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CONCORD, N.H. (AP) _ A federal appeals court has reinstated an investor lawsuit against Gov.-elect Craig Benson and his former computer networking firm alleging that the company inflated revenue and booked fictitious sales to hide its downward spiral.

The ruling, released Wednesday, said a lower court erred in dismissing the class-action case in May 2001.

Cabletron reported strong financial performance in the beginning of 1997, including a 26 percent increase in net sales. By June of that year, though, the stock price had plummeted after the company announced declining earnings.

In June 1999, Benson stepped down as chief executive of Cabletron, which later went out of business. One of its spinoffs, Enterasys Networks Inc., is under federal investigation. Benson, a Republican elected New Hampshire governor on Nov. 5, still sits on the audit committee and board of directors of Enterasys.

A Benson spokesman, Keith Herman, said Wednesday the charges are baseless.

``This is a case that's already been thrown out twice,'' Herman said. ``I think it demonstrates the charges are groundless and will probably be thrown out again.''

The class-action lawsuit, first filed in 1998, accuses Cabletron of issuing bright forecasts for the company in the face of its problems.

It says the company booked fictitious sales and juggled around finished products and raw materials to bump up revenues.

At its height, Cabletron employed 7,000 people, had annual sales of $1.6 billion and was a leading manufacturer and vendor of equipment for large enterprise computer networks.

Wednesday's ruling reinstated all claims against six defendants, including Benson and Cabletron co-founder Robert Levine. Cabletron also is listed as a defendant. The ruling affirmed the dismissal of one of two claims against engineering and manufacturing director Christopher Oliver.

The case now returns to U.S. District Court in Concord.