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From the current print issue of NHBR
Filing says U.S. attorney steered probe away from Benson
By Bob SandersTuesday, November 11, 2008
Colantuono, left, and Benson.
A long, but hardly close, relationship
Is U.S. Attorney Thomas Colantuono a “close associate” of Craig Benson, Cabletron Systems’ co-founder and former New Hampshire governor, as claimed by attorneys for imprisoned former Enterasys chief financial officer Robert Gagalis?</p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">Neither Benson nor Colantuono would talk to NHBR about the matter. According to the public record, Benson and Colantuono have rubbed political shoulders for the past 15 years, but you would hardly say that they are joined at the hip.</p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">There are contributions, contracts and other connections — but the money involved is relatively small and the ties are somewhat tenuous. </p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">The ties do go back for some time, at least to 1994, when as Cabletron chief executive Benson contributed $500 to Colantuono’s campaign. Benson also chipped in $250 to build up Colantuono’s state campaign coffers shortly before he launched a failed bid for Congress in 1996 (though Benson ended up backing Colantuono’s opponent in the primary, Jack Heath) and another $1,000 in 1998 when Colantuono ran successfully for Executive Council in 1998.</p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">During his time as executive councilor — and shortly after Benson resigned as CEO of Cabletron (though he remained on the board and was the company’s largest shareholder) — Colantuono voted to approve two state contracts with Cabletron, for some $17,460 in support services for the Department of Administrative Services in June 1999, and another $35,000 for computer networking equipment and repair for the Department of Employment Security in September 1999. He also voted to accept a “no-cost” offer from Cabletron for training materials and classes related to computer networking for the Department of Administrative Services, valued at $7,297 in April 2000. None of these votes was contested.</p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">As an Executive Councilor, Colantuono never got a chance to vote on any of Governor Benson’s nominees. That’s because President George W. Bush named Colantuono U.S. attorney in December 2001. Benson was only elected Governor in November of 2002.</p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">There is no record of Colantuono contributing to Benson’s gubernatorial campaign.</p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">After Benson was inaugurated in January 2003 — and during the build-up to the Enterasys prosecution — the two ran into each other at various official and political functions. </p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">For instance, on Sept. 11, 2003 — four months after the U.S. attorney’s office questioned Benson about his role in the investigation — they both spoke at a ceremony commemorating the September 11th attacks in 2001. Three weeks later, Benson as governor thanked Colantuono for Project ChildSafe and his leadership on gun safety.</p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">“The allegations that Mr. Colantuono had some conflict of interest with Mr. Benson are ridiculous,” Benson’s attorney, Harvey J. Wolkoff, said. “Mr. Colantuono did a very through investigation.”</p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">Colantuono won’t say when he recused himself from the Enterasys prosecution. According to Gagalis’ attorneys, it was some time after April 13, 2004, when the U.S. attorney’s office sent out a targeting letter to the initial defendants (who did not include Benson) and before May 19, when Gagalis was indicted under acting U.S. Attorney Peter Papps. </p><p class="NormalParagraphStyle"><br/></p><p class="NormalParagraphStyle">On the other hand, a motion went out under Colantuono’s name as late as June 2, 2005, concerning sealing another motion to delay — because of an “active investigation” — the sentencing of Michelle Winder, who implicated Benson. Papps’ name only appeared on Winder’s documents in October 2005 — on another sealed motion citing the “active investigation” concerning Winder’s sentence. - BOB SANDERS
U.S. Attorney Thomas Colantuono directed a securities fraud investigation of Cabletron Systems away from then-Gov. Craig Benson, despite evidence that Benson might have been involved in sham transactions through a company he effectively controlled to boost revenue at Cabletron spinoff Enterasys Networks, charges former Enterasys chief financial officer Robert Gagalis in a filing in U.S. District Court in Concord.
Colantuono - described in the filing as “Benson’s close associate” — also did not pursue allegations that Benson was funneling money, perhaps illegally, from the company, Final Mile Communications, to his gubernatorial campaign through executives, the filing said.
Gagalis is serving more than 11 years in prison after his conviction in December 2006 on charges of inflating revenue during the split-up of Cabletron, the Rochester, N.H.-based networking firm that was once the state’s largest employer.
Gagalis first filed a motion in July to reverse his conviction, arguing that he was a scapegoat for the crimes of his superiors. But the latest filing goes into much greater detail concerning Benson, a Cabletron founder and Enterasys board member and largest stockholder at the time in question. Benson was never charged with any wrongdoing.
The filing liberally quotes from FBI interviews of former employees at Cabletron and Final Mile— a Dover company Benson formed in 1999 (and that filed for bankruptcy in April 2003) — as well as an interview with Benson himself when he was governor.
In his May 2003 interview with the FBI, Benson said he was “not aware of incorrect product being shipped to buyers in order to record a sale. Benson stated he would not have been involved in anything like that,” according to the report.
But that claim seemed to be contradicted by a FBI interview of Michele Winder, Final Mile’s controller of operations from January 2000 to November 2002. Winder charged that Benson was involved in pressuring Final Mile to write a $1 million purchase of product that it didn’t need and couldn’t afford in order for Cabletron to make its numbers. When contacted by NHBR, Winder stood by the general accusations of interview, in which she also discussed campaign irregularities.
The filing also cites an ongoing civil suit by the Securities and Exchange Commission. In August, the SEC charged that a securities fraud conspiracy involving Gagalis was led by former Cabletron CEO Piyush Patel, Cabletron CFO David Kirkpatrick and Eric Jaeger, Cabletron’s former senior vice president of corporate affairs.
“These facts strongly suggest that the government improperly steered the criminal prosecution away from the true wrong-doers,” said the filing by Portsmouth attorney Stephen M. Rasche and Los Angeles attorney Michael H. Artan. “If any of the top-level wrongdoers were charged, Benson would undoubtedly have been drawn into the case. Because none of the top-level wrongdoers were charged, Benson was kept out of the fray.”
Colantuono did recuse himself before charges were filed, but not before Benson was questioned and Gagalis targeted, Gagalis attorney’s maintains.
Colantuono, who has not answered NHBR questions about when and why he recused himself, also did not respond to this latest filing.
Benson’s attorney, Harvey J. Wolkoff, of the Boston law firm of Ropes and Gray, called the accusations “ridiculous, absolutely false.” Wolkoff noted that Gagalis did not take the stand in his own trial.
“Mr. Gagalis never tried to offer any explanation for his criminal conduct. Anyone could see that Mr. Gagalis has absolutely no credibility, not one scrap of truth in what he has said about Mr. Benson,” he told NHBR. “He has gone out of his way to spread outright lies about Mr. Benson in order to get back at him for spearheading the investigation that resulted in Mr. Gagalis’ conviction.”
But Gagalis also charges that his former lawyer, James Rehnquist, advised him against testifying in his own defense.
Rehnquist’s law firm, Goodwin Procter LLC, also represented Daniel Harding, — the “center of decision-making at Cabletron/Enterasys,” according to Gagalis’ filing - who was being targeted by a criminal investigation involving Riverstone Networks, another Cabletron spinoff where Harding went on to work.
“Showing that others were behind the conduct at hand, rather than Gagalis, would have implicated Harding. Rather than implicate others, and possibly expose its client Harding, Goodwin presented no defense,” the filing said.
<font size=1>Bob Sanders can be reached at bsanders@nhbr.com.</font size>
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