Stephen P. Gardner, former chairman and chief executive officer of Peregrine Systems, has pleaded guilty to three criminal charges regarding a massive fraud that forced the company to file for bankruptcy, according to published reported.
Gardner was among seven former executives and consultants of the business software company who were scheduled to stand trial April 10, according to the San Diego Union-Tribune. Previously, he pleaded not guilty to one count each of conspiracy, securities fraud, and obstruction of justice, according to the Fresno Bee.
During Peregrine’s bankruptcy reorganization in 2003, the Union-Tribune reported, the company disclosed that it had overstated revenue by $509 million and understated losses by $2.6 billion over a 33-month period that began in April 1999.
In October 2004, Gardner and other Peregrine executives and consultants were charged with engaging in a conspiracy to commit a multibillion-dollar securities fraud.
Specifically, the indictment alleged that the defendants conspired from the quarter ending March 1999 through May 2002 to deceive investors about Peregrine’s true financial performance and condition through a variety of means, including:
• improperly booking software license revenue on backdated, impaired, or sham transactions
• fraudulently deceiving financial institutions into extending credit based on false financials and false accounts receivable associated with dubious deals
• concealing Peregrine’s mountain of uncollectible accounts receivable by keeping bad debts associated with these deals off the books, and covertly writing them off as related to one or more of Peregrine’s many acquisitions
• employing various accounting tricks, such as manipulations of reserves and unsupported journal entries, to fraudulently improve Peregrine’s financial appearance
Peregrine, which eventually emerged from bankruptcy, was later acquired by Hewlett-Packard, according to the Bee.