New York City The Securities and Exchange Commission charged two former senior executives at drug store chain Duane Reade with fraud for allegedly orchestrating multimillion-dollar accounting schemes that caused the company to inflate its reported earnings and overstate its net income.
The U.S. Attorney for the Southern District alleges that former CEO 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 Dec. 2000 through June 2005, Cuti and former CFO William Tennant "engaged in a scheme to misrepresent Duane Reade's financial performance" to investors and fraudulently made millions of dollars.
However, Cuti's attorney in the civil case, Jeffrey Sklaroff, said that the transactions were disputed and had no effect on stockholders, bondholders, the company or Oak Hill.
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.