850 F.3d 94 (2nd Cir. 2017), 14-3213-cr(L), United States v. Finazzo

Docket Nº:14-3213-cr(L), 14-3330-cr(Con)
Citation:850 F.3d 94
Opinion Judge:Droney, Circuit Judge:
Party Name:UNITED STATES OF AMERICA, Appellee, v. CHRISTOPHER FINAZZO, DOUGLAS DEY, Defendants-Appellants
Attorney:ROBERT J.A. ZITO (Alan S. Lewis, Karen E. Meara, Madelyn K. White, on the brief), Carter Ledyard & Milburn LLP, New York, New York, for Defendant-Appellant Christopher Finazzo. T. BARRY KINGHAM (Jacques Semmelman, Rachel L. Cohn, on the brief), Curtis, Mallet-Prevost, Colt & Mosle LLP, New York, ...
Judge Panel:Before: SACK, CHIN, and DRONEY, Circuit Judges.
Case Date:March 07, 2017
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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850 F.3d 94 (2nd Cir. 2017)

UNITED STATES OF AMERICA, Appellee,

v.

CHRISTOPHER FINAZZO, DOUGLAS DEY, Defendants-Appellants

Nos. 14-3213-cr(L), 14-3330-cr(Con)

United States Court of Appeals, Second Circuit

March 7, 2017

         Argued September 17, 2015

          Appeal from the United States District Court for the Eastern District of New York. No. 10-cr-457 -- Roslynn R. Mauskopf, Judge.

         Consolidated appeal from judgments of conviction of the United States District Court for the Eastern District of New York (Mauskopf, J.) following a guilty plea to conspiracy by Dey and a jury verdict convicting Finazzo on one count of conspiracy to commit mail and wire fraud and to violate the Travel Act; fourteen counts of mail fraud; and one count of wire fraud. Finazzo contends that the district court's jury instructions regarding the " right to control" property under the mail and wire fraud statutes were erroneous and that there was insufficient evidence to support his convictions on the mail and wire fraud counts. Finazzo and Dey also appeal from the restitution order in the amount of $13,690,822.94 imposed by the district court jointly and severally against them, arguing that the district court improperly used Finazzo's gain as a measure of the victim's loss. We AFFIRM in part and VACATE and REMAND in part.

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         ROBERT J.A. ZITO (Alan S. Lewis, Karen E. Meara, Madelyn K. White, on the brief), Carter Ledyard & Milburn LLP, New York, New York, for Defendant-Appellant Christopher Finazzo.

         T. BARRY KINGHAM (Jacques Semmelman, Rachel L. Cohn, on the brief), Curtis, Mallet-Prevost, Colt & Mosle LLP, New York, New York, for Defendant-Appellant Douglas Dey.

         WINSTON M. PAES, Assistant United States Attorney (Amy Busa, Claire S. Kedeshian, Assistant United States Attorneys, on the brief), for Loretta E. Lynch, United States Attorney for the Eastern District of New York, Brooklyn, New York, for Appellee.

         Before: SACK, CHIN, and DRONEY, Circuit Judges.

          OPINION

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          Droney, Circuit Judge:

         Defendant-Appellant Christopher Finazzo is a former merchandising executive for teen apparel retailer Aé ropostale, Inc. Defendant-Appellant Douglas Dey controlled South Bay Apparel Inc. (" South Bay" ), a clothing vendor. Between 1996 and 2006, Finazzo caused Aé ropostale to use South Bay as its supplier of T-shirts and fleeces in exchange for secret payments to Finazzo of portions of South Bay's profits. As a result of this scheme, Finazzo and Dey were charged in the United States District Court for the Eastern District of New York with one count of conspiracy to commit mail and wire fraud and to violate the Travel Act, as well as fourteen counts of mail fraud and one count of wire fraud.

         Dey pleaded guilty to conspiracy to violate the Travel Act and was sentenced to 42 months' imprisonment. Finazzo was convicted of all counts1 after a three-week jury trial. The jury rendered a special verdict. On the conspiracy count, the jury found Finazzo guilty of conspiracy to commit mail fraud " [o]n the basis of intent to deprive Aé ropostale of money" and " [o]n the basis of Aé ropostale's right to control use of its assets." Dist. Ct. Dkt. No. 260, at 2. It found Finazzo guilty of conspiracy to commit wire fraud on the basis of Aé ropostale's right to control use of its assets, but not on the basis of intent to deprive Aé ropostale of money. On each of the fourteen substantive mail fraud counts and the substantive

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wire fraud count, the jury found Finazzo guilty on the basis of Aé ropostale's right to control use of its assets, but not on the basis of intent to deprive Aé ropostale of money.2 The district court (Mauskopf, J. ) sentenced Finazzo to 8 years' imprisonment on the substantive mail and wire fraud counts and 5 years' imprisonment on the conspiracy count, all to run concurrently. The court also imposed a $13,690,822.94 restitution order jointly and severally against Finazzo and Dey.

