Risk Management

Man Bites SEC

In a classic man-bites-dog turnabout, a former Aeropostale executive sues the SEC for allegedly violating attorney-client privilege.
Stephen TaubMarch 6, 2008

A former executive with Aeropostale Inc. has sued the Securities and Exchange Commission, claiming it violated his confidential relationship with his attorney to obtain key information while investigating why he was fired. Christopher Finazzo, the former chief merchandising officer of the clothing retailer, said the privileged information obtained by the regulator should be quashed, according to Reuters, citing his complaint filed in U.S. District Court in Manhattan.

“It is a black-letter law that confidential attorney-client communications are protected from disclosure and inadmissible as evidence,” the complaint reportedly stated. “The Commission is prohibited from relying on the improper information in performing its own investigation.”

In November 2006, Aeropostale announced that Finazzo was terminated for cause. The company said it took action after an independent investigation — conducted by outside legal counsel and a third-party investigation firm — revealed that Finazzo concealed personal ownership interests in, and served as an officer of, entities affiliated with one of the company’s primary vendors, South Bay Apparel. “These activities, and their concealment, constitute conflicts of interest in breach of the Company’s Code of Business Conduct and Ethics, and violations of Mr. Finazzo’s employment agreement,” the company stated in a press release at the time.

Aeropostale said that the breaches and violations were confined to this one individual and to entities affiliated with this one vendor.

In January of this year, Aeropostale officials noted that the SEC had issued a formal order of investigation regarding matters arising from Finazzo’s activities. “The SEC’s investigation is a non-public, fact-finding inquiry to determine whether any violations of law have occurred,” the company added.

Finazzo claims that Aeropostale used an e-mail message sent to him by his attorney as the sole basis for firing him, reported Reuters. The e-mail note was discovered during an internal investigation in September 2006 into an unrelated matter, and contained information about Finazzo’s financial interests, added the wire service. According to the report, Finazzo said that by January, the SEC had sent him an administrative subpoena seeking information and testimony related to document attached to his attorney’s e-mail.

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