4 of Cabletron’s ‘Big 5’ settle with SEC

Four former executives of Cabletron Systems have agreed to pay a total of almost $700,000 to settle charges lodged by the Securities and Exchange Commission.The SEC charged that the four were involved in a scheme to inflate revenue by millions of dollars at Cabletron and its spinoff companies. The settlement was filed in U.S. District Court in Concord on June 17.Former Cabletron chief executive officer Piyush G. Patel, chief financial officer David J. Kirkpatrick, Enterasys Networks comptroller Lawrence Collins and Michael A. Skubisz, former CEO of Aprisma Technologies, have agreed to pay disgorgement and fines and interest totaling $667,835.Enterasys and Aprisma were both spinoff of Cabletron.Kirkpatrick, as the top finance officer, received the biggest penalty — $349,346 — followed by Patel, with a $236,989 levy. Skubisz and Collins have to pay the least of all — $57,056 and $24,444, respectively. The four also are forbidden from engaging in fraudulent conduct in the future.The penalties were termed “disgorgement,” a term usually associated with ill-gotten gains, but there is no admission or denial of guilt in the settlement.But all of the latest penalties are minuscule compared to those received by four lower-ranking figures in the scandal – all of whom were associated with Enterasys. They are serving federal prison sentences ranging from 3 to 11 1/2 years.Left out of the latest settlement was Eric Jaeger – Cabletron’s then-chief counsel who, along was considered a ringleader of the scheme to inflate revenues, along with Patel and Kirkpatrick, according to the SEC complaint.Also not included in the settlement was Jerry Shanahan, Cabletron’s former chief operating officer and a defendant in the 2006 criminal trial.The jury could not reach a verdict on Shanahan, and the charges against him were eventually dropped.Jaeger and Shanahan remain the only defendants of the SEC civil case left standing.The SEC complaint is the latest, and probably the last, in a series of legal ordeals that have date back to the days when Cabletron and Enterasys were public companies based in Rochester, N.H.Cabletron, co-founded by Craig Benson (who later went on to serve a term as New Hampshire governor), had once been the state’s largest employer. But after the disastrous spinoff, the company became a shadow of itself. The largest spinoff, Enterasys, eventually was sold for a fraction of what it was once worth to a private equity firm and moved out of state.It was Patel, Benson’s successor, who engineered the spinoff, with Benson’s support. At the time of the scandal, Benson sat on the audit committee of the board of directors and was the company’s largest stockholder. Benson was never accused by federal authorities of any wrongdoing. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW