The Turnaround Specialist

New CFO Laureen DeBuono has stepped into a hornet's nest at Critical Path. Good thing she knows a good lawyer.

Laureen DeBuono may be the ideal turnaround CFO. She’s smart, meticulous, and she’s a damned good securities lawyer.

After earning a bachelor’s degree from Duke University, a master’s from Stanford, and a law degree from NYU, DeBuono launched her career at Bronson, Bronson and McKinnon, a San Francisco law firm. But it wasn’t long before she decided to enter the nonbillable world, moving first to Varian Associates, a Palo Alto, California-based semiconductor equipment manufacturer. In 1987, DeBuono joined household-products maker Clorox, where she became more involved in the actual running of the business. In fact, in her next position as vice president general counsel at Nellcor Puritan Bennett Inc., a medical-device manufacturer, DeBuono helped negotiate that company’s $2 billion sale to Mallinkrodt Inc.

Soon after, DeBuono leveraged the Nellcor Puritan Bennett sale. In 1998, she landed the top finance post at ReSound Corp., a manufacturer of hearing devices and communications products. At the time, ReSound was not so sound. “The company had about $150 million in revenues but no market cap, no analyst coverage, very little cash in the bank, and a lot of businesses that were not rationalized,” she recalls. “But we were able to clean it up quite successfully.” Later, DeBuono oversaw ReSound’s sale to GN Great Nordic, a Danish telecom company, in late 1999.

In September, DeBuono signed on at yet another struggling company — this time, the aptly named Critical Path. When she joined the Internet messaging specialist as interim CFO in September 2001, Critical Path was in serious trouble. The company had gone through several CFOs, and earnings had fallen well short of fourth-quarter estimates. Worse, some managers at the company admitted to having improperly booked revenue, and the company was forced to restate earnings for the prior two quarters. In the aftermath of the restatement, Critical Path was slapped with 52 — count ‘em, 52 — shareholder lawsuits, along with an SEC investigation. The company was also carrying some $300 million in debt, yet barely generated $27 million in revenues in the first quarter of the year.

Under DeBuono’s tenure, however, Critical Path has stabilized. The company reduced its debt load to around $38 million, and is now sitting on about $70 million in cash. The Net operator has also expeditiously settled its cases with shareholders and the SEC, proving that it doesn’t hurt having a CFO who knows his or her way around a legal brief.

In January, Critical Path management rewarded DeBuono for her hard work, naming her Critical Path’s permanent finance chief. DeBuono recently spoke with CFO.com’s Jennifer Caplan about lawyers as CFOs, what it takes to save a sinking company, and the challenges of managing through an accounting scandal.

It’s uncommon for a CFO to have a legal background. Do you feel your knowledge of the law has made you a better CFO?

My legal background has been critical in making me the type of CFO that I am. As a lawyer, I believe you develop the best possible analytical and risk-assessment skills that you can — even better than in business school or going directly into an accounting situation.

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