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Subway’s Late CEO Fred DeLuca Testifies at Trial via Videotape

The late co-founder/CEO of the Subway restaurant chain, Fred DeLuca, made the decision twelve years ago to partner with Anthony Pugliese III, a powerful real estate tycoon in Delray Beach, Florida to develop a green community south of Orlando under the trademark "America's First Eco-Sustainable City." Four years later the project crashed, resulting in "highly complex civil and criminal" lawsuits between the two powerful wealthy businessmen.

This month, following seven years of litigation, the matter has gone to trial. Both parties, Pugliese and DeLuca, now under Fred DeLuca's estate since his death from leukemia on September 15, 2015, seeking hundreds of millions of dollars in damages to compensate their losses in their dream of developing 64 square miles of Osceola and Indian River counties into a "Silicon Valley of green technology."

The trial proceedings, reported by the Sun-Sentinel last Friday, state that Anthony Pugliese III testified, introducing himself to the jury as "a lifelong successful builder" who witnessed his planned Destiny project of Orlando fall apart. In the expectation of the franchise executive's death, DeLuca gave videotaped testimony for the trial, hoping it would assist his wife Elisabeth in pursuing his estate. As part of his testimony, DeLuca stated, "I thought that, clearly, I had been wronged," explaining that was the reason he went to the authorities in 2012.

Sun-Sentinel said in its account of the trial that prosecutors filed criminal charges against Pugliese and his business manager, Joseph Reamer, who took a plea deal to resolve the claims, which included using $11,000 to buy a "moat chilling machine," that would cool the pond to keep the fish alive at Pugliese's estate. As a result, Pugliese served four months of a six-month jail sentence and is now serving a ten-year probation term. He also paid $1.2 million back to DeLuca's estate.

Pugliese and his business manager testified that they had "created phantom companies and fake invoices as a way to protect Destiny with a reserve account because of fears about DeLuca pulling his investment." Pugliese stated the location was "the best site left in Florida," being located close to major highways. Their lead attorney, Willie Gary, told the jury that DeLuca reneged on his contract with Pugliese, causing the project's demise. He said, "Anthony Pugliese never saw it coming."

In the CVN court account of the opening testimony of the trial of AP Destiny v. FD Destiny, 2009CA029903, it states that Tricia C.K. Hoffler of Edmond, Lindwsay & Hoffler, told jurors "as it relates to the city that was going to be built, Subway founder Fred DeLuca 34 times breached the parties' operating agreement." She also stated that Fred Florio, an associate of DeLuca's, said to Pugliese that if he [Pugliese] didn't set aside some money and reserve some money, "you're going down, or Deluca's going to squeeze you out, and he's going to take you down." Hoffler said Pugliese had no obligation under the agreement to set aside funds, saying, "You'd better do something."

Hoffler said money from the scheme, as well as money from Puliese's own pocket, helped fund the development when DeLuca broke his end of the agreement. Lead attorney Will Gary chimed in, saying DeLuca cut funding to pressure Pugliese. "He set Anthony Pugliese up. Fred DeLuca knew what he was doing when he cut off that money." Gary added that DeLuca's failure to fund the development "hammered the project." He stated, "You may decide that a billion dollars in damages is not enough."

DeLuca's lead counsel, Rick Hutchinson of Holland & Knight agreed that Pugliese is experienced and successful on local development projects. But he blames him for the Destiny debacle, saying he was over his head. He told the jury, "He just didn't know what he was doing," citing the purchase of "useless swamp land." Hutchinson also said it's one thing to build a Walmart. But when you go out to a remote area, an environmentally sensitive area, it's different. The CVN reported Hutchinson saying, "It's like a dermatologist doesn't do brain surgery. It's a different area of expertise."

Attorney Hutchinson told jurors he would ask for more than $40 million in damages in the case for his DeLuca estate clients.

The trial continued today with Anthony Pugliese telling the Palm Beach County jury why the late founder of Subway owes him millions of dollars for backing out of the Destiny deal-gone-wrong. He is expected to give the reason why he sent DeLuca roughly $2.6 million in phony invoices, some from real companies who did work on other projects and others from fake companies he created, reported today.

The lawsuit was filed in 15th Circuit, Civil, Palm Beach County Circuit Court. It is expected to last another two weeks.

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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at or at 303-799-7398.