Ex-Cabletron exec seeks to toss SEC civil suit



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Former Cabletron Systems executive Eric Jaeger has moved to throw out what he calls "a hanging chad of a lawsuit" filed three years ago by the U.S. Securities Exchange Commission that accused Jaeger of being one of the masterminds behind the fraudulent scheme to inflate revenue when the defunct Rochester company was spinning off Enterasys Networks a decade ago.The accounting scandal resulted in eight former Cabletron and Enterasys executives going to prison. Jaeger was never charged with criminal misconduct, but in 2007 the SEC filed a civil case against five criminal defendants and five other executives not previously charged. The amended complaint particularly focused on former Cabletron CEO Piyush Patel, former chief financial officer James Kirkpatrick and Jaeger, as the three leaders of the scheme.Much of the case was thrown out in July 2009, leaving only a few charges standing, and there has been little action in federal court since then."Everything about this case is old," said Jaeger's motion, filed Feb. 11 in Concord, noting that the alleged fraudulent conduct at Cabletron dates back before Enron. Enterasys went private six years ago and moved out of the state eight years ago. And during the last decade, Jaeger has left both the field of corporate law and public companies, working as an emergency medical technician in Lee."There is simply no discernible 'investor protection' purpose behind the SEC's case," says the motion.Jaeger joined Cabletron in 1998 after leaving Ropes & Gray, the law firm that represented Cabletron and Enterasys in the ensuing scandal. He started as general counsel and in July 1999 he became executive vice president of corporate affairs, offering legal guidance to the company during the Enterasys spinoff.Afterward he left the companies, according to the motion, he was as "out of a job," though he did work as a consultant for Enterasys.The SEC charged that Jaeger was involved in or knew about various "three-corner" deals, in which the company lent money to small companies to buy Enterasys products that they didn't need in order to boost sales and profits so Enterasys would meet Wall Street's expectations during the crucial time during the spinoff.But Jaeger's defense is that he was not an accountant, in what amounted to an accounting scandal, and was not aware of the complex rules involved in recognizing revenue. He also says he was not part of the finance department, and he thought that the specific deals (that the federal court still left standing) were legitimate.That defense worked for Jerry Shanahan, the Irish-born ex-chief operating officer, and the only criminally charged defendant not convicted. Shanahan, however, is also facing civil charges.The other defendants - who have either not settled or defaulted - are Patel, Kirkpatrick, Lawrence Collins, Cabletron's former controller, and Michael A. Skubisz, a Cabletron executive who later went on to run Aprisma, a Cabletron division that was sold to private investors in 2001.Skubisz also filed a brief on Feb. 11 denying the substantial allegations against him. The other defendants had previously filed their denials. -- BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW Edit ModuleShow Tags