Duane Reade former CEO and CFO indicted for falsifying income reports
NEW YORK Duane Reade’s former chairman, president and chief executive officer, Anthony Cuti, and former chief financial officer, William Tennant, were indicted Thursday for allegedly falsely inflating the income and reducing the expenses reported by Duane Reade. In addition, Cuti was charged with making false filings with the Securities and Exchange Commission, according to the United States Attorney Southern District of New York.
“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,” stated acting U.S. Attorney Lev L. Dassin. “Corporate executives who profit through fraud do so at the expense of public confidence in our financial markets.”
Cuti is expected to be arraigned on Friday, while Tennant is expected to surrender “at a later date.”
Cuti and Tennant are being charged with one count of conspiracy to commit securities fraud, make false statements in annual and quarterly SEC reports, make false statements to auditors, and make false entries in books and records; and one count of securities fraud. The indictment also charges Cuti with three counts of making false filings with the SEC.
The conspiracy count carries a maximum sentence of five years in prison and a fine of $250,000 or twice the gross gain or gross loss from the offense.
The securities fraud count and the false SEC filing counts each carry maximum sentences of 20 years in prison and fines of $5 million.
From December 2000 through June 2005, Cuti and Tennant allegedly engaged in a scheme to misrepresent Duane Reade’s financial performance in order to meet its own projections and the expectations of analysts. The scheme, according to officials, involved the reporting of inflated income from fraudulent real estate transactions and the artificial reduction of expenses through fictitious credits from vendors who did work for Duane Reade.
Cuti and Tennant reportedly caused, through this scheme, the Manhattan-based retailer to report income that was inflated in a false and misleading way by about 10 percent to 15 percent between the last quarter of its fiscal year in 2000 and Oak Hill’s acquisition in July 2004.
Cuti and Tennant also reportedly reaped the financial gains of the alleged scheme. From 2000 to 2005, Cuti received more than $50 million in compensation from Duane Reade and Oak Hill, including a payout of more than $25 million in connection with Oak Hill’s acquisition, according to officials.
From June through November 2001, Tennant, after reportedly participating in numerous fraudulent real estate transactions, exercised his options to buy Duane Reade stock and received in excess of $2.8 million in gain, according to officials.
Duane Reade terminated Cuti’s employment in November 2005. Tennant was employed by Duane Reade until December 2001 and then served as a consultant until April 2005.
Responding to the indictment of the former executives, Duane Reade’s current chairman and chief executive officer John Lederer issued a statement Thursday that read, “Duane Reade has cooperated fully with the government agencies in their investigations over the last 16 months and we are pleased to see this issue reach resolution. We are gratified that the government has concluded its investigation with no finding of any wrongdoing by the company or any of its current executives. Most importantly, the actions taken today have no effect upon our current business and our financial condition is unaffected by these actions. Our business continues to perform well and we remain fully focused on elevating Duane Reade to the next level.”
Duane Reade also stated that, as previously disclosed in May 2007, the company’s audit committee, with the assistance of an independent counsel, conducted an investigation into matters related to Thursday’s announcement. As a result of the probe, the company restated its financial results for the impacted historical periods and reported the results of the investigation to the U.S. Attorney’s Office and the SEC.
HealthPartners site helps Minneapolis area patients estimate healthcare costs
BLOOMINGTON, Minn. A healthcare organization has launched a Web site that quotes prices for 83 procedures at the primary care and radiology centers in its network in the Minneapolis-St. Paul metropolitan area.
The prices listed are for five high-volume service categories, including office visits, immunizations and vaccines, lab services, X-rays and CTs and MRIs. For example, a wrist X-ray at one of the clinics costs $61.60, while an influenza test costs $29.18.
“This is an important step forward in transparency because the information we provide is for specific prices rather than a range,” HealthPartners senior vice president for customer service and product innovation Scott Aebischer said. “This information is particularly useful for members who are paying out-of-pocket fees.”
FDA challenges Bayer’s TV commercial claims about Yaz
NEW YORK The Food and Drug Administration told Bayer in a letter Tuesday that two of the company’s TV commercials for its premenstrual dysphoric disorder drug Yaz are misleading.
The FDA said one commercial suggests the drug is approved for treating post-menopausal syndrome by saying it treats irritability, moodiness and bloating—symptoms common to PMDD and PMS. That commercial, which featured women hitting balloons while singing “We’re not gonna take it,” has been pulled.
The second commercial had the song “Good-Bye to You” and women releasing balloons with symptoms written on them. The FDA said evidence has not demonstrated that Yaz eliminates symptoms, even though the commercial suggests that it does.
Yaz (drospirenone and ethinyl estradiol) had global sales of $1.42 billion in 2007, according to Bayer financial data.