Accounting investigation hits Peregrine Systems

Computerworld - An independent financial audit of business software vendor Peregrine Systems Inc. is under way to look into alleged revenue accounting irregularities involving as much as $100 million.
In a startling announcement yesterday, the San Diego-based company also announced the resignations of CEO and Chairman Steve Gardner and Chief Financial Officer and Executive Vice President of Finance Matt Gless.
The audit is being conducted on behalf of the company's board of directors after an internal investigation was recently begun by auditing firm KPMG International LLP, according to Peregrine. KPMG was hired last month to replace troubled accounting firm Arthur Andersen LLP.
A spokeswoman at Peregrine declined today to comment further on the resignations, the audit or the continuing investigation.
In its announcement, Peregrine said the "scope and magnitude" of the potential financial irregularities have not been determined. "Based on the preliminary information reviewed to date, certain transactions involving revenue recognition irregularities, totaling as much as $100 million, have been called into question and may have been recorded during periods in fiscal 2001 and 2002," the company said. "These transactions were recorded initially as revenue from the company's indirect channels and may have been written off in later quarters."
The financial information previously reported and under investigation could potentially affect the company's financial results for fiscal 2002 and earlier, according to Peregrine.
The U.S. Securities and Exchange Commission has been notified of the internal audit and investigation.
As part of the management shake-up, Peregrine Executive Vice President Rick Nelson has been appointed acting CEO and a member of the board. Fred Gerson has been named acting chief financial officer, and Charles La Bella has been appointed executive vice president and senior counsel. Gerson is also CFO for the San Diego Padres baseball team, and La Bella was formerly the U.S. attorney for the Southern District of California.
Board member John Moores has been named Peregrine's new chairman.
Last week, the company was preparing to release its fiscal fourth-quarter and year-end results when it announced that the information would be delayed pending the completion of the audit by KPMG.
In its statement, the company said it is not known how long the audit and investigation into its finances will take.
Peregrine, founded in 1981, makes and sells infrastructure management software, including infrastructure resource planning and supply chain management products.

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