Another Ex-Enterasys exec settles with SEC

Former Enterasys Networks executive Gary Workman has agreed to pay $225,000 to settle a civil complaint with the Securities and Exchange Commission, which charged that he conspired to inflate revenue starting even before the company was spun off by Cabletron Systems in 2001.

Workman, former president of Asia Pacific Division of Enterasys, previously pleaded guilty to a wire fraud charge relating to the SEC charges in exchange for testimony against five other employees, four of whom were convicted in December.

In his testimony, Workman primarily testified about his role in a scheme to recognize about $4 million of revenue from Ariel International via a backdated agreement and a secret side letter.

But in the relentless questioning that followed, Workman also admitted living a “life of falsehood” and inflating revenue in previous quarters to inflate his bonus out of “greed.” Judge Paul Barbadoro later characterized the testimony as “devastating” to the prosecution.

Workman’s SEC complaint — which he neither admitted to or denied — discusses the Ariel transactions, weeks after the August 2001 spinoff from Cabletron, but it also details Workman’s involvement in two earlier transactions when Enterasys was still part of the Rochester-based Cabletron, which was once New Hampshire’s largest employer.

One involved a $3.1 million deal with ChoiceWay Technologies, a Beijing distributor, in February 2001, six months before the August 2001 spinoff, in which Cabletron investment money was channeled through the company to buy Cabletron’s product. Workman allegedly did not tell auditors that the sales were linked to these investments.

Workman knew that ChoiceWay wouldn’t be able to sell the products and would probably return them, yet caused them to be recorded them as revenue anyway, the SEC complaint alleged.

The other was a $3.79 million deal involved JBS Communications, a Japanese distributor that would warehouse products that Cabletron still had to sell. The sales – dating back to March 2000 — were recorded on the books but hadn’t actually been sold, according to the complaint.

Workman consented to paying more than $205,000 for his “ill-gotten gains” as well as paying a civil penalty of $20,000 He is scheduled for sentencing on his criminal charges on April 19, along with Anthony Hurley, an ex-Enterasys controller who also pleaded guilty in exchange for his testimony and who settled with the SEC on Jan. 31, for $32,000. – BOB SANDERS