Former Enterasys exec. opens appeal

Robert Gagalis, the former Enterasys Networks chief financial officer convicted of securities fraud, opened an appeal Friday of trial Judge Paul Barbadoro’s refusal to reconsider his case and sentence.

Gagalis had waived his appeal rights before Barbadoro had sentenced him to an 11 ½-year federal prison term for securities fraud. Gagalis now argues he that did so without fully understanding the implications of the conflict of interest of his former attorney, James Rehnquist, because Rehnquist’s firm was also representing Daniel Harding, an executive from Cabletron Systems, the Rochester firm that spun off Enterasys in 2001.

Harding was never charged with securities fraud, but Gagalis was convicted of inflating revenue at the time of that spin off. Another four Enterasys officials, including CEO Enrique Fiallo, pled guilty and were given lesser sentences.

While some Cabletron officials, including former CEO Piyush Patel, are facing civil charges, no leading official at Cabletron was charged criminally.

Gagalis never worked for Cabletron.

Gagalis also charged that the former U.S. Attorney Tom Colantuono had his own conflict – a political relationship with Cabletron founder Craig Benson – and only recused himself after he targeted Gagalis to protect Benson. Benson, Patel’s predecessor, was a board member of Enterasys at the time, and the company’s largest stockholder. He later went on to serve a term as the state’s governor.

Barbadoro ignored the latter issue, but did hold a two-day hearing on the former. However, he ruled that Rehnquist had no real conflict, and even if there were one, it wouldn’t have caused Barbadoro any miscarriage of justice, nor was it the reason that Gagalis didn’t testify in his own defense. Gagalis would have been “destroyed” on cross-examination, Barbadoro said.

The Friday filing just opened the case. Gagalis has yet to file the basis of his appeal. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW