained. See Zangari, 677 F.3d at 93; Gushlak, 728 F.3d at 196.
2. Kickbacks as a Reasonable Measure of Loss
As explained above, "a restitution order must be tied to the victim's actual, provable, loss." Zangari, 677 F.3d at 91 (internal citations omitted); Marino, 654 F.3d at 319-20. However, the Second Circuit has also "construe[d] value' as used in the MVRA to be a flexible concept to be calculated by a district court by the measure that best serves Congress's statutory purpose." Boccagna, 450 F.3d at 115. The MVRA thus "requires only a reasonable approximation of losses supported by a sound methodology, " Gushlak, 728 F.3d at 196, and allows for the "exercise of discretion by sentencing courts in determining the measure of value appropriate to [a] restitution calculation in a given case." Boccagna, 450 F.3d at 114; United States v. Marsh, 820 F.Supp.2d 320, 344 (E.D.N.Y. 2011). When making that determination, "the preponderance standard must be applied in a practical, common-sense way." Gushlak, 728 F.3d at 196 (quoting United States v. Savoie, 985 F.2d 612, 617 (1st Cir. 1993)). "So long as the basis for reasonable approximation is at hand, difficulties in achieving exact measurements will not preclude a trial court from ordering restitution." Savoie, 985 F.2d at 617 (quoting United States v. Hand, 863 F.2d 1100, 1104 (3d Cir. 1988)); see also Gushlak, 728 F.3d at 196 (same); United States v. Kerekes, 531 F.Appx. 182, 184 (2d Cir. 2013) (same).
For the reasons discussed infra in this section, the Court finds that the amount of the kickbacks paid to Finazzo are a reasonable measure of the actual pecuniary loss sustained by Aeropostale. At the outset, however, the Court notes that in fixing loss for purposes of restitution, a defendant's "ill-gotten gains" and a "victim's actual loss" are not interchangeable. Zangari, 677 F.3d at 93. But neither that principle nor the acknowledgment that "a court's power to order restitution is limited to actual loss, " United States v. Carboni, 204 F.3d 39, 47 (2d Cir. 2000) (citing Germosen, 139 F.3d at 130), prohibits using the amount of the kickbacks received by Finazzo as a reasonable measure of the loss in this case.
Defendants' arguments to the contrary are incorrect and based on an overly broad reading of the limitation in Zangari. The Second Circuit has emphasized that the term "actual loss" is used to "distinguish the sorts of losses cognizable in restitution proceedings from those cognizable under the United States Sentencing Guidelines, which additionally recognize intended loss.'" Gushlak, 728 F.3d at 195 (quoting Germosen, 139 F.3d at 130). The term prohibits "loss calculations that incorporate hypothetical or speculative losses" and "those that arbitrarily fall short" of the full amount of a victim's loss, but it does not adopt a "one-size-fitsall standard" or require that loss calculations be "mathematically precise." Gushlak, 728 F.3d at 195. The standard for loss remains "a flexible concept to be calculated by a district court by the measure that best serves Congress's statutory purpose." Boccagna, 450 F.3d at 115.
Moreover, Zangari itself recognized that "there may be cases where there is a direct correlation between gain and loss, such that the defendant's gain can act as a measure of - as opposed to a substitute for - the victim's loss." 677 F.3d at 93 (citing Berardini, 112 F.3d at 609-10) (emphases in original). The court explicitly acknowledged that, in Zangari, the "analysis might be different" if the parties that had actually paid the sham finder's fees, which were eventually distributed as kickbacks, had been identified as victims. Id. at 94 n.9. If those parties had come forward, the court acknowledged, there may well have been "some correlation between (a) the sham finder's fees they paid... and (b) the kickbacks... paid to [the defendant]." Id. Citing Zangari and employing an analogous rule against substituting gain for loss, the District of Columbia Circuit has explained this distinction as requiring "some approximation of actual loss... in order to assess whether the defendant's gain serves as a reasonable estimate of the loss." Fair, 699 F.3d at 513 (citing Zangari, 667 F.3d at 93-94). In this case and as discussed more fully below, a "practical, common-sense" application of the preponderance standard leads to the conclusion that the kickbacks paid to Finazzo are a reasonable measure of Aeropostale's loss. Gushlak, 728 F.3d at 196.
Second Circuit case law supports the Court's conclusion. In United States v. Newsom, for example, the defendant was convicted at trial of two counts of conspiracy to commit securities and mail fraud and two substantive counts of securities fraud, all of which stemmed from the defendant's failure to disclose commissions that his company would receive in connection with the sale of interests in certain companies. 399 F.Appx. at 626. Initially, the district court ordered restitution in the amount of $499, 989.64, which reflected the purchase price of the securities the defendant had sold. Id. at 626-27. The Second Circuit reversed, finding that "the district court erred in not deducting from the purchase price the actual value of the instruments." Id. at 627 (quoting United States v. Leonard, 529 F.3d 83, 93 (2d Cir. 2008)). On remand, the district court ordered restitution in the amount of the sales commissions received (and fraudulently concealed) by the defendant. 399 F.Appx. at 627. The defendant appealed again.
This time, however, the Second Circuit affirmed. Id. Like Finazzo and Dey, the defendant in Newsom "principally argue[d] that the amount of the undisclosed commissions" - the secret profits from Newsom's crime - "was not a reasonable estimate of the actual loss to investors caused by the fraud." Id. The Second Circuit disagreed, stating that it was "satisfied that the district court acted well within its discretion in ordering [the defendant] to pay restitution based on the amount of the undisclosed commissions." Id. Proceeding under the MVRA and recognizing that a district court's determination of the proper amount of restitution may "not only lack certainty[, ] but may indeed be based on mere probabilities, expectations, guesswork, even a hunch, '" id. (quoting United States v. Atkinson, 788 F.2d 900, 902 (2d Cir. 1986)), the court held that the district court's "valuation method... accurately (and reasonably) reflects the nature of the fraud in this case, which centered on hiding exorbitantly high commission rates so as to induce investors to buy securities at an inflated price." 399 F.Appx. at 628. The court also stated that the district court's calculation "reflects the fact that the fraud in question related to how the investors' money would be spent, rather than the inherent value of a particular asset or liability, " and that "[b]y pegging actual loss to the amount of the undisclosed commissions, the court ensured that [the defendant] was held liable for the loss caused by his fraud, i.e., the nondisclosure of the excessive commissions." Id.
The same approach was followed in United States v. Niebuhr, 456 F.Appx. 36 (2d Cir. 2012), where the defendant was convicted of one count of securities fraud and one count of conspiracy to commit securities fraud, commercial bribery, and wire fraud. Id. at 38. The defendant in Niebuhr also argued on appeal that "the district court erred in measuring restitution by reference to the amount of the hidden, excessive commissions that [the defendant] charged his victims." Id. at 39. Again, the Second Circuit flatly rejected that contention. Id. (citing Newsom, 399 F.Appx. at 628).
Recognizing that gain may not be substituted for loss for purposes of restitution, the Court finds that the kickbacks received by Finazzo are a reasonable measure of Aeropostale's actual pecuniary loss. The essence of defendants' offense conduct in the course of their conspiracy was a series of transactions - spread over a decade - in which Finazzo, with full knowledge and cooperation by Dey, directed business to South Bay in exchange for secret kickbacks cloaked as consulting fees and funneled through a shell corporation. Like the undisclosed commissions in Newsom and Niebuhr, the kickbacks received by Finazzo accurately and reasonably capture the character of the fraud in this case, which relied on extracting substantial hidden profits from the amounts Aeropostale paid to South Bay. "[P]egging actual loss to the amount" of the illicit kickbacks ensures that defendants are held liable for the loss caused by their fraud. Newsom, 399 F.Appx. at 628. The Court therefore finds that the kickbacks paid to Finazzo are a reasonable measure of Aeropostale's loss.
