Former Peregrine Systems Inc. CEO to Serve 97 Months

San Diego, CA - Stephen Parker Gardner, former Chief Executive Officer of Peregrine Systems, Inc. (Peregrine), was sentenced December 11 in federal court in San Diego by United States District Court Judge Thomas J. Whelan to serve 97 months in custody, based on his conviction on charges of conspiracy, securities fraud, and obstruction of justice, arising out of his participation in a scheme to defraud Peregrines shareholders between 1999 and 2002. Judge Whelan cited Gardners cooperation with federal authorities following his guilty plea in March 2007 and his testimony during the trial of his co-defendants as reasons that supported the sentence. Judge Whelan ordered Gardner to serve a three-year term of supervised release following his release from prison. Judge Whelan also ordered Gardner to forfeit to the United States the proceeds from the sale of three parcels of real estate in Maine, approximately $970,032 from the sale of a fourth parcel of real estate, plus approximately $384,652 seized from his brokerage accounts. Judge Whelan will address restitution at a hearing on February 23, 2009. According to evidence introduced in Gardners case, Peregrine was a business software company formerly headquartered in San Diego, California and had been one of the regions most celebrated technology companies. Shares of Peregrine were publicly traded on the NASDAQ and for ten consecutive quarters between 1999 and 2001, Gardner and his co-schemers declared that Peregrine had met or exceeded Wall Street expectations for revenue and earnings. In truth, Gardner and others fraudulently manipulated Peregrines financial statements in order to deceptively meet these numbers, thereby fraudulently inflating and sustaining the price of Peregrines stock. The scheme employed a number of fraudulent practices designed to manipulate Peregrines revenue and earnings figures, including: (1) improperly keeping Peregrines books open past the end of the fiscal quarter and deceptively including in the prior fiscal period backdated contracts that had actually closed in later periods; (2) improperly recording revenue on contracts that were subject to oral and written side agreements and promises; and (3) concealing from Wall Street the fact that Peregrine counted revenue on barter deals that is, sales that were dependent on Peregrines providing the purchaser with cash, equity, or orders for products or services. According to court documents, in an effort to avoid restating revenues that had already been reported to Wall Street, Gardner and his co-schemers took steps to conceal from investors the fact that millions of dollars of Peregrines accounts receivable had not been collected. In addition, in an effort to avoid scrutiny from the U.S. Securities and Exchange Commission (SEC), Gardner gave false and misleading testimony to the SEC about whether a series of barter deals booked by Peregrine were directly linked and predicated upon each other. According to court files, Gardner was hired by Peregrine in 1997 as Vice President of Strategic Acquisitions, was promoted to President and Chief Executive Officer in April 1998, and accepted the title of Chairman of the Board of Directors in July 2000. During his time at the company, Gardner exercised stock options and sold thousands of shares of Peregrine stock, reaping approximately $8.2 million in net proceeds. Gardner also took annual bonuses from Peregrine that at one point exceeded $1 million. When Peregrine publicly disclosed its accounting improprieties in May 2002, the companys stock price collapsed. Peregrine later sought federal bankruptcy protection and eventually sold itself to Hewlett-Packard Company. Shareholders have claimed losses in excess of $3 billion resulting from the fraudulent activities of Gardner and others. Gardner was ordered to begin serving his sentence by February 20, 2009.