Aeropostale Inc. said on Wednesday that the Securities and Exchange Commission has launched a formal investigation into the circumstances surrounding the November 2006 firing of Christopher Finazzo, who was executive vice president and chief merchandising officer.
The company said at the time Finazzo was fired that he had concealed personal ownership interests in, and served as an officer of, entities affiliated with one of the Aeropostale’s primary vendors, South Bay Apparel. Those actions, and their concealment, were conflicts of interest in breach of the company’s ethics code and violated Finazzo’s employment agreement, according to Aeropostale.
In an April 2007 regulatory filing, the company said Finazzo had executed an unauthorized agreement that obligated Aeropostale to guarantee any payments due from South Bay to Tricot Richelieu, an apparel manufacturer that was a South Bay vendor. Finazzo also failed to disclose unauthorized business relationships and transactions between members of his family and other Aeropostale vendors, the company said.
News of the SEC investigation followed good news for the specialty retailer, which announced that sales for the crucial December shopping season rose 17.5 percent from 2006 to a record $313.5 million.
In November the company authorized a $250 million increase in its share-repurchase program, which now is at $600 million.
The precise nature of the SEC investigation was not disclosed, but Aeropostale said the regulator was trying to determine if any laws had been broken. The company’s shares were down about 7 percent Thursday morning.