The decisions of courts in other circuits, while not controlling, lend further support to the Court's conclusion. In United States v. Sleight, 808 F.2d 1012 (3d Cir. 1987), for example, the Third Circuit affirmed an order of restitution in the amount of kickbacks the defendant had received in the course of a scheme to defraud his employer. Id. at 1015, 1022. Based on testimony from the corporate victim's president, the district court found that the kickbacks the defendant had received represented amounts to which the victim was entitled because those amounts "should have accrued to [the victim] in the form of lower prices...." Id. at 1017. The court rejected the "argument that there was only an intangible loss'" and described its award as "something akin to the concept of lost profits. We're talking about money which the employer was entitled to make which he did not make. It didn't know that it was available to it. It was satisfied because it didn't know any better." Id. The Third Circuit affirmed, finding that the kickbacks "were part and parcel of the transactions which the jury found constituted the scheme to defraud" and there was an "ample basis in the record to conclude that [the victim] suffered a loss" in the amount of those kickbacks. Id. at 1018.
The parallels to the instant case are again apparent. Like Finazzo and Dey, Sleight argued that "evidence that the price paid by [the victim] was at the market price or lower support[ed] his contention that there was no loss...." Id. The Third Circuit rejected that assertion, explaining that the argument failed to acknowledge that the defendant "w[as] able to purchase [products] at a price lower than market, " and that his "obligation as an officer and employee" was to purchase goods for his employer "at the best price available, even below market when possible." Id. at 1017-18. More importantly, Sleight's argument that the victim suffered no loss ignored the fact that the defendant "failed to take advantage of the opportunity" to buy goods for his employer "at the price actually available, but instead structured the purchases so that he personally could make a profit on the transactions. " Id. at 1018 (emphasis added). Since "[t]he kickbacks were [the defendant]'s share of the profits, " the court concluded that they fairly represented the victim's loss. Id. It also went on to note that because "[t]he offense... is a scheme to defraud, and each count is simply an act in furtherance of the unitary scheme[, ]... establishing that a single count caused a specific loss would be difficult. It is the overall scheme that is central to all the counts and gives rise to the victims' financial loss." Id. at 1018 (quoting United States v. Woods, 775 F.2d 82, 88 (3d Cir. 1985)).
The Eleventh Circuit reached a similar conclusion in United States v. Vaghela. There, the defendant was convicted of conspiracy to defraud the United States, and of soliciting and receiving kickbacks for Medicare referrals to a laboratory. 169 F.3d at 731. At sentencing, the district court ordered the defendant to make restitution for the "full amount" that the government had paid for the lab work. Id. at 736. On appeal, the defendant urged that the government had received at least some value in return for its lab payments, and argued that he should instead be required to make restitution in "the amount [he] received in illegal kickbacks in exchange for the referrals." Id. Implicit in the defendant's argument, of course, is the recognition that no value accrued to the government in return for the kickback payments. The Eleventh Circuit agreed, concluding that it was reasonable to assume that the government "was overcharged in the amount of the kickbacks, and that the loss [the government] suffered was equivalent to that amount" because the defendant and his co-conspirator "would not have participated in the kickback scheme if it was not profitable." Vaghela, 169 F.3d at 736. Without belaboring the facts in this case, a similar conclusion follows here as well.
To counter, Finazzo and Dey argue that, even if Aeropostale suffered a pecuniary loss, that loss is not properly measured by the amount of the kickbacks because the government failed to offer evidence of inflated prices. (Doc. No. 357 at 6.) In particular, defendants repeatedly insist that the differences in South Bay's business model render it incomparable to other possible vendors. Defendants' myopic focus on the particulars of South Bay's business model misses the point, however. There is no question that Aeropostale received goods and services from South Bay that in fact had value. But defendants fail to rebut the crucial point that a portion of every payment Aeropostale made went toward generating secret kickbacks for Finazzo. As the government demonstrated, any increase to the prices of goods purchased by Aeropostale attributable to the kickbacks was not justified by any features of South Bay's business model. And those kickbacks, drawn from South Bay's profits, benefitted only Finazzo and Dey. Cf. United States v. O'Malley, 364 F.3d 974, 980 (8th Cir. 2004) (holding that the amount of loss suffered by the victim of a kickback conspiracy "should have included all [of] the funds retained by all of the co-conspirators as a result of their fraudulent scheme"); United States v. Gamma Tech Indus., Inc., 265 F.3d 917, 928 (9th Cir. 2001) (finding that "it is not unreasonable to assume that a natural result of paying kickbacks is inflation of the charges in order to make the scheme profitable for the payer of the kickbacks"); Vaghela, 169 F.3d at 736 (holding that it was "not unreasonable to assume that [the government] was overcharged in the amount of the kickbacks, and that the loss [the government] suffered was equivalent to that amount" since the person paying the kickbacks "would not have participated in the kickback scheme if it was not profitable"). In short, there is a direct correlation between the prices Aeropostale paid, the profits South Bay accrued, and the kickbacks Dey paid to Finazzo from those profits.
Moreover, the government did offer evidence that Aeropostale paid inflated prices for merchandise it obtained from South Bay. The record at trial contains clear evidence of several instances in which Finazzo, pursuant to his covert arrangement with Dey, ensured that business flowed to South Bay at the expense of Aeropostale's bottom line. This evidence includes Jinah Jung's testimony that she was required to pay more for subpar products from South Bay, even when other cheaper merchandise was available, as well as Geiger's testimony that Finazzo failed to transfer business to cheaper vendors overseas. Based on that evidence, the government maintains that "[t]he kickbacks... when placed in the context of Finazzo's complete control of South Bay's business, the higher prices, the disastrous delivery delays, the lack of accountability and lack of competition, all of which harmed Aeropostale, represent [a] reasonable approximation of losses supported by a sound methodology.'" ( Id. at 8 (quoting Gushlak, 728 F.3d at 196).) Viewed in the context of the overall scheme, the evidence in the record is sufficient to establish by a preponderance of the evidence that defendants' scheme prevented Aeropostale from ensuring that it obtained the best possible prices, and caused Aeropostale to sustain harm in the amount of the kickbacks.
In the face of this evidence, defendants attempt to argue, in the alternative, that the government has not adduced enough proof of price inflation. While the government's evidence does not offer a comprehensive accounting of price and cost throughout the ten years that Finazzo and Dey operated their kickback scheme, the government is not required to deliver such an exhaustive or detailed accounting of a victim's loss. Cf. Kerekes, 2012 WL 3526608, *3 ("It would undercut the stated purpose of the MVRA to determine that because the [g]overnment cannot prove losses as to all of the taxpayers and has used conservative estimates rather than undertaking the complex and costly project that a full calculation of the loss - if even possible - would entail, the IRS is not entitled to restitution."). As the First Circuit has recognized, "[t]he law cannot be blind to the fact that criminals rarely keep detailed records of their lawless dealings, totaling up every column and accounting for every misbegotten dollar." Savoie, 985 F.2d at 617. The government was required only to present evidence sufficient to show by a preponderance that the amount of the kickbacks paid to Finazzo is a "reasonable approximation" of Aeropostale's loss. Gushlak, 728 F.3d at 196. It has done so here.
