Peregrine Systems, the San Diego software firm that melted down after revelations of accounting fraud in 2002, is still making news but not the positive type.
Peregrine, which filed bankruptcy in 2002 and emerged the following year, was sold last year to Hewlett Packard Cos. for $425 million in cash.
Earlier this month, Douglas Stephen Powanda, its former vice president of worldwide sales, pleaded guilty to conspiracy to commit securities fraud. Powanda, 50, and now living in Texas, has a significant link to disgraced former U.S. Rep. Randy Cunningham, who pleaded guilty to accepting more than $2.4 million in bribes in March. Cunningham is now serving an eight-year prison sentence.
After Cunningham, one of the most powerful members of Congress, sold his Del Mar house, he moved up in a big way in December 2003, buying Powanda’s former house in Rancho Santa Fe.
The house was described as a mansion, and possessed 7,628 square foot of space, plus many amenities.
Cunningham paid $2.55 million in cash for the estate, presumably most of the funds coming from the sale of his Del Mar house to defense contractor Mitchell J. Wade.
That sale, for $1.7 million in 2003, was well beyond the market price for similar homes in the area.
Eleven months later, Wade sold the Del Mar house for about $700,000 less than he paid for it. The transaction triggered an investigation that brought down Cunningham, a former Navy aviator and one of the most powerful members of Congress.
According to the 2004 Peregrine indictment, Powanda began serving in the office of the chairman of the board in July 2001. He reported to Chairman and CEO Stephen Gardner.
By the time he left the company in May 2002, Powanda had been paid $2 million in salary, bonuses and commissions, and he had exercised stock options worth about $30 million
In other Peregrine legal news, a federal court indicted yet another former executive, Richard T. Nelson, the company’s general counsel, on July 19.
Nelson, who pleaded not guilty the next day in federal court, is charged with helping to fraudulently manipulate Peregrine’s finances as part of an elaborate scheme to inflate its revenues and thus prop its stock price.
Prosecutors said while he was at Peregrine and engaged in the fraudulent activity, Nelson, 46, exercised and sold shares worth $8.4 million.
Nelson joins eight other former Peregrine officers who were indicted in October 2004 for a range of felonies, including conspiracy to commit securities fraud, securities fraud, wire fraud affecting a financial institution, bank fraud, and keeping false books and records.
The defendants are former chief executive Stephen Parker Gardner, former executive vice president for worldwide sales Vincent Cahill, former president and chief operating officer Gary Lee Lenz, former senior vice president of alliances Joseph Reichner, