Cases of Ex-CFOs in Legal Trouble Wrapped Up

It has been a relief-filled week so far for ex-CFOs facing difficult legal circumstances — one from New York drugstore chain Duane Reade, and the other a former finance chief at AOL.

Former Duane Reade CFO William Tennant, 64, was sentenced to three years’ probation for his June 2010 securities fraud conviction. He and former CEO Anthony Cuti were tried together on charges they falsely inflated income and misled investors from 2000 to 2005.

Cuti was convicted of conspiracy and securities fraud and sentenced last month to three years in prison.

On Tuesday, Tennant faced U.S. District Judge Deborah Batts and said, “Please don’t send me to jail.” She granted his request at the hearing in federal court in Manhattan, after Tennant told Batts he had cooperated in the investigation and suffered from the “long, painful, humbling experience” of the case.

The judge, after the post-trial hearings, found that prosecutors hadn’t proved any financial loss resulting from Tennant’s crime, according to a Bloomberg News report.

Batts had been tougher on Cuti, whom she called “a gifted, arrogant, driven, entitled individual” who “bullied people into committing fraudulent acts to make the company look better than it actually was” to increase his pay. She also said he was guilty of “the height of hubris” for re-writing his employee compensation plan in way that would allow him to double his compensation even if he was fired for cause, which later occurred, she said.

For his part, Cuti didn’t admit any wrongdoing when he spoke in court before the sentence was imposed. “I’ve always led my life with integrity,” Cuti said as his wife, adult daughter and brother sat in the courtroom. “It’s confusing, if not incomprehensible.” He added that “I

DuaneReade, founded in 1960, was named after the two Lower Manhattan streets where it was located, a few blocks from the federal courthouse.

Bain Capital LLC bought the chain from brothers Abraham, Eli and Jack Cohen in 1992 and sold shares to the public in 1998. Oak Hill Capital Partners LP bought all the publicly traded shares in July 2004. Walgreen Co., the biggest U.S. drugstore chain, agreed to buy Duane Reade Holdings from affiliates of Oak Hill for $618 million in February 2010.

The other case involving an ex-CFO resulted in a Tuesday Securities and Exchange Commission settlement, in which former AOL Inc. finance chief John Michael Kelly agreed to pay $260,000 to settle the SEC’s suit claiming he had helped overstate Internet ad revenue at the company.

As part of the settlement, Kelly neither admitted to, nor denied the allegations made by the SEC.

The commission had sued eight former AOL executives in 2008, including Kelly and another former chief financial officer, Joseph Ripp, claiming they helped inflate revenue at the company by more than $1 billion from 2000 to 2002.

In a judgment signed by U.S. District Judge Colleen McMahon in Manhattan, Kelly agreed to turn over $200,000 in profits he allegedly made from the scheme and pay a $60,000 penalty.

AOL had agreed in 2005 to pay $300 million to settle a related investigation.