The bare suggestion that Aeropostale might still have transacted business with South Bay had Finazzo's secret stake been disclosed is equally unavailing. ( See, e.g., Doc. No. 329 at 7 n.2.) Defendants cannot refute the government's case simply by speculating about events that might have transpired had they never engaged in any deception. The fact remains that Finazzo repeatedly misrepresented his relationship with Dey, dominated vendor selection to steer business to South Bay, and illegally concealed the substantial secret profits that he derived from Aeropostale's transactions with South Bay, all in an effort to line his own pockets.
Finally, to the extent Finazzo and Dey argue that the difficulty in precisely determining the amount of Aeropostale's loss militates in favor of dispensing with restitution entirely, their contention must be rejected. Both the MVRA and the VWPA provide that restitution need not be awarded where its calculation is so complex as to outweigh the need to compensate any victims. See 18 U.S.C. §§ 3663A(c)(3)(B), 3663(A)(1)(B)(ii); see also Adorno, 950 F.Supp.2d at 431 (declining to award restitution in light of "issues both as to the cause and the amount of the [victim]'s losses"). But nothing in those statutes "require[s] the district court to surrender whenever one or more complex issues of causation or loss calculation appear, " Gushlak, 728 F.3d at 192. And the Second Circuit has observed that, even under the VWPA, "the purpose of the restitution provision is to require restitution whenever possible. " United States v. Porter, 41 F.3d 68, 70 (2d Cir. 1994) (citing United States v. Atkinson, 788 F.2d 900, 903 (2d Cir. 1986)) (emphasis added); see also Catoggio, 326 F.3d at 328 (finding that restitution was proper in an "admittedly complex case" where "the district court, although aware of the difficulties involved in ordering restitution in th[e] case, did not consider the process too burdensome"); Donaghy, 570 F.Supp.2d at 421 (calculating restitution despite numerous complicated legal and factual issues).
Indeed, other courts have engaged in far more extensive proceedings and significantly more complex calculations before ordering restitution. See generally Gushlak, 728 F.3d at 192 (affirming a restitution award that took eighteen months, four different restitution submissions by the government, and expert testimony to calculate). The calculation of the appropriate amount of restitution in this case is not so complex or burdensome to suggest that it cannot be fixed.
For the foregoing reasons, the Court concludes that Aeropostale sustained a pecuniary loss directly attributable to defendants' criminal conduct in the amount of $25, 790, 822.94, representing the amount of the kickbacks paid to Finazzo over the course of defendants' illegal scheme, which is the reasonable measure of the loss incurred by Aeropostale for the purposes of restitution under the MVRA.
In the alternative, the Court concludes that the VWPA supports restitution as to both defendants in the amount of $25, 790, 822.94. Cf. Donaghy, 570 F.Supp.2d at 421-23 (determining the applicability of the MVRA and, in the alternative, the VWPA). As noted above, restitution under the VWPA is discretionary and not limited to offenses against property. However, all of the considerations analyzed above in connection with the MVRA - including the standards to be applied, the definitions employed, and the elements evaluated - are the same under the VWPA. See Marino, 654 F.3d at 317; Battista, 575 F.3d at 230. In exercising its discretion under the VWPA, however, the Court must also "consider the amount of the loss sustained by the victim as a result of the offense, the defendant's financial resources, the financial needs and earning ability of the defendant and the defendant's dependents, and other factors the court deems appropriate." Id. at 230; see also 18 U.S.C. § 3663(a)(1)(B)(i)(I)-(II). "Courts are statutorily required to consider the[se] enumerated restitution factors, but not to make detailed factual findings as to each factor." United States v. Stevens, 211 F.3d 1, 6 (2d Cir. 2000); Donaghy, 570 F.Supp.2d at 421.
The amount of the loss sustained by Aeropostale as a result of defendants' criminal conduct is discussed in detail supra. Given the magnitude of the harm to the victim of defendants' scheme, it suffices to say that this factor militates in favor of ordering restitution. Furthermore, Finazzo's financial difficulties do not excuse him from paying restitution. "Although the financial resources of the defendant are one of the mandatory section 3663(a) considerations, even a defendant with no present ability to pay can still be ordered to do so pursuant to section 3663." Donaghy, 570 F.Supp.2d at 421-22; see also Porter, 41 F.3d at 70 ("Even an indigent defendant may be subject to the duty to pay restitution when and if funds are eventually acquired."). "[I]n the absence of a defendant showing a restricted future earnings potential by a preponderance of the evidence, it is entirely reasonable for a district judge to presume future earnings in ordering restitution." United States v. Ben Zvi, 242 F.3d 89, 100 (2d Cir. 2001) (citing 18 U.S.C. § 3664(e)). Given the nature and scope of the scheme, the fact that Finazzo retains significant earning potential, and the amount of loss to Aeropostale, the Court concludes that his financial condition does not preclude restitution.
The remaining VWPA factors also weigh in favor of ordering restitution. First, the financial needs and earning ability of defendants and their families do not preclude a restitution award. Finazzo's wife, a retired business analyst, has actively sought to assert her rights to a share of her husband's substantial remaining assets. Finazzo's children are all grown, independent, and gainfully employed. ( See Doc. No. 295 ¶¶ 68-69.) Dey is divorced, with two children that have graduated college and entered the workforce. ( See Doc. No. 288 ¶ 51; Doc. No. 369 at 2.) And Dey has already provided for the financial well-being of his family. ( See Doc. No. 288 ¶ 51.) Second, although the Court must consider "such other factors as the court deems appropriate, " 18 U.S.C. § 3663(B)(i)(II), defendants do not argue - and the Court does not find - any other considerations that militate against ordering restitution. As such, in the alternative, restitution may be ordered against both defendants in the amount of $25, 790, 822.94.
D. Joint and Several Liability
Because Finazzo and Dey were co-conspirators, each may be required to make restitution for acts committed by the other in furtherance of the conspiracy. See United States v. Boyd, 222 F.3d 47, 50 (2d Cir. 2000) (holding that a sentencing court may "order a single defendant to pay restitution for all losses caused by the actions of that defendant as well as by the actions of that defendant's co-conspirators, or, in its discretion, to allocate restitution proportionately among culpable parties); Donaghy, 570 F.Supp.2d at 423. The Court has discretion to "make each defendant liable for payment of the full amount of restitution, " or instead "apportion liability among the defendants to reflect the level of contribution to the victim's loss and economic circumstances of each defendant." 18 U.S.C. § 3664(h); see also United States v. Nucci, 364 F.3d 419, 422 (2d Cir. 2004) (citing United States v. Tzakis, 736 F.2d 867, 871 (2d Cir. 1984)) ("It has long been the law of this circuit that the restitution obligation may be ordered to be joint and several."); Agate, 613 F.Supp.2d at 323. Joint and several liability may be imposed, "payable by all convicted co-conspirators in respect of damage suffered by all victims of a conspiracy, regardless of the facts underlying counts of conviction in individual prosecutions." Gushlak, 728 F.3d at 202 n.7 (quoting Boyd, 222 F.3d at 50-51) (internal quotation marks omitted).
