The ongoing federal trial of two former Duane Reade executives on charges that they misled investors through bogus real estate transactions may sully the reputation of one of the city’s leading retail brokerage firms even though it faces no charges, real estate insiders said.
Prosecutors claim the former drugstore executives structured dozens of real estate deals with affiliates of Winick Realty Group between 2000 and 2005 that were used to artificially exaggerate the company’s earnings and its stock value.
Former Duane Reade CEO Anthony Cuti and former CFO William Tennant are charged with multiple counts including securities fraud in a 2008 indictment. Cuti and Tennant pleaded not guilty, and in the trial that started earlier this month at the U.S. Courthouse in Lower Manhattan they claim the deals were legitimate. Winick Realty, its CEO Jeff Winick and former president Cory Zelnik have not been charged in the case. Winick is considered by prosecutors to be an unindicted co-conspirator. Zelnik is testifying under a grant of immunity from prosecution.
Winick and Zelnik declined to comment on stories related to the trial.
Real estate attorney Lawrence Lenzner, partner at Patterson Belknap Webb & Tyler who is not involved in the trial, said in such cases the allegations often stick in the public realm even if there is no conviction.
“Now the Winick name has been sullied, whether [the charges are] true or not,” he said.
“Once an allegation is made and it goes through the media sound chamber, people who were only partially paying attention will have it stick in their cranium,” he said. “Even if it is 100 percent false, enough people have heard it, his name has been disparaged and it can take years to recover from that.”
A half-dozen of the city’s brokers, who did not want to be identified in discussing the case, gave different assessments of the repercussions it could have on Winick Realty, Jeff Winick and Zelnik.
Some said it would have little or no impact. Brokers say Winick has a reputation as a tough negotiator and Zelnik has one of a well-liked and respected dealmaker.
“Real estate investors today are very forgiving as most of them have hit a bump in the road at one time or another,” Adelaide Polsinelli, associate vice president at Marcus & Millichap, said. “These are very successful brokers and their contributions to the industry are undeniable.”
Others saw the trial as potentially troublesome for Winick and Zelnik even though they have not been charged with any wrongdoing and are not defendants. Several noted that Duane Reade was recently purchased by Walgreens and the purchase created an uncertainty about which brokerage would get the account. Winick Realty has acted as the exclusive or preferred broker for Duane Reade since before 1996 and Walgreens is currently handled in New York City by the Manhattan office of Dallas-based SRS Real Estate Partners.
Walgreens declined to comment.
“There is the old expression, ‘No one has ever been fired for hiring IBM,’” one retail broker said, meaning some may avoid a firm that has been embroiled in a criminal case, even if the allegations are proven false. “I see it as potentially tainting [potential clients] who want to cover their asses, and so don’t want to hire a firm where the principals have a giant cloud over them.”
Others believed Winick Realty will continue to thrive despite the case. For example, the Moinian Group announced today Winick Realty represented the landlord in two leases, at 509 Madison Avenue and 530 Madison Avenue, totaling more than 10,000 square feet of ground-floor retail.
Ary Freilich, a longtime friend and business associate and managing partner of property owner Blumberg & Freilich Equities, did not believe Winick would be toppled as one of the city’s leading retail brokers.
“It seems difficult for me to accept that Jeff’s conduct was objectionable given the ongoing relationship with Duane Reade,” he said, adding that clients would continue to work with the broker. “I think Jeff’s best days lie ahead of him.”