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Ex-Duane Reade CEO, CFO indicted for fraud


    NEW YORK (Reuters) - Two former top executives of the Duane Reade Holdings Inc drug chain were indicted on Thursday on charges of falsely reducing reported company expenses and inflating income, prosecutors in New York said.

    The office of the U.S. Attorney for the Southern District said in a statement that former Chief Executive Officer Anthony Cuti also provided false information during negotiations over the purchase of Duane Reade by private equity firm Oak Hill Capital Partners.

    It said from December 2000 through June 2005, Cuti, 63, and former Chief Financial Officer William Tennant, 61, "engaged in a scheme to misrepresent Duane Reade's financial performance" to investors and fraudulently made millions of dollars.

    "The defendants are alleged to have deceived the investing public by providing false and misleading information about Duane Reade's financial condition while lining their own pockets with millions of dollars in compensation," Deputy U.S. Attorney Lev Dassin said in a statement.

    Attorneys for Cuti and Tennant were not immediately available to comment on the indictments in Manhattan federal court. Cuti was also charged with making false filings with the U.S. Securities and Exchange Commission.

    He was expected to be arraigned on the charges on Friday and Tennant at a later date, the statement said.

    The company was bought by Oak Hill Capital Partners in July 2004. Representatives of Duane Reade and Oak Hill were not immediately available for comment.

    "Materially false and misleading information was provided to Oak Hill during the negotiation of this purchase," the U.S. attorney's office statement said. "Cuti participated directly in those negotiations."

    Cuti and Tennant were accused of causing Duane Reade to report income that was inflated by 10 to 15 percent between the last quarter of its fiscal 2000 year and the company's acquisition by Oak Hill.

    The men "achieved significant financial gain" according to prosecutors. Cuti also received more than $50 million in compensation from Duane Reade and Oak Hill, including a payout of more than $25 million after the takeover, the release said.

    It said Cuti and Tennant were accused of "reporting inflated income from fraudulent real estate transactions and the artificial reduction of expenses through fictitious credits from vendors who did work for Duane Reade."

    (Reporting by Grant McCool; Editing by Tim Dobbyn)