Given the comparable levels of knowledge, participation, and profit in this case, Finazzo and Dey should be held liable jointly and severally for the full amount of restitution owed to Aeropostale. Both defendants participated fully in the scheme to accord South Bay handsome profits and to funnel substantial kickbacks to Finazzo - an illicit endeavor that both concocted from the outset and knew to be a violation of the law. Cf. Tzakis, 736 F.2d at 871 (holding that, because the defendant "was convicted... for a conspiracy encompassing the entire fraudulent scheme, " he could "be required to make restitution for damage caused to all of the scheme's victims" even if his role in the scheme was "comparatively minimal"). Defendants jointly retained Conefry to falsely characterize those sums as consulting fees, and defendants equally split the profits from their illegal venture. The scheme would not have been possible without the participation of both Finazzo and Dey. Irrespective of Finazzo's additional transgressions as a fiduciary of Aeropostale, the active participation of both defendants in all aspects of the scheme warrants the imposition of joint and several liability for the full amount of restitution. See United States v. Nachamie, 121 F.Supp.2d 285, 298 (S.D.N.Y. 2000), aff'd, 5 F.Appx. 95 (2d Cir. 2001) (noting that a court is not required to apportion restitution based on lesser degrees of culpability).
E. Offset for Settlements
Finazzo and Dey also argue that, in the event the Court does award restitution, certain amounts should be deducted for settlements paid directly to Aeropostale. In particular, Finazzo asserts that he is entitled to an offset of $5 million, (Doc. No. 358 at 9), and Dey urges that he is entitled to an offset of $8 million. (Doc. No. 357 at 12-13.) The government opposes any deduction for Finazzo. ( See Doc. No. 355 at 11.) The government agrees, without explanation, that Dey is entitled to an offset, but disputes a portion of the amount sought by Dey. ( Id. ) Based on the evidence in the record, the Court will accord Finazzo an offset in the amount of $5 million, and Dey an offset in the amount of $7.1 million.
Restitution may not result in a double recovery for a victim. See United States v. Fore, 169 F.3d 104, 110 (2d Cir. 1999); Cummings, 189 F.Supp.2d at 79. Thus, "[i]n fashioning a restitution order, a pre-existing civil settlement is properly considered by the Court... as an offset against the calculation of total loss to the victim." United States v. Hamburger, 414 F.Supp.2d 219, 224 (E.D.N.Y. 2006).
With respect to Finazzo, the government repeatedly emphasizes that, at the time it reached the settlement with Finazzo, Aeropostale had no knowledge of the kickback scheme. As an initial matter, the Court notes that this assertion represents a significant change in the government's position. In its initial objections to Finazzo's PSR, the government stated that "[u]pon proof to the Court that the defendant paid Aeropostale the sum of $5 million as part of a civil settlement, the government respectfully submits that the Court could find, based on the terms of that payment, that $5 million should be deducted from the $25, 790, 822.94 owed to Aeropostale as restitution." (Doc. No. 307 at 9-10.) In its later submissions, however, the government "contends that the $5 million... should not be deducted from the restitution order because it was unrelated to the merchandise provided by South Bay to Aeropostale, and additionally because Aeropostale was unaware of the kickback scheme at the time of the settlement agreement." (Doc. No. 355 at 11.)
The government's new position is curious given that it has never challenged an offset for Dey's settlement with Aeropostale, to which Aeropostale agreed with knowledge of largely the same facts. Moreover, the very documents that the government submitted undermine its position because they establish that Finazzo's settlement did relate to conduct relevant to this case. For example, a letter from Aeropostale dated November 27, 2007, sent in the course of the mediation leading to the settlement between the company and Finazzo following his termination, states that
Critical to Finazzo's misconduct were his undisclosed interests in certain of Aeropostale's suppliers. The financial harm caused by that conduct is what constituted Aeropostale's claim for damages. That harm, Finazzo's misconduct in his relationships with certain Vendors and his deliberate failure to make appropriate and required disclosures support his firing for cause.
(Doc. No. 355-1 at 3.) Whether or not Aeropostale knew all of the relevant facts at the time it consummated its settlement with Finazzo, the evidence clearly demonstrates that Aeropostale knew enough to be aware of Finazzo's illicit dealings with South Bay.
In any event, the government offers no legal reason why Aeropostale's knowledge of the facts at the time of the settlement with Finazzo is determinative, nor does it explain why proof that the payment was applied to Aeropostale's losses is crucial. Indeed, the government does not cite a single statute or case in support of either proposition. ( See Doc. No. 355 at 11-12.) In the absence of any authority to the contrary, and in light of the fact that the settlement was related in part to the offense conduct here, the Court will accord Finazzo an offset in the amount of $5 million.
Dey seeks an offset of $8 million based on his settlement with Aeropostale. The government submits that the Court should offset only $7.1 million and exclude the remaining $900, 000, which the parties agree is attributable to Aeropostale' attorneys' fees. The Court will accord Dey an offset in the amount of the $7.1 million on which the parties agree. As discussed in the next section, the Court will not impose restitution for attorneys' fees and other expenses as requested by Aeropostale and as such, the Court will not offset that portion of Dey's settlement related to attorneys' fees. To do otherwise would reduce the amount of restitution awarded for Aeropostale's loss directly and proximately caused by defendants' offense conduct with monies paid by Dey to Aeropostale for additional harms - those ostensibly arising out of Aeropostale's efforts in connection with the investigation and prosecution of this action - that the Court concludes it cannot calculate. Thus, it is of no moment here that Dey chose to recompense Aeropostale for those additional harms as part of his civil settlement.
F. Aeropostale's Request for Attorneys' Fees and a Portion of Finazzo's Salary
In connection with sentencing, Aeropostale requests additional restitution for attorneys' fees and related expenses, as well as twenty percent of the salary paid to Finazzo during the relevant period.
The Court has discretion under the MVRA to include certain attorney's fees as part of a restitution award. 18 U.S.C. § 3663A; see also Amato, 540 F.3d at 160-62; United States v. Gupta, 925 F.Supp.2d 581, 584 (S.D.N.Y. 2013), aff'd, 2014 WL 1193411 (2d Cir. Mar. 25, 2014). A victim may also seek restitution of fees under the VWPA. See 18 U.S.C. § 3663(b)(4). The Court applies the same standard under both statutes. Battista, 575 F.3d at 233. But "[a]ny attorney's fees to be included under this provision must be tied to the investigation and prosecution of the criminal case." United States v. Levis, No. 08-CR-181 (TPG), 2011 WL 497958, at *2 (S.D.N.Y. Feb. 10, 2011) (citing Battista, 575 F.3d at 233). Such fees may be awarded only if the Court finds "by a preponderance of the evidence, that such expenses were necessary; that they were incurred while participating in the investigation, prosecution, or attendance at proceedings regarding the offense; that they were incurred by a victim' as defined by the Act; and that they do not require unduly complicated determinations of fact.'" Gupta, 925 F.Supp.2d at 584 (quoting Amato, 540 F.3d at 160); see also 18 U.S.C. § 3663A(b)(4).
As Finazzo correctly noted in opposing the fee request, Aeropostale failed to provide documentation that would enable the Court to determine whether such fees should be awarded. ( See Doc. No. 329 at 7-8.) As for the Government, "other than noting that legal fees incurred by the victim can be considered by the Court in fashioning a restitution order, the government t[ook] no position as to whether Aeropostale is entitled to restitution of attorney's fees, " (Doc. No. 307 at 10), because it "d[id] not possess the necessary information." (Doc. No. 335 at 25.) At the hearing held January 17, 2014, the Court plainly noted that without further documentation, the Court could not consider Aeropostale's request and directed the government to submit additional briefing on these issues. ( See Tr. of Hr'g held Jan. 17, 2014, at 58-59.) In its supplemental submission, however, the government states only that "[t]he case law cited by Aeropostale in support of its requests indicates that courts have previously awarded restitution for a defendant's salary and legal fees" and added that "[b]ased on communications with company counsel, the government understands that Aeropostale is willing to provide additional information and documents in support of its position if the Court deems it necessary." (Doc. No. 355 at 11 n.4.)
