Silicon Valley success story ends with disbarment

A former Cisco Systems vice president convicted of wire fraud and insider trading in a scheme that enabled him to steal millions from the networking giant was summarily disbarred. ROBERT S. GORDON [#116467], 49, of Palo Alto lost his license Aug. 16. Because wire fraud is a felony involving moral turpitude, it meets the criteria for summary disbarment.

Gordon has been on interim suspension since he pleaded guilty in 2002 in federal court in San Jose. He was convicted of two counts of wire fraud and one count of insider trading and was sentenced to five and a half years in prison.

A five-year employee of Cisco who became vice president of business development, Gordon admitted that he transferred 30,206 shares of stock in Internet Security Services Group, a company later acquired by Cisco, into a Bahamian shell company he created called “Cisco Systems Inc. Bahamas.” It had no relation to the company.

The indictment also accused Gordon of transferring to the same account thousands of shares of other Cisco-owned stock without the company’s permission. The transfers included 100,000 shares of Terayon stock, worth $3.2 mil lion; 26,372 shares of Microsoft stock, worth $2.4 million; 7,234 shares of Cabletron stock, worth $120,000; and a $2.8 million distribution of IVP Broadband Fund.

Prosecutors also accused Gordon of a complicated arrangement involving a start-up called Spanlink, in which he used a phony venture capital firm to invest in the company. He then persuaded Cisco to provide $15 million to Spanlink and obtained a $5 million return on the investment, which he kept for himself.

Gordon also admitted to insider trading, personally investing in companies in which Cisco was pursuing an investment.

In court documents filed before Gordon was sentenced, prosecutors accused him of perpetrating a “massive fraud” against Cisco that included the Spanlink scam as well as 16 separate embezzlement schemes and insider trading in seven different stocks that totaled more than $55 million in fraud.

Gordon repaid or forfeited to the government about $22 million and an appellate court ordered that he repay a total of $27 million.

A Stanford Law School graduate skilled in corporate finance, Gordon  was a rising star in Silicon Valley. He explained his actions as “thinking outside the box” when he was caught by Cisco investigators. He viewed the money and stock transfers as creative ways to help start-up companies affiliated with Cisco, according to an FBI affidavit. Cisco fired him when it uncovered his actions.

Gordon’s downfall turned tragic when he disappeared during plea negotiations. He eventually turned up near death at a Santa Barbara psychiatric ward after a suicide attempt. At Gordon’s sentencing, his lawyers argued that his crimes were the result of mental problems, asserting that he is schizophrenic and delusional.

“Obviously, Mr. Gordon’s story is a personal tragedy,” said U.S District Judge Jeremy Fogel, before imposing a 66-month sentence. “The scope of this criminal scheme was very broad and lasted a long time. I’m just not convinced his criminal conduct was . . . caused by mental illness. What he did is very, very serious.”