Another ex-Enterasys exec settles civil charges

Gayle Spence Luacaw has agreed to pay nearly $339,000 to settle civil charges that she helped inflate revenues at the former Rochester-based Cabletron Systems and its spinoff, Enterasys Networks, in an agreement reached Tuesday and approved Wednesday by a federal judge.

Luacaw, who resides in Newfields, agreed to pay back the “ill-gotten gains” of more than $264,000 and a fine of more than $74,000, without admitting or denying charges that she participated in two methods to deceive auditors and stockholders, one involving an undisclosed side agreement making reported sales tenuous and “three-corner deals,” using “investments” in a company to buy Enterasys products through a distributor.

Luacaw had already pleaded guilty to a lesser related criminal charge in exchange for testifying against five other former Enterasys executives, four of whom were convicted in December. She is scheduled to be sentenced in July.

In February, the Securities and Exchange Commission also filed a civil complaint against 10 other former executives connected with Enterasys, including former Cabletron Systems Chief Executive Officer Piyush Patel and the five Enterasys officials who were on trial. They have retained counsel and appear to be contesting the charges so far.

The SEC also has filed civil charges against six former executives of Riverstone Networks, Cabletron’s other spinoff, in U.S. District Court in California, where Riverstone relocated.

Luacaw started at Cabletron in 1992, when it was run by co-founder Craig Benson, who later served a term as governor of New Hampshire. Indeed, her late husband was Benson’s bodyguard.

She rose as a sales rep to the position of vice president of inside sales in the executive office, and worked under Benson, his successor Patel (who oversaw the split-up of Cabletron and went on to chair Riverstone’s board) and under former Enterasys CEO Enrique “Henry” Fiallo.

At the trial Luacaw said she was right in the thick of deals that used investment to create revenue, even though she knew “something was wrong” with the deals, even while she was a “cheerleader” for Fiallo and Enterasys.

Luacaw and three other cooperating witnesses also may testify in the retrial of Enterasys’ former chief operating officer, Jerry Shanahan. The jury could not reach a verdict on Shanahan’s case in December and the court has scheduled a retrial in September. Prosecutors would not comment on whether they plan to go ahead with the retrial.

Luacaw is the last of the cooperating witness to settle. The other three witnesses settled in February. She also thus far has agreed to pay the largest amount, though the amount to be paid by Fiallo has been left open, to be determined in U.S. District Court in Concord. – BOB SANDERS