To date, the Court has not received any documentation - billing records, itemized lists of expenses, explanatory affidavits, or the like - determine whether attorneys' fees are recoverable in this case. As such, it cannot assess Aeropostale's general request for fees and expenses. Compare, e.g., Cuti, 2013 WL 1953741, at *6 (awarding restitution for a victim's legal fees based on the government's showing that the fees were related to the victim's participation in the criminal prosecution); Donaghy, 570 F.Supp.2d at 430 (same).
Aeropostale also seeks recovery of a portion of a defendant's salary which can be awarded in an appropriate case. See, e.g., Skowron II, 529 F.Appx. at 74; Bahel, 662 F.3d at 649. In this case, however, even Aeropostale admits that it is unable "calculate exactly [w]hat portion of Finazzo's work days was spent on behalf of A[e]ropostale as opposed to South Bay...." (Doc. No. 293 at 4.) As such, the Court is left without facts or a sound methodology on which to substantiate any such award.
The Court next turns to Finazzo's challenge to the jury's forfeiture verdict. Following its deliberations as to Finazzo's guilt, and after hearing additional evidence solely on the issue of forfeiture, the jury rendered a special forfeiture verdict finding that (1) $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, and (2) certain specific property was subject to forfeiture. (Doc. No. 262.)
Where a defendant is convicted of an offense authorizing forfeiture, the Court must order the forfeiture as part of the defendant's sentence in accordance with the Federal Rules of Criminal Procedure. 28 U.S.C. § 2461(c). The Court has entered a Preliminary Order of Forfeiture. ( See Doc. No. 291.) That order becomes final at sentencing or earlier if the defendant so agrees. Fed. R. Crim. P. 32.2(b)(4)(A).
However, Finazzo now challenges the jury's forfeiture verdict as unconstitutionally excessive, in violation of the Eighth Amendment to the United States Constitution. ( See generally Doc. Nos. 275-1, 285.) The government argues that the Eighth Amendment does not apply in this case because the forfeiture of the "proceeds traceable to the crimes of conviction for which the jury returned a verdict of guilty" is not punitive and "only seeks to ensure that a defendant is denied his ill-gotten gains." ( See Doc. No. 280 at 14-16.) Assuming, arguendo, that the Eighth Amendment applies, see Bajakajian, 524 U.S. at 331-32 (noting that in personam criminal forfeitures "have historically been treated as punitive, being part of the punishment imposed for felonies and treason"); Viloski, 2014 WL 401074, at *6 (remanding for evaluation under the Eighth Amendment a forfeiture of laundered funds); United States v. Jalaram, Inc., 599 F.3d 347, 352 (4th Cir. 2010) (holding that "forfeiture of criminal proceeds does indeed constitute punishment to which the Excessive Fines Clause applies"), Finazzo has failed to establish a constitutional violation.
A. Analysis Under the Excessive Fines Clause
"The touchstone of the constitutional inquiry under the Excessive Fines Clause is the principle of proportionality, " and "[t]he amount of the forfeiture" sought by the government "must bear some relationship to the gravity of the offense that it is designed to punish." Bajakajian, 524 U.S. at 334 (citing Austin, 509 U.S. at 622-23); United States v. Castello, 611 F.3d 116, 120 (2d Cir. 2010). "[A] punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant's offense." Bajakajian, 524 U.S. at 334. The defendant bears the burden of showing that a forfeiture is unconstitutionally excessive, Castello, 611 F.3d at 120 (citing United States v. Jose, 499 F.3d 105, 108 (1st Cir. 2007); United States v. Ahmad, 213 F.3d 805, 816 (4th Cir. 2000)), and Finazzo has failed to carry that burden here.
"[I]f the value of forfeited property is within the range of fines prescribed by Congress, a strong presumption arises that the forfeiture is constitutional." United States v. 817 N.E. 29th Drive, Wilton Manors, Fla., 175 F.3d 1304, 1309 (11th Cir. 1999) (cited by Varrone, 554 F.3d at 332). Although the maximum statutory fine in this case is $4 million,  see 18 U.S.C. § 3571(b)(3), the Second Circuit has held that courts should instead look to the maximum sentence and fine recommended under the federal Sentencing Guidelines. See Castello, 611 F.3d at 123 (stating that "the relevant metric is the top of the Guidelines for the fine and for imprisonment"). Thus, the Court must first calculate the Guideline applicable to Finazzo's crimes of conviction. It does so here both for the analysis pursuant to Bajakajian, as well as for sentencing.
1. Finazzo's Guidelines Calculation
The ultimate responsibility to calculate the applicable Guidelines range rests with the Court at the time of sentencing. See United States v. Fernandez, 443 F.3d 19, 29 (2d Cir. 2006) (citing United States v. Crosby, 397 F.3d 103, 111 (2d Cir. 2005)). District courts are "statutorily obliged" to "consider" the Guidelines, "which necessarily means they must determine the Guidelines range applicable to a particular defendant." United States v. Garcia, 413 F.3d 201, 220 n.15 (2d Cir. 2005) (quoting Crosby, 397 F.3d at 111) (internal quotation marks omitted). Consequently, the applicable Guidelines range, calculated with the assistance of the Probation Department's Pre-Sentence Report ("PSR"), is the starting point for any sentencing proceeding. See United States v. Cavera, 550 F.3d 180, 189 (2d Cir. 2008) (citing Gall v. United States, 552 U.S. 38, 48 (2007)). Disputed issues relevant to determining the applicable Guidelines range are resolved by a preponderance of the evidence. See United States v. Salazar, 489 F.3d 555, 557 (2d Cir. 2007).
In Finazzo's PSR (s ee Doc. No. 295.), the Probation Department calculates Finazzo's Total Offense Level as follows:
The parties, however, do not quite agree with these calculations. Two disputes are relatively minor. First, rather than the four-point enhancement for violations of the securities laws under section 2B1.1(b)(18)(A) applied by Probation, both parties suggest that a two-point enhancement for abuse of trust under section 3B1.3 is warranted. ( See Doc. Nos. 275-1 at 9; 307 at 10-11.) For the reasons set forth by the parties, the Court finds the two-point abuse of trust enhancement appropriate.
Second, although Finazzo was convicted following a jury trial, he suggests that he is eligible for a two-point reduction for acceptance of responsibility pursuant to section 3E1.1(a). ( See Doc. No. 302 at 15-16.) The government disagrees. ( See Doc. No. 307 at 11.) The Court will not apply the reduction. "This adjustment is not intended to apply to a defendant who puts the government to its burden of proof at trial by denying the essential factual elements of guilt, is convicted, and only then admits guilt and expresses remorse." U.S.S.G. § 3E1.1, Application Note 2. This is not one of the "rare situations [in which] a defendant may clearly demonstrate an acceptance of responsibility for his criminal conduct even though he exercises his constitutional right to a trial." Id .; cf. United States v. Nouri, 711 F.3d 129, 146 (2d Cir. 2013), cert. denied, 134 S.Ct. 309 (2013); United States v. Broxmeyer, 699 F.3d 265, 284 (2d Cir. 2012), cert. denied, 133 S.Ct. 2786 (2013). Thus, the Court will not accord Finazzo a reduction for acceptance of responsibility.
