U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19986 / February 1, 2007
SEC v. Anthony L. Hurley, Civil Action No. 07cv022 (D.N.H.)
On January 30, 2007, the Securities and Exchange Commission filed a settled civil fraud action against Anthony L. Hurley in United States District Court for the District of New Hampshire. Hurley, without admitting or denying the allegations of the complaint, consented to an injunction against future violations of Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 13b2-1 and 13b2-2 thereunder; and from aiding and abetting any violation of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder. Additionally, Hurley consented to paying disgorgement in the amount of $24,498, plus prejudgment interest in the amount of $7,526, reflecting the full amount of his ill gotten gains.
According to the Commission's complaint, from March 2000 through December 2001, Hurley, the former assistant controller of Enterasys Networks, Inc., participated in a company-wide scheme to fraudulently inflate revenues at Enterasys and its former parent company, Cabletron Systems, Inc. and thereby convince the market that Enterasys was a viable independent company with consistently strong revenue growth.
The Commission's complaint further alleges that Hurley directly participated in transactions which involved undisclosed side agreements in which the purchaser was granted full return or exchange rights, or payment for the product was contingent upon the purchaser's resale of the product, or payment was contingent upon an investment by Enterasys. In the latter, Enterasys agreed to take a debt or equity interest in its customer, in return for that company's agreement to use those funds to purchase product from Enterasys.
In a related criminal case, Hurley pled guilty to one count of wire fraud and cooperated with the U.S. Attorney's Office for the District of New Hampshire in the prosecution of U.S. v. Barber et al., Criminal No. 04-126 (D.N.H.).
On February 26, 2003, the Commission authorized the institution of public cease-and-desist proceedings against Enterasys Networks, Inc. and Aprisma Management Technologies, Inc. and simultaneously accepted the offers of settlement of Enterasys and Aprisma. Enterasys and Aprisma were ordered to cease and desist from future violations of Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5), and Rules 10b-5, 13a-1, 13a-13, 13b2-1 and 12b-20 thereunder. Aprisma was also ordered to cease and desist from future violations of Exchange Act Section 12(g)(1). Enterasys was further ordered to comply with its undertaking to appoint an internal auditor who reports directly to the audit committee of the company's board of directors.