Ex-Cabletron CEO wins legal fee deal
Former Cabletron Systems Chief Executive Officer Piyush Patel has reached a deal over legal fees with the bankrupt estate of the company’s spinoff, Riverstone Networks.
According to papers filed in federal bankruptcy court in Delaware on Tuesday, Patel’s attorneys can be reimbursed for up to $650,000 to defend the former executive against any criminal and civil charges in relation to his tenure at Riverstone.
The deal comes in the wake of a civil suit filed by the Securities and Exchange Commission against six other officials at Riverstone, accusing them of fraudulently inflating revenue to increase the share price during and immediately after the company’s 2001 spinoff from Cabletron, once New Hampshire’s largest employer.
Patel – who succeeded Cabletron co-founder Craig Benson at the helm of the company – engineered the split-up, and went on to chair Riverstone’s board of directors. He has not been charged civilly or criminally with misconduct but has been notified that he was a target of an SEC investigation, according to previous filings.
The SEC maintains that the alleged fraud surrounding Riverstone cost shareholders millions of dollars. Riverstone eventually left the state and went bankrupt, selling its assets to Lucent Technologies for $200 million. Shareholders will end up with less than a tenth of what the stock was worth at the time of the spin off.
In his deal, Patel’s attorneys would have three years to withdraw from the reserve. Whatever money is left would be distributed to shareholders. – BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW