John E. Isselmann Jr., former general counsel at scandal-plagued Electro Scientific Industries Inc., was faced with such a choice. The SEC considered Isselmann a “gatekeeper” even though the agency admitted he neither participated in nor knew about the fraud allegedly committed by former CFO James Dooley and ex-controller James Lorenz III in late 2002. Isselmann settled the civil case, he says, “to get five years of my life back.” But in addition to receiving an acknowledgment by the SEC that he did nothing intentionally or recklessly, Isselmann — and his defense attorney, Melinda Haag, a partner at Orrick, Herrington & Sutcliffe LLP — successfully fought the director and officer bar, which allowed him to continue practicing law. “I wouldn’t have settled without it,” he says.
But a settlement can be seen as a tacit admission of guilt. And even without a bar, executives with ties to tainted companies often find it difficult to secure employment. Recruiters say those executives should be prepared to lower their career expectations. “[For some time], they may end up working in the private sector or in some capacity they never imagined,” warns Crist.
For many, a career change may even be a necessity — particularly since recruiters may be working against them. “We need to present candidates with instant credibility,” grants John C. Wilson, founder of San Francisco–based financial executive search firm JC Wilson Associates. Consequently, recruiters are asking more questions about a person’s associates, former bosses and companies — and even about résumé gaps. Any hint of a connection to fraud, says Wilson, and “the inclination is to assume the person knew.”
The toll from such thinking goes well beyond professional standing. Haag, who also defended Richard Hawkins, McKesson Corp.’s former CFO, in a highly publicized securities-fraud case, says the personal impact can be profound. In Hawkins’s case, for example, the litigation dates back to 1999. And “although we’re grateful that Rich has been exonerated, the court’s decision can’t give him back the past six years of his life,” says Haag, who was former head of the white-collar-crime section of the U.S. Attorney’s office in San Francisco.
It’s not clear if the cloud ever dissipates. Isselmann, for example, has to be vigilant about any public mention he sees that incorrectly paints him as a participant in the fraud. At the same time, there are some sizable bills to pay. Isselmann had to pay $50,000 to settle his case with the SEC. And as Thompson points out, the legal costs “take a toll.” Although she was entitled to reimbursement of her legal fees from Chapman Capital, she had to sue to get the money.
If there’s any good news here, it’s that with time, some of the sting seems to lessen. “At some point, especially in an active market,” Crist explains, “the skills of the individual will prevail and [he or she] will be allowed to reengage.”
How soon that will be is uncertain. But going through these traumatic, life-changing episodes may actually strengthen an executive’s skills. Thompson, for example, says the scandal at her former employer has made her even more vigilant about due diligence. “I was always careful about controls and compliance,” she says. “But now I’m really careful.”
Lori Calabro is a deputy editor of CFO.
CFOs on the Move
Dessa Bokides has moved up from the treasurer position at Pitney Bowes to become finance chief at ProLogis, an owner and manager of distribution facilitiesÂÂ . Big 5 Sporting Goods Corp. has named Barry Emerson CFO and treasurerÂÂ . Ryder System Inc. has announced that CFO Tracy Leinbach will retire from the transportation company in 2006ÂÂ . Industrial-chemical maker Celanese Corp. has tapped John Gallagher III to fill the top finance positionÂÂ . Golf-community developer Bluegreen Corp. has named Anthony Puleo treasurer and finance chiefÂÂ . Lexmark International Inc. has selected John Gamble Jr. for the CFO post at the printer manufacturer. Peter Kelly will take over Gamble’s former job as head of finance at semiconductor-maker Agere Systems IncÂÂ . Cinergy has promoted Lynn Good from the controller post to CFO, as former finance chief James Turner becomes president at the energy companyÂÂ . John Davison is the new CFO at Four Seasons Hotels Inc., succeeding the retiring Douglas LudwigÂÂ . Office Depot has picked Patricia McKay for the top finance job. McKay had been CFO at home-furnishings seller Restoration HardwareÂÂ . Preppy retailer J.Crew Group Inc. has a new CFO in advance of its planned IPO. James Scully, formerly head of strategic planning and human resources at Saks Inc., landed the job following the June resignation of Amanda Bokman.