The SEC sued Peregrine Systems on June 30, 2003, alleging that the software company filed materially incorrect financial statements for 11 consecutive quarters to inflate revenue and its stock price. Peregrine later consented to a court judgment without admitting or denying the allegations.
What the SEC alleged
The SEC filed its civil case against Peregrine Systems, Inc., a San Diego-based software company, in the U.S. District Court for the Southern District of California. The Commission alleged that Peregrine’s financial statements for quarters from June 30, 1999, through December 31, 2001, were materially incorrect and that the alleged scheme was intended to inflate revenue and the company’s stock price. The SEC’s June 30, 2003 announcement described the statements as incorrect across 11 consecutive quarters.
According to the company complaint, the alleged fraud was uncovered in April 2002. Peregrine restated results in February 2003 for fiscal years 2000 and 2001 and the first three quarters of fiscal 2002. The complaint said the restatement reduced previously reported revenue of $1.34 billion by $509 million, including at least $259 million reversed because the underlying transactions lacked substance. The complaint also alleged that company personnel used a spreadsheet called the “Revenue Report,” rather than Peregrine’s computerized accounting system, to record license revenue.
What happened to the company case
On June 30, 2003, the SEC announced the lawsuit and submitted a partial settlement with Peregrine for court approval. The court entered final judgment on July 23, 2003. Peregrine consented to the judgment without admitting or denying the complaint’s allegations. The SEC’s final-judgment release says the judgment permanently enjoined the company from specified antifraud, reporting, books-and-records, and internal-controls violations.
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The judgment also required remedial measures, including appointment of an internal auditor and a corporate compliance officer, employee training, accelerated reporting on internal controls, and disclosure of the condition of internal controls and financial reporting procedures. Peregrine had filed for Chapter 11 reorganization on September 22, 2002. Its reorganization plan became effective August 7, 2003, and it disclosed the condition of its internal controls and financial reporting procedures in an SEC Form 8-K that day.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How the 2004 case against former officers differs
On October 6, 2004, the SEC announced a separate civil case against six former senior officers. That proceeding concerned individual defendants, not the company action resolved by the 2003 judgment. The 2004 SEC announcement said Peregrine’s restatement reduced previously reported revenue of $1.34 billion by more than $507 million. That release’s figure differs from the $509 million stated in the 2003 company complaint; each is the figure reported in its respective SEC document.
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