Court rejects ex-Enterasys exec’s appeal


The U.S. Court of Appeals Friday rejected an attempt by the former chief financial officer of Enterasys Networks to reverse his securities fraud conviction and sentence “We see nothing reasonably debatable about the district court's decision,” said an opinion by the three-judge panel on the appeal of Robert Gagalis.A federal jury in U.S. District Court in Concord convicted Gagalis and three other executives at the end of 2006 for conspiring to inflate revenue at Enterasys during its spinoff from the former Cabletron Systems in 2001.The presiding U.S. District Court judge, Paul Barbadoro, sentenced Gagalis to 11-1/2 years, the steepest sentence handed out among the four defendants.Right before sentencing, Gagalis waived his right to appeal to avoid risking the application of more recent, stricter sentencing guidelines.But in July 2008, Gagalis – who is still serving out his term at federal prisoner in Fort Dix, N.J. -- asked the court to reconsider. Gagalis contended he was the fall guy for higher-ups at Cabletron – once New Hampshire’s largest employer -- including Cabletron co-founder Craig Benson. He maintained that the prosecutor and his lawyer did not pursue the Cabletron ties because of separate and distinct conflict of interests.Benson, who later went on to serve a term as New Hampshire governor and at one time was an Enterasys board member and its largest shareholder, was never charged.The Securities and Exchange Commission has filed civil charges against other former Cabletron officials, including Piyush Patel, who succeeded Benson as chief executive, chief financial officer David Kirkpatrick and Eric Jaeger, former executive vice president. A trial on those charges has been scheduled for March 2012.Gagalis’ attorneys -- Michael Arton of Los Angeles and Stephen M. Rasche of Portsmouth -- charged that then-U.S. Attorney Tom Colantuono – a former state senator and congressional candidate – was politically tied to Benson but didn’t recuse himself until after the decision was made to prosecute Gagalis instead.And they said that his attorney, James Rehnquist (son of the late chief justice William Rehnquist) didn’t pursue Cabletron officials because such action might implicate Daniel Harding, another Cabletron official who went to work for another Cabletron spinoff, Riverstone Networks – another firm the SEC accused of inflating revenue in the 2001 period. Barbadoro ignored the first alleged conflict concerning Colantuono, but he did hold a hearing on the second allegation. But -- after a two-day evidentiary hearing Barbadoro ruled against Gagalis last July. That was the decision Gagalis appealed to the appeals court in November.After reviewing the evidentiary hearing, the appeals court said Barbadoro “applied the correct legal standards in this well-reasoned oral decision” and that its “underlying factual findings, which were amply supported by the evidence … are not clearly erroneous or even arguably so.” – BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW
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