Software Maker Peregrine Files Chapter 11 Bankruptcy

Peregrine Systems Arthur Andersen

Peregrine began a downward spiral in May with the disclosure of irregularities in financial statements audited by Andersen. An internal investigation found revenue inflated by as much as $250 million from April 1999 to the end of 2001. The company said it improperly booked the sale of accounts receivables as revenue.

A cash and credit crunch, an investigation by the Securities and Exchange Commission and shareholder lawsuits followed the disclosures. Peregrine's stock, which trades for pennies, was removed last month from the Nasdaq Stock Exchange.

The Chapter 11 petition, filed in U.S. Bankruptcy Court in Delaware, listed company assets of $1.7 billion and more than $607 million in liabilities.

Peregrine said it planned to file a lawsuit Monday against Andersen and audit partner Daniel Stulac for negligence, fraud, and breach of audit and accounting duties, according to a company news release.

"Had they acted in a prompt manner, we would not be in the dire financial straits we find ourselves in now," said Gary Greenfield, Peregrine's chief executive.

The company fired Andersen as its auditor April 2 and fired its replacement auditor, KPMG, at the end of May. KPMG then informed the Securities and Exchange Commission of possible financial fraud at the company.

The company in June slashed half its work force, or 1,400 jobs, and closed some offices. Greenfield said additional layoffs weren't planned and daily operations would continue as usual.

Also Sunday, Peregrine announced it was selling its Remedy unit for $350 million to BMC Software. In exchange, BMC has committed up to $110 million in financing to help Peregrine pay off loans and meet its daily needs.

Greenfield said the actions will allow Peregrine to move beyond its problems.

"Our destiny is in our control now," he said. "Looking ahead, we expect to emerge from Chapter 11 as a financially stable company."