The bulk of the disagreement over Finazzo's Guideline calculation concerns the proper loss amount. The government urges that the proper measure of loss under the standards applicable to fixing loss for purposes of the Guidelines is $25, 790, 822.94, the amount that Finazzo received in kickbacks from South Bay. Similar to his arguments in connection with restitution, but based on the applicable Guidelines principles, Finazzo urges that there was no loss to Aeropostale and therefore no loss amount for the purposes of the Guidelines. (Doc. No. 275-1 at 9-10.) Using zero as a loss amount, Finazzo calculates his Total Offense Level at nine. ( See id.; Doc. No. 302 at 13-15.) For the reasons that follow, and set forth fully below, the Court finds Finazzo's Total Offense Level to be 31, finding him responsible for a loss amount of $25, 790, 822.94.
Under the Guidelines, "loss" is defined as "the greater of actual loss or intended loss." U.S.S.G. § 2B1.1, Application Note 3(A). "Actual loss" is further defined as "the reasonably foreseeable pecuniary harm that resulted from the offense, " which includes "pecuniary harm that the defendant knew or, under the circumstances, reasonably should have known, was a potential result of the offense." Id. § 2B1.1, Application Notes 3(A)(i) and (iv). Applying these principles, the Court finds for purposes of the Guidelines that Aeropostale sustained an actual pecuniary loss in the amount of $25, 790, 822.94, which is the sum of the kickbacks paid to Finazzo over the course of the defendants' scheme.
It is important to note at the outset that the principles for determining loss for purposes of the Guidelines differ from those applicable to imposing restitution. Germosen, 139 F.3d at 130 ("An amount-of-loss calculation for purposes of sentencing does not always equal such a calculation for restitution.") That is because "the MVRA is intended to compensate victims, while sentencing enhancements for loss amount under the Guidelines are predicated on the notion that fraudsters who cause more monetary harm are more culpable and should therefore generally be given longer terms of imprisonment." Niebuhr, 456 F.Appx. at 39. As the Second Circuit has observed, "because a defendant's culpability will not always equal the victim's injury, an amount-of-loss calculation for purposes of sentencing does not always equal such a calculation for restitution." Id. at 39 (quoting United States v. Catherine, 55 F.3d 1462, 1464-65 (9th Cir. 1995); Germosen, 139 F.3d at 130) However, the two calculations can be "closely related." United States v. Copus, 110 F.3d 1529, 1537 (10th Cir. 1997) (cited by Germosen ); see also Niebuhr, 456 F.Appx. at 38 (quoting Copus, 110 F.3d at 1537) ("While calculating the loss amount' for Guidelines purposes and the victims' losses' for restitution purposes are obviously closely related' inquiries, they are not identical.").
Nevertheless, "the quantity and quality of evidence the district court may rely upon to determine the amount of loss is the same in both contexts, " Germosen, 139 F.3d at 130 (citing Copus, 110 F.3d at 1537; United States v. Henoud, 81 F.3d 484, 490 (4th Cir. 1996)). Moreover, the Court need only make a "reasonable estimate of the loss" under the Guidelines. U.S.S.G. § 2B1.1, Application Note 3(C); accord United States v. Lacey, 699 F.3d 710, 719-20 (2d Cir. 2012); Viloski, 2014 WL 401074, at *6.
The record evidence is replete with examples of how Finazzo not only intended loss, but caused actual loss. The Court will not belabor the trial evidence. The government in its Sentencing Memorandum painstakingly recounts the evidence on this point, and on which the Court relies. ( See Doc. No. 334 at 4-13.) Simply put, it is readily apparent that Finazzo's conduct significantly undermined Aeropostale's ability to make strategic economic decisions, manage its relationship with its vendors, secure merchandise at the most advantageous prices, and generate the most profits. It is equally clear that this harm was reasonably foreseeable. Finazzo actively prevented Aeropostale from obtaining merchandise from vendors other than South Bay, even when it was available at lower prices. For instance, Jennifer Heiser and John DiBarto described how Finazzo's control over vendor selection caused Aeropostale to purchase more expensive merchandise and obtain lower quality products. Jinah Jung recounted how Finazzo's actions on behalf of South Bay caused Aeropostale to incur a loss of approximately $300, 000 on a single order. And Geiger estimated that Finazzo's refusal transfer a percentage of t-shirt orders from South Bay to overseas vendors may have cost Aeropostale between $5 million and $6 million. These examples, in concert with the other evidence presented at trial, amply establish that pecuniary harm to Aeropostale was reasonably foreseeable.
To be clear, in fixing the loss amount for purposes of the Guideline calculation as the value of Finazzo's kickbacks, the Court is not substituting gain for loss. While the Guidelines provide for this calculus, see U.S.S.G. § 2B1.1, Application Note 3(B); Viloski, 2014 WL 401074, at *6 (affirming the substitution of the defendants' gain for a measurement of loss under the Guidelines because the loss could not reasonably be determined and basing that gain on "the amount funneled directly and indirectly" in kickbacks from one defendant to another), here, the Court has found that the loss to Aeropostale can, indeed, reasonably be measured as the value of the kickbacks for Guidelines purposes. The Court thus rejects Finazzo's alternative argument that any loss to Aeropostale cannot be determined.
Based on this analysis, the Court fixes Finazzo's Guideline calculation as follows:
Accordingly, the Court finds that Finazzo's Total Offense Level to be 31. There is no dispute that Finazzo falls within Criminal History Category I. Thus, the Guidelines range for imprisonment is 108-135 months, recommends a minimum fine of $15, 000 and maximum fine of $150, 000 on each count. U.S.S.G., ch. 5, Pt. A; id. § 5E1.2(c)(3). Because Finazzo was convicted of sixteen counts, the cumulative range of fines for all of the counts combined is $240, 000-$2, 400, 000.
Since the forfeiture sought by the government in this case is neither within nor near that range, the Court "cannot presume that the amount of forfeiture is permissible under the Eighth Amendment." Varrone, 554 F.3d at 331-32 (citing United States v. Sherman, 262 F.3d 784, 795 (8th Cir. 2001)). Instead, it must "evaluate the Bajakajian factors [and] ma[k]e factual findings regarding those factors." Varrone, 554 F.3d at 331-32; see also 817 N.E. 29th Drive, 175 F.3d at 1309. The Court now turns to that analysis.
B. Application of Bajakajian Factors
In Bajakajian, the Supreme Court identified several considerations that bear on whether a forfeiture is unconstitutionally excessive. See 524 U.S. at 337-39. The Second Circuit has distilled those considerations into four factors:
 "the essence of the crime" of the defendant and its relation to other criminal activity,  whether the defendant fit[s] into the class of persons for whom the statute was principally designed,  the maximum sentence and fine that could have been imposed, and  the nature of the harm caused by the defendant's conduct.
