Enterasys sentencing delayed yet again

Enrique “Henry” Fiallo, former chief executive officer of Enterasys Networks, will have to wait another three months before he finds out how much time he will serve for securities fraud.

Fiallo’s sentencing, and that of three other former Enterasys executives who pleaded guilty to fraud in exchange for their testimony at the trial of five other former executives, will be rescheduled from April to July. That means their sentencing will be held after the sentencing of the four executives they helped to convict. The jury failed to reach a verdict on the fifth former executive.

The four convicted executives are: former Robert Gaglias, former chief financial officer; Bruce Kay, former vice president of finance; Robert Barber, a member of Enterasys’ investment team; and David Boey, who oversaw sales in the firm’s Asia Pacific division. The jury failed to reach a decision on former chief operating officer Jerry Shanahan, whose retrial is scheduled for the fall.

The sentencing of the convicted defendants has been delayed until two days after a June 27 hearing determining the size of the loss caused by the securities fraud.

In December 2006, after a monthlong trial, a federal jury convicted the defendants of using a variety of accounting schemes to fraudulently inflate Enterasys’ revenue in 2001, after it was spun off from Cabletron Systems, which was once New Hampshire’s largest employer.

Federal guidelines link the size of the sentence to the amount lost in the fraud. Enterasys never recovered from the accounting scandal and was eventually sold to private investors at a fraction of its stock price at the time of the spinoff. Prosecutors contend that the loss is more than $1 billion. The defendants claim that it is much less than that.

The sentencing of the witnesses who pleaded guilty depends on their cooperation in bringing their fellow executives to justice. That’s why their sentencing hearing has been delayed “so that any further assistance from the defendant and the full results of the defendants’ assistance can be taken into account” at their own sentencing hearing.

Fiallo’s sentencing has been scheduled on July 9, as is the sentencing of former controller Anthony Hurley. The sentencing of Fiallo’s assistant, Gayle Spence, has been set for July 20, along with that of Gary Workman, president of the Asia Pacific unit. – BOB SANDERS