         Finazzo does not challenge his conspiracy conviction in this appeal. He challenges only his convictions on the mail and wire fraud counts. Both Finazzo and Dey also challenge the restitution order.

         In this opinion, we address: (1) Finazzo's challenge to the district court's jury instructions regarding the " right to control" property under the mail and wire fraud statutes, (2) the sufficiency of the evidence to support Finazzo's convictions for depriving Aé ropostale of the " right to control" its assets, and (3) Finazzo's and Dey's challenge to the district court's restitution order. We affirm the district court's " right to control" jury instructions and conclude that there was sufficient evidence to support the challenged portions of the jury verdict. However, we vacate and remand the district court's restitution order as to Finazzo and Dey. In a summary order issued simultaneously with this opinion, we affirm the district court on the remaining issues on appeal.

         BACKGROUND

         Finazzo and Dey were first indicted on June 8, 2010. The original indictment alleged that Dey and Finazzo " agreed that Finazzo would cause Aé ropostale to use South Bay as a vendor to purchase merchandise at rates that were less favorable to Aé ropostale than the prevailing market rate." Dist. Ct. Dkt. No. 1, at 3. " In exchange, Dey covertly paid Finazzo approximately fifty percent of South Bay's profits" through C & D Retail Consultants, Inc. (" C& D" )--a consulting business controlled by Finazzo--and through various joint ventures. Id. The indictment alleged that Finazzo and Dey did not disclose this scheme to Aé ropostale. The indictment further stated that, between August 1996 and November 2006, Finazzo caused Aé ropostale to pay South Bay more than $350 million in payments for its merchandise. Over that period, Dey paid Finazzo more than $14 million through bank transfers to C& D and transferred over $13 million to three jointly owned entities: Vertical Line Apparel, Inc., Vertical Line Apparel II, Inc., and Vertical Line Apparel III, Inc. (the " Vertical Line entities" ).

         The September 6, 2011 Second Superseding Indictment[3] added that Finazzo and Dey defrauded Aé ropostale by: (1) depriving Aé ropostale of the opportunity to make informed decisions, thereby preventing Aé ropostale from seeking lower prices for merchandise it purchased from South Bay and the opportunity to select other vendors based upon price, quality and timely delivery; and (2) causing Aé ropostale to pay higher prices on merchandise it purchased from South Bay than were available from other vendors, thereby increasing South Bay's profits and the amounts Dey paid Finazzo.

Dey App'x at 59. That indictment included seventeen counts. Count One alleged conspiracy to commit mail and wire fraud and

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to violate the Travel Act from August 1996 to November 2006 in violation of 18 U.S.C. § 371. Counts Two through Fifteen alleged mail fraud in violation of 18 U.S.C. § ; 1341. Count Sixteen alleged wire fraud, in violation of 18 U.S.C. § 1343, and Count Seventeen alleged a false statement in a report required to be filed with the Securities and Exchange Commission, in violation of 15 U.S.C. § 78ff(a).4 Like the conspiracy charge, the scheme to defraud for the mail and wire fraud counts was also alleged to have taken place between August 1996 and November 2006. The mail and wire fraud counts were linked to fifteen specific payments by Aé ropostale to South Bay between June 9, 2005 and November 1, 2006.

         On September 27, 2012, Dey pleaded guilty to conspiracy to violate the Travel Act. In his plea agreement, Dey agreed to a $7,500,000 forfeiture order, but specifically reserved the right to appeal any restitution order imposed by the court.

         A. Finazzo's Trial

         Finazzo's case proceeded to a three-week jury trial on the Second Superseding Indictment, beginning on April 8, 2013. At trial, the Government called fifteen witnesses--most of whom were current or former Aé ropostale employees--and the defense called three witnesses. Because one of the issues on appeal is sufficiency of the evidence, we recount in some detail the evidence presented at trial.

         1. The Government's Case

         a. The Creation of the South Bay Relationship with Aé ropostale

         In July 1996, Julian Geiger--Aé ropostale's President and CEO--hired Finazzo as its Men's Divisional Merchandising Manager.5

         Prior to being hired by Aé ropostale, Finazzo owned a small sports-clothing retailing business called C& E Marketing, at which Dey was an employee. Shortly after Finazzo was hired by Aé ropostale, Peter Conefry--Finazzo's and Dey's former private accountant and a cooperating Government witness--attended a meeting with Finazzo and Dey in which Finazzo stated that he and Dey were going to a start a new company that would do business with Aé ropostale.6...

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