Varrone, 554 F.3d at 331 (quoting United States v. Collado, 348 F.3d 323, 328 (2d Cir. 2003)); see also Garza-Gonzalez, 512 F.Appx. at 60; United States v. Elfgeeh, 515 F.3d 100, 139 (2d Cir. 2008). Application of these factors is flexible, and the government need not definitively prevail on each and every one to obtain full forfeiture. See Elfgeeh, 515 F.3d at 139 ("Although the record is silent as to the fourth factor, the other three reveal that the order... is not disproportional."); United States v. Rudaj, No. 04-CR-1110 (DLC), 2006 WL 1876664, at *8 (S.D.N.Y. July 5, 2006) ("[t]aking all of these four factors together" and finding a forfeiture was not excessive even though one factor arguably favored the defendants). Under the requisite analysis, the Court finds that the special forfeiture verdict is not constitutionally excessive.
1. Essence of the Crime and its Relation to Other Criminal Activity
First, the essence of Finazzo's crimes and their relation to other criminal activity weigh heavily in favor of forfeiture. See Varrone, 554 F.3d at 331. Finazzo was convicted of conspiracy to commit mail fraud, wire fraud, and to violate the Travel Act; fourteen counts of mail fraud; and one count of wire fraud. The evidence introduced at trial laid bare myriad misrepresentations, falsified documents, concealed sums, mischaracterized payments, and secret agreements - demonstrating pervasive fraud and deceit. Finazzo's scheme lasted years, and netted $25 million in illicit kickbacks. Finazzo conceived, orchestrated, and handsomely profited from his criminal conduct by abusing his position of trust to steer business to South Bay, often against the direction of his superiors and the recommendations of his subordinates. The serious and extensive nature of Finazzo's offenses thus militates strongly in favor of forfeiture.
Finazzo attempts to draw parallels between the "comparatively mild" offense conduct in Bajakajian itself and his own criminal conduct, characterizing both as a "failure to report conduct that, if reported, would not be criminal." (Doc. No. 275-1 at 6.) This case is a far cry from Bajakajian. Finazzo's panoply of convictions and their underlying conduct are worlds apart from Bajakajian's singular failure to report. Here, Finazzo's extensive fraud spanned years and resulted in his unlawful acquisition of over $25 million covert kickbacks. He also deprived Aeropostale of "potentially valuable economic information, " United States v. D'Amato, 39 F.3d 1249, 1257 (2d Cir. 1994) (quoting United States v. Wallach, 935 F.2d 445, 462 (2d Cir. 1991)), causing considerable pecuniary harm to the company. In contrast, Bajakajian concerned a failure to report that was "unrelated to any other illegal activities, " "affected only one party... in a relatively minor way, " did not involve fraud, and "caused no loss." Id. at 338-39. Indeed, in Bajakajian "under the Sentencing Guidelines, the maximum sentence that could have been imposed on [the defendant] was six months, while the maximum fine was $5, 000, " indicating a "minimal level of culpability." Id. at 338-39. Any analogy to the facts of this case strains credulity.
Finazzo also continues to insist that any forfeiture is excessive because he was convicted of depriving Aeropostale of the right to control its assets, not money. ( See Doc No. 275-1.) This argument ignores the jury's special verdict convicting Finazzo of Conspiracy to Commit Mail Fraud with the intent to deprive Aeropostale of money, as well as his conviction for his Travel Act conspiracy.
Simply put, as evidenced by his convictions, the jury found that Finazzo abused his position of trust and influence within Aeropostale, intentionally concealing interested transactions that generated great personal profits at his employer's expense. He conspired to defraud Aeropostale of both money and intangible property, secretly accepted substantial kickbacks, and deprived Aeropostale of its right to control its assets. That criminal conduct was extensive, fraudulent, serious, highly profitable, and extremely damaging to Aeropostale. As such, the gravity of Finazzo's offenses tips decidedly in favor of finding that the forfeiture verdict is not excessive.
2. Class of Persons for Whom the Statutes Were Principally Designed
Second, Finazzo falls comfortably within the class of persons for whom the statutes in question were principally designed. See Varrone, 554 F.3d at 331. The Travel Act is "concerned with a broad spectrum of unlawful activity'... [and] is, in short, an effort to deny individuals who act for such a criminal purpose access to the channels of commerce." Erlenbaugh v. United States, 409 U.S. 239, 246 (1972). Similarly, the mail and wire fraud statutes are designed to prevent the use of interstate communications facilities - the mails and wires - to affect a broad range of fraudulent schemes to obtain money or property through false pretenses, representations, or promises. See Pasquantino, 544 U.S. at 353; Parr v. United States, 363 U.S. 370, 389 (1960). As demonstrated at trial, Finazzo engaged in an extended course of conduct designed to profit from interested business dealings; concealed his adverse interests from his employer by lying on numerous occasions, in multiple documents, and by routing funds through various corporations; and profited significantly at the expense of his employer. Those actions fall well within the heartland of fraudulent conduct prohibited by the above provisions.
Additionally, Sekhar v. United States, 133 S.Ct. 2720 (2013), is not controlling here. ( See Doc. No. 285 at 8-9.) In Sekhar, the Supreme Court reversed a conviction for the attempted extortion of the general counsel of the New York State Comptroller's Office, holding that attempting to compel a person to recommend that an employer approve an investment does not constitute "obtaining of property from another" under the Hobbs Act, 18 U.S.C. § 1951(b)(2). See 133 S.Ct. at 2723. But Sekhar concerned extortion, which the Hobbs Act defined as "the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right." Id. at 2725 (quoting 18 U.S.C. § 1951(b)(2)) (emphasis omitted). Because "obtaining property requires not only the deprivation but also the acquisition of property, '" the Court held that "property extorted must therefore be transferable - that is, capable of passing from one person to another." Sekhar, 133 S.Ct. at 2725 (quoting Scheidler v. National Organization for Women, Inc., 537 U.S. 393, 404 (2003)) (emphasis omitted). The upshot of Sekhar was that the "intangible property right [of a general counsel] to give his disinterested legal opinion to his client free of improper outside interference" is not property that can be extorted. 133 S.Ct. at 2724-25, 2727 (internal citation omitted). That holding has no application to Finazzo or to this case. Rather, as Dinome and subsequent cases make clear, a prosecution for mail and wire fraud may be premised on a right to control theory. See 86 F.3d at 283; accord Carlo, 507 F.3d at 801-02; Rossomando, 144 F.3d at 201 n.5.
In sum, Finazzo's conduct is aptly characterized as an extensive scheme to defraud that employed the instrumentalities of interstate commerce. That is the kind of conduct that the Travel Act, the mail fraud statute, and the wire fraud statute are "principally designed" to combat. Bajakajian, 524 U.S. at 338. Further, "[r]ather than being [a] minor or accidental participant in the fraud, " Finazzo was "found guilty of plotting the entire scheme." United States v. Vilar, No. 05-CR-621 (RJS), 2010 WL 1491859, at *2 (S.D.N.Y. Apr. 7, 2010), adhered to on recons., 2010 WL 3447222 (S.D.N.Y. Aug. 26, 2010). This factor therefore weighs in favor of full forfeiture.
3. Maximum Sentence and Fine Under the Guidelines
Third, the special forfeiture verdict is not grossly disproportionate to the maximum sentence and fine recommended under the Guidelines. See Varrone, 554 F.3d at 331; Castello, 611 F.3d at 123. As indicated above, the maximum fine recommended under the Guidelines is $2.4 million, while the maximum recommended sentence is 135 months. Thus, the forfeiture sought here is roughly ten times the maximum monetary penalty recommended under the Guidelines. But that is not the end of the inquiry. As the Second Circuit has emphasized, a forfeiture that exceeds the maximum fine is "not necessarily constitutionally excessive." Varrone, 554 F.3d at 333 n.4 (quoting Bajakajian, 524 U.S. at 336-37) (internal alteration omitted). Even for a defendant in Criminal History Category I, the Guidelines recommend a significant period of incarceration - 108 to 135 months - which denotes the seriousness of Finazzo's crimes. Cf. Bajakajian, 524 U.S. at 350 (finding a crime with an authorized term of sixty months' imprisonment and the imposition of a fine to be "serious").
