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8/31/2007
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More Enterasys Execs Get Prison Terms As Government Winds Up Case

Three executives got sentences that range from a year and a day to several years in prison.

Fraud cases involving the telecommunications bubble appear to be entering their final phases as a judge in New Hampshire sentenced three former Enterasys Networks executives to prison terms.

Sentenced Thursday were: Gary M. Workman, the former head of Enterasys's Singapore sales office, to three years and five months; Gayle Spence Lucauw, a former senior executive involved in sales and special projects, to two years and three months and Anthony Hurley, Assistant Controller, to 12 months and one day in prison.

The three executives received leniency from U.S. District Court Judge Paul Barbadoro, because they cooperated with the prosecution in the wide-ranging case against several Enterasys executives, Assistant Attorney General Alice S. Fisher of the Criminal Division and Acting U.S. Attorney Joseph N. Laplante for the District of New Hampshire, said in a release.

In an earlier jury trial, four former Enterasys' executives were found guilty and received prison sentences and fines. The jury, however, was unable to reach a unanimous verdict on the major charges against the fifth defendant in that trial, Enterasys's former Chief Operating Officer Jerry Shanahan.

Prosecutors had argued that the executives had conspired to backdate and falsify documents and conceal material terms of business transactions from Enterasys's auditors in order to inflate the company's revenue. The prosecutors added: "They also fraudulently created revenue by secretly investing company funds in other companies and causing those companies to use the investment proceeds in turn to buy Enterasys products. The court found that, as a result of the fraudulent scheme, public investors lost at least $97 million."

Enterasys executives sentenced earlier received prison terms of from three to eleven years. Included in the earlier sentencing was Enterasys's former Chief Financial Officer, Robert J. Gagalis. Former Enterasys chairman, chief executive officer and president Enrique (Henry) Fiallo, also pleaded guilty to felony charges in connection with the scheme, the U.S. Attorney's Office said, adding that he is scheduled for sentencing in October 2007.

Enterasys was spun off from Cabletron Systems.

The case was prosecuted by Assistant U.S. Attorney Bill Morse for the U.S. Attorney's Office in Concord, and Senior Litigation Counsel Colleen A. Conry from the Fraud Section of the Criminal Division.

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