A prominent Providence insurance executive Thursday was acquitted of charges that he recruited two Brown University students to be prostitutes, engaged in illegal sexual acts with them, and also tried to recruit a student at another college as a prostitute.

Though he was cleared of the sex-related charges, Stanley E. Henshaw III, 45, was convicted of possessing marajuana and cocaine. He will be sentenced next month.

Despite her accusation that Henshaw made a prostitute out of her, Brown alumna Rebecca R. Kidd admitted under cross examination this week that she had suggested to Henshaw that they have sex and that he pay her for it. He had merely wanted a boyfriend-girlfriend relationship, she said in the trial.

Another factor that weighed against Henshaw's conviction was that the only evidence that he had committed an "abominable and detestable crime against nature" in illegal sexual acts turned out to be the women's testimony that they had performed "oral sex" on him.

"He knew them, he had sex with them, but what they said [about the prostitution ring] was not true," said John F. Sheehan, Henshaw's attorney.

The Brown students were arrested in March, 1986 by Providence police investigating an ad placed in the now-defunct Providence Eagle. In the ad, Kidd and Dana E. Smith, both of whom graduated in June of that year, offered a sexual threesome to any businessman willing to pay $500.

When the two women were arrested, they said the ad was part of a prostitution ring into which Henshaw had lured them. Police had been investigating the existence of such a ring since the fall of 1985, when a student approached them and said she had been pressured into becoming a prostitute.

Henshaw was also found not guilty of luring Maria Picciano, a student at Providence's Johnson and Wales College, into the prostitution ring. In the trial, Picciano said she was not a prostitute, but that she was lonely.

Picciano, who graduated in 1985, had "had sex with several of Henshaw's friends and they had given her gifts," Sheehan said. "Draw your own conclusions," he said.

Even though Henshaw was acquitted, "It was a case where there was evidence of wrongdoing on the part of the defendant," said Rhode Island's Assistant Attorney General, Robert E. Craven. He said a trial was necessary because Henshaw "was not willing to plea bargain in an way acceptable to the attorney general."

"The only unfortunate thing, besides the verdict, was that it would have been nice to have had the testimony of the three other women" who were allegedly involved in the prostitution ring, Craven said. The prosecution was unable to locate the women, whose testimony, Craven said, would have enhanced Kidd's.