"[T]he ultimate question before the [C]ourt is how the amount of the forfeiture compares to the gravity of the defendant's offense.'" Id. In the context of this case, the Court finds that the amount of the forfeiture is proportional to the gravity of Finazzo's crime. Finazzo engaged in a complicated fraudulent scheme that spanned many years and netted huge gains. In the course of perpetrating that scheme, he broke numerous laws and routinely abused a position of trust. Although the forfeiture here clearly exceeds the maximum recommended fine, the Guideline ranges for imprisonment and purposes of a fine recommend substantial penalties that underscore the seriousness of Finazzo's crimes of conviction. On balance, the Court concludes that this factor weighs in favor of sustaining the forfeiture verdict.
4. Nature of the Harm Caused
Fourth, the proposed forfeiture amount is not grossly disproportionate to the harm caused by Finazzo's conduct. Quantifying the harm caused by illegal conduct is often difficult. See Bajakajian, 524 U.S. at 336 (noting that "any judicial determination regarding the gravity of a particular criminal offense will be inherently imprecise"). It does not follow, however, that the harm to Aeropostale is hopelessly "hypothetical, unmeasurable and speculative." (Doc. No. 285 at 10.) The evidence at trial established that the harm to Aeropostale was both significant and substantial, a conclusion fortified by the fact that Finazzo was convicted of multiple violations. See Castello, 611 F.3d 124. Based on that evidence, the Court has found that $25, 790, 822.94 is a reasonable approximation of the loss Aeropostale suffered. The nature of the harm caused is favor of full forfeiture" where the Guidelines range of imprisonment was "far greater" than the statutory maximum despite the fact that "the maximum Guidelines fine" was a "small fraction of the $12 million" sought by the government). therefore real, serious, and reasonably quantifiable. As such, the fourth factor weighs in favor of full forfeiture.
C. Finazzo's Proposed Additional Factors
Finally, Finazzo points out that Bajakajian "did not say that the factors it identified were necessarily exclusive." (Doc. No. 275-1 at 13.) He urges the Court to incorporate other considerations, including (1) any financial benefits that accrued to Aeropostale from its relationship with South Bay; (2) the $5 million settlement with Aeropostale; and (3) the risk that the forfeiture verdict could bankrupt him. ( Id. at 9-10.) The government responds that these arguments are "wholly irrelevant and inapposite to well-established Second Circuit law." (Doc. No. 280 at 24.) The Court agrees.
First, any profits Aeropostale may have earned do nothing to reduce the amount of a forfeiture award, which is punitive and not remedial. See United States v. Peters, 732 F.3d 93, 101 (2d Cir. 2013) (noting that "[c]riminal forfeiture is a form of punishment" and, "[a]s such, it is distinct from restitution or other remedial actions, which are intended to return the victim and the perpetrator to the status quo"). Such profits do not bear on the Court's proportionality determination. The sole question here is whether the special forfeiture verdict is grossly disproportionate to Finazzo's illegal conduct. See Bajakajian, 524 U.S. at 322; United States v. Warshak, 631 F.3d 266, 331 (6th Cir. 2010). Moreover, it is not necessary that Aeropostale have suffered financial ruin for the government to disgorge Finazzo of his criminal proceeds.
Finazzo's $5 million settlement with Aeropostale is also irrelevant under the Bajakajian analysis. It is axiomatic that "civil actions instituted to remedy or recoup financial losses... and actions taken to achieve retribution or deterrence in order to uphold public justice... are separate and distinct." United States v. Morgan, 51 F.3d 1105, 1113 (2d Cir. 1995). Finazzo offers no authority for the proposition that a private settlement is relevant to the Eighth Amendment analysis of a forfeiture of criminal proceeds sought by the government. Compare, e.g., Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 260 (1989) (holding that "the Excessive Fines Clause does not apply to awards of punitive damages in cases between private parties"). As explained above, the settlement with Aeropostale is relevant to restitution, where the purpose is to "compensate victims for their losses." Pescatore, 637 F.3d at 138. But forfeiture and restitution serve very different purposes. See Peters, 732 F.3d at 101. The imposition of both in the same case may be proper. See United States v. Torres, 703 F.3d 194, 202-03 (2d Cir. 2012), cert. denied, 133 S.Ct. 2782 (2013).
Finally, the potential impact of the forfeiture on Finazzo's finances is not a factor to be considered under the Bajakajian analysis. On this score, Finazzo cites a single case that held that "a court should also consider whether forfeiture would deprive the defendant of his or her livelihood." United States v. Levesque, 546 F.3d 78, 83 (1st Cir. 2008). In contrast, the Eleventh Circuit, for example, "do[es] not take into account the personal impact of a forfeiture on the specific defendant in determining whether the forfeiture violates the Eighth Amendment." United States v. Dicter, 198 F.3d 1284, 1292 (11th Cir. 1999) (citing 817 N.E. 29th Drive, 175 F.3d at 1311).
The Second Circuit appears to take the latter approach. "Mandatory forfeiture is concerned not with how much an individual has[, ] but with how much he received in connection with the commission of the crime." United States v. Awad, 598 F.3d 76, 78 (2d Cir. 2010) (quoting United States v. Casey, 444 F.3d 1071, 1077 (9th Cir. 2006)). "A contrary interpretation could have the undesirable effect of creating an incentive for an individual involved in a criminal enterprise to rid himself of his ill-gotten gains to avoid the forfeiture sanction." Awad, 598 F.3d at 78-79 (quoting United States v. Hall, 434 F.3d 42, 59 (1st Cir. 2006)). Rather, a focus on how much a defendant gained instead "ensures that there is a mechanism by which the government may disgorge their ill-gotten gains, even those already spent.'" Awad, 598 F.3d at 79 (quoting Casey, 444 F.3d at 1074). As in Awad, the forfeiture statute applicable here "does not contain any language limiting the amount of money available in a forfeiture order to the value of the assets a defendant possesses at the time the order is issued." 598 F.3d at 79 (quoting United States v. Vampire Nation, 451 F.3d 189, 201 (3d Cir. 2006)) (internal quotations omitted). The Court thus concludes that the potential economic consequences to Finazzo as a result of the forfeiture are not an additional factor that must be weighed under Bajakajian. 
The burden of demonstrating that a forfeiture is excessive and therefore unconstitutional rests with the defendant. Castello, 611 F.3d at 120. In this case, Finazzo has failed to carry that burden. Based on the Bajakajian analysis, the Court finds that the special forfeiture verdict is not grossly disproportional to the gravity of Finazzo's offenses. Accordingly, the jury's forfeiture verdict does not violate the Eighth Amendment.
For the foregoing reasons, (1) Dey's request for an evidentiary hearing is denied, (2) defendants' challenges to the amount of restitution are rejected and restitution shall be ordered at sentencing consistent with this opinion, and (3) Finazzo's motion to vacate the special forfeiture verdict as unconstitutionally excessive is denied. The Court shall sentence each defendant on the dates currently scheduled.