EPCAL businessman facing federal wire fraud and money laundering charges

10/20/2011 12:00 PM |

FILE PHOTO COURTESY OF SILVERWOOD FILMS | The cast and producers of 'Phoebe in Wonderland', shot in large part at Riverhead's Roanoke Avenue Elementary School, gathered at a premiere party at the Sundance Film Festival in Utah in 2008. Left to right: Bill Pullman, Felicity Huffman, Doug Dey and Lynette Howell of Silverwood Films, Elle Fanning, co-producer Ben Barnz, Patricia Clarkson, and writer/director Daniel Barnz. 1/30/2008

Up until a few years ago, Doug Dey of Southold had a highly successful business that employed more than 70 people at the Enterprise Park at Calverton, making clothes for the popular Aeropostale brand.

He was also part of a movie production company that was turning out award-winning films starring big-name actors and he owned a popular indoor sports facility, also at EPCAL, that at one time ran a free sports camp for Riverhead kids.

Then, in June of last year, Mr. Dey, 54, and a business partner were named in a 28-count federal indictment alleging that, between 1996 and 2006, the two took part in a multi-million “kickback scheme” to defraud Aerospostale, a major apparel company that makes clothes and accessories aimed at teenagers.

The charges include conspiracy to commit mail fraud and wire fraud, money laundering conspiracy and providing false information to the U.S. Securities and Exchange Commission.

The indictment also alleges that money made through the scheme was invested into properties at EPCAL that were jointly owned by Mr. Dey and co-defendant Christopher Finazzo of Garden City, including the South Bay Apparel and Southbay Sportsplex properties.

South Bay Apparel and its outlet store, Cotton Market, are now closed, although Southbay Sportsplex remains open and continues to host youth leagues in soccer, football and lacrosse. The town recently gave Southbay a special permit approval to have outdoor fields as well.

Peter Danowski, an attorney for South Bay on local zoning issues, said Mr. Dey has put someone else in charge of running the sportsplex but still owns the property.

Town tax records show that all three parcels Mr. Dey had ownership in at EPCAL remain under the same ownership entities, Vertical Line Apparel, Vertical Line Apparel II and Vertical Line Apparel III.

Three of the four parcels owned by those entities are in arrears on taxes, according to town records, and more than $144,059 in taxes is owed on those properties.

Those are the same properties into which the federal indictment alleges Mr. Dey and Mr. Finazzo invested their profits from the alleged kickback scheme.

Mr. Dey also was a rising star in the film business. He and Lynette Howell of England started a film production company called Silverwood Films in 2005 and produced several award-winning films, including “Half Nelson” in 2006, which garnered an Academy Award nomination for actor Ryan Gosling, and “Phoebe in Wonderland” in 2008, which was screened at the Sundance Film Festival and filmed partially in Riverhead.

In 2007, Variety magazine named Mr. Dey and Ms. Howell among its “10 Producers to Watch.”

Mr. Dey is no longer mentioned on the Silverwood Films website. An article in Filmmaker Magazine in January of this year said his financial involvement in Silverwood ended last year.

A representative of Silverwood did not return a call or email from the News-Review.

The Internet Movie Database (IMDB) website lists Mr. Dey as a producer on seven films, including 2010’s “Blue Valentine,” although Silverwood’s website does not list him as a producer of that film.

The federal case against Mr. Dey may now be nearing trial. A Sept. 13 letter from U.S. Attorney Loretta Lynch to Judge Roslynn Mauskopt references an Oct. 31, 2011, trial date, although officials in Judge Mauskopt’s chambers in United States District Court in Brooklyn say they are not aware that a trial date has been set.

Robert Nardoza, a spokesman for the U.S. Department of Justice, said the next court date in the case is a status conference on Dec. 2, and a court date may be set at that meeting.

Court papers indicate that the trial has been tentatively scheduled to begin Oct. 31, although the defendant’s attorneys have asked that this date be pushed back.

The indictment states that the government will seek forfeiture of any property “constituting or derived from proceeds obtained directly or indirectly as a result of such offenses.”

Mr. Dey’s company, South Bay Apparel, based at EPCAL, was a major supplier to Aeropostale. The other man named in the indictment, Mr. Finazzo, was a former executive vice president and chief merchandising offer for Aeropostale.

The indictment claims Mr. Finazzo convinced Aeropostale to buy more than $350 million worth of merchandise from South Bay Apparel and that, in exchange, Mr. Finazzo received about half of South Bay’s profits. Federal investigators say Mr. Dey paid Mr. Finazzo more than $14 million through a firm Mr. Finazzo owns called C&D Retail Consultants.

Among Mr. Finazzo’s duties at Aeropostale was the selection of vendors to make their clothes, according to the indictment, which says that Mr. Finazzo steered business toward South Bay Apparel at a rate that was “causing Aeropostale to pay higher prices than were available from other vendors” in exchange for getting about half the profit from the deal. The indictment says the deal was entered into without the knowledge or approval of Aeropostale.

In addition, because Aeropostale is a publicly traded company, the alleged scheme also resulted in Aeropostale filing incorrect filings with Securities and Exchange Commission, according to the indictment.

Locally, some officials weren’t even aware of Mr. Dey’s indictment or the fact that South Bay Apparel was no longer operating at EPCAL.

“I didn’t even know about it,” said former Riverhead Town councilman Ed Densieski. He said Mr. Dey had supported him in his election campaigns and gave him a tour of his EPCAL facilities.

“He ran a really professional operation,” Mr. Densieski said. “I found him to be the ultimate professional, who not only was concerned about making a good living for his family, but he also took good care of his employees. I was impressed with the operation and I was impressed with him as a person. If he got tangled up in something bad, I’m sorry to hear it.”

Tracy Stark, who had been the Empire Zone coordinator at EPCAL prior to this year, said the town was never notified that South Bay Apparel was closing its manufacturing operation at EPCAL.

Mr. Dey could not be reached for comment. His attorney, Barry Kingham of Manhattan, did not return a call seeking comment this week, but told the News-Review in an email last year, at the time of the indictment, that the “indictment of Doug Dey is unfounded. Doug Dey is not guilty of any crime.”

He said the relationship between South Bay Apparel and Aeropostale ended in 2006 and that South Bay was named Vendor of the Year in 2004 by Aeropostale chairman and CEO Julian Geiger.

“South Bay earned that honor by its excellent performance, not by any illegal conduct,” Mr. Kingham stated, adding that Aeropostale profited and incurred no loss in its relationship with South Bay and Mr. Dey.

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

tgannon@timesreview.com