By Grant McCool
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, officials 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 previously public Duane Reade by private equity firm Oak Hill Capital Partners in 2004.
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 in the indictment with making false filings with the Securities and Exchange Commission.
The SEC filed separate civil charges accusing the pair of multimillion dollar accounting schemes when they were in charge of the biggest chain of drug stores in the New York City area.
It said the inflated earnings involved two kinds of fraudulent transactions called Real Estate Concession and Credit and Rebilling.
According to the SEC's complaint, these schemes caused Duane Reade to overstate its pre-tax income by a total of about $17.5 million.
The SEC accused Cuti of making false statements and omissions in writing and in conversations with independent auditors as to the true nature of the transactions.
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."
The men "achieved significant financial gain" according to federal prosecutors. They said 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.
(Editing by Tim Dobbyn)
