Fraud trial against former Duane Reade CEO, CFO begins

NEW YORK The trial of former Duane Reade CEO Anthony Cuti and former Duane Reade CFO William Tennant started on Wednesday, during which prosecutors told jurors that Cuti falsely inflated income at the pharmacy retailer and misled investors, Bloomberg reported.

The trial, being held in federal court in New York, charges that Cuti and Tennant engaged in a scheme to falsely increase revenue and lower expenses from 2000 to 2005.

Prosecutors said that Cuti and Tennant inflated the chain's income through fraudulent real-estate transactions and expense reductions using fictitious credits from company vendors, Bloomberg reported. Both men face securities fraud and conspiracy charges, and Cuti faces three counts of false filings. Cuti and Tennant pleaded not guilty.

Prosecutors also maintain that Cuti and Tennant benefited financially from the alleged scheme, with Cuti pocketing more than $50 million from Duane Reade and private equity firm Oak Hill from 2000 to 2005, including $25 million from the 2004 acquisition by Oak Hill.

Tennant allegedly received a $2.8 million stock gain in 2001 after working in fraudulent real-estate transactions, according to court papers.

Cuti was terminated from Duane Reade in 2005. Tennant moved from CFO to VP planning and logistics in 1999 and then left the company in 2001. According to the indictment, Tennant was a consultant to the company after he left in 2001.