The Department of Justice and the Securities and Exchange Commission have filed charges against a number of former executives of Peregrine Systems Inc. and against outside business associates of the company. Amid a massive accounting scandal, the software maker filed for bankruptcy protection in September 2002 and subsequently restated 11 quarters of financials.
The Justice Department charged eight former Peregrine executives, including former vice president of finance and chief accountant Berdj Joseph Rassam and former revenue manager Patrick Jude Towle; former Arthur Andersen LLP audit partner Daniel Francis Stulac; and two outside business partners of Peregrine with securities fraud, wire fraud, bank fraud, falsifying books and records, and conspiracy to commit securities fraud.
“The indictment charges these defendants with a massive conspiracy that had at its core one corrupt goal: to hit the numbers quarter after quarter, no matter what,” said Attorney General John Ashcroft, in a press release.
The Justice Department investigation has already resulted in deals with former chief financial officer Matthew C. Gless, who pleaded guilty to conspiracy and securities fraud,; former vice president of sales Steven S. Spitzer, who pleaded guilty to conspiracy to commit securities fraud; and former assistant treasurer Ilse Cappel, who pleaded guilty to conspiracy to commit bank fraud.
The SEC filed civil fraud and related charges against six former senior officers of Peregrine, including Rassam and Stulac, for their roles in the accounting scandal. The commission alleged that the individuals “fraudulently inflated” revenue and “employed deception and lies to portray Peregrine as a company with constantly growing sales while covering up Peregrine’s persistent failure to fulfill revenue forecasts.”
The commission also accused some of the Peregrine defendants of illegal insider trading that, in some instances, enabled them to earn millions of dollars by selling company stock.
In February 2003, Peregrine restated its results for 11 quarters during fiscal years 2000, 2001 and 2002, reducing previously reported revenue of $1.34 billion by more than $507 million.