The Justice Department announced Wednesday that a federal grand jury has indicted eight former Peregrine Systems Inc. executives with taking part in a massive conspiracy that inflated the company’s revenue by more than $500 million over several years. Peregrine is in the business of developing software to track corporate assets.
Former Houstonian John Moores — who founded Houston-based BMC Software, has been a major philanthrapist for the University of Houston and is currently the owner of the San Diego Padres Baseball Club — is the former chairman of the board of Peregrine. Dozens of shareholder lawsuits filed over the past several years allege that Mr. Moores and his entities sold over 14 million Peregrine shares worth $630 million from 1999 to 2001 during a time in which Peregrine’s financial reports were being falsified. Mr. Moores denies any knowledge of the falsity of Peregrine’s financial statements and has never been charged criminally in regard to Peregrine or any other venture.
The indictment charged former Peregrine CEO Stephen Gardner and former President and COO Gary Lenz, and other executives involved in sales, finance and accounting at the company. The indictment also charged a former Arthur Andersen LLP audit partner, who oversaw Peregrine’s bookkeeping. Messrs. Gardner and Lenz, and four other executives also face related civil fraud charges filed by the Securities and Exchange Commission.
Peregrine filed for bankruptcy protection in 2002 after announcing an internal probe of its accounting. It later restated financial results for 11 quarters from 2000 through 2002 in which it reduced its previously reported revenue of $1.3 billion by over a half a billion dollars. Peregrine had reported 17 consecutive quarters of rising earnings from 1997 through 2002, and its stock price reached nearly $80 in March, 2002. The plaintiffs in the civil lawsuits against Mr. Moores and others — and now the Justice Department — are taking the position that those results were the result of the Peregrine executives’ cooking of the company’s books.
In the meantime, a former Peregrine sales executive on Wednesday agreed to plead guilty to charges of obstructing justice and will join several others who are cooperating in the government’s ongoing investigation of the company. Moreover, Peregrine’s former chief financial officer previously pled guilty to conspiracy and securities fraud charges, and two other former Peregrine executives also pled guilty to conspiracy charges.