Hey MH, since you were the last investor seen buying PRGN shares before it went busto.
Here's an update.
<<November 23, 2002
A former Peregrine Systems manager pleaded guilty yesterday to bank fraud, in what prosecutors called the beginning of a campaign to punish criminal conduct that reached deep into the company's executive ranks.
Ilse Cappel, an accounting executive at Peregrine for nine years, admitted she participated in a conspiracy at the company to falsify invoices and manipulate key financial data, according to a plea agreement signed yesterday.
Middle managers first to take hit in corporate cases
In a related development, the Securities and Exchange Commission filed a lawsuit against Cappel yesterday. In its suit, the SEC alleges that "Peregrine management engaged in a myriad of deceptive sales and accounting practices to create the illusion of growth."
The two cases represent the first enforcement actions taken against San Diego-based Peregrine since the software developer disclosed in May that it had uncovered accounting irregularities.
The intertwined actions also laid the groundwork for Cappel's cooperation in a continuing investigation of wrongdoing at Peregrine.
"She has agreed to cooperate," said her lawyer, Michael L. Lipman. He described the 40-year-old certified public accountant as "exceedingly emotionally upset."
U.S. Attorney Carol C. Lam said the action "begins the process of holding accountable those in Peregrine's management who were responsible for the massive investor losses caused by their criminal conduct – conduct that extended deep into the ranks of Peregrine's executives, and took many different forms."
That sentiment was seconded by Larry West, an assistant director of the SEC's enforcement division in Washington, D.C.
"We can tell you that this is the first of several actions we're likely to bring in this case," West said.
Peregrine's financial debacle has drawn widespread interest, due partly to an outbreak of corporate scandals nationwide and partly to its chairman, Padres owner John Moores. His sale of Peregrine shares worth more than $370 million during the restatement period has made him a lightning rod in the case.
Moores did not respond to an e-mail seeking his reaction to the government's allegations.
In a prepared statement, Peregrine said it would not comment on either the criminal or civil actions against Cappel.
"Peregrine's board and management have been cooperating fully with regulatory agencies, including the SEC and Department of Justice, since accounting irregularities were first brought to the board's attention late in April 2002," the statement says.
"To the best of the company's knowledge, all individuals involved with the accounting irregularities are no longer with the company, and these matters are now in the hands of the appropriate government authorities."
Peregrine's troubles have only mounted during the past six months. In August, Peregrine said an internal investigation found the company had inflated revenue by $250 million during the past 32 months.
In addition to the federal investigations, the company has been named in at least 44 shareholder suits.
Those suits were stayed in September, after the company sought federal bankruptcy protection. The company, which once had more than 3,000 employees, now has about 650.
The SEC suit includes some of the same charges detailed in the criminal case brought by the Department of Justice. Both actions included revelations about how Peregrine artificially inflated its revenue as its stock soared, reaching a high of $79.50 per share on March 27, 2000.
The fraud began as early as June 1999, according to information filed in San Diego federal court by the prosecutors, Assistant U.S. Attorneys George D. Hardy and Sanjay Bhandry. Cappel worked at Peregrine until June 14.
Cappel's actions helped make Peregrine's financial performance appear far stronger than it actually was. The improper accounting included manipulating balance sheets and other information that Wall Street analysts use to track companies.
Peregrine's false statements may have aided the company's $270 million bond offering in November 2000.
Among other revelations, Cappel admitted that she worked with others at Peregrine to create a fraudulent invoice of $19.58 million for fictitious accounts receivable, or the money owed by customers.
No other Peregrine executives or directors were identified by name in the documents, but the implications of Cappel's plea agreement were clear.
In its civil suit, the SEC alleges that Cappel was at times following instructions from Peregrine's chief financial officer, an apparent reference to Matthew Gless, who was terminated by the company in May.
The SEC alleged that Peregrine used its third-party sales partners to pump up revenue by booking software shipments to its resellers as sales, when the revenue was actually contingent on resale to an end-user.
The SEC suit also alleges that Cappel sold Peregrine stock for $334,287 while she was committing fraud.
Cappel faces a maximum penalty of five years in prison and a $250,000 fine, although sentencing guidelines disclosed in the plea agreement recommend a minimum sentence of six months to a year.
Cappel and her husband, Scott, are listed in city records as the owners of Sorrento Mesa Printing.
The SEC is seeking an order requiring the return of all ill-gotten gains plus interest and penalties.
"While working at Peregrine, my client made some mistakes and bad judgments," said Lipman, her lawyer. "She has been candid in discussing these events with the government and will continue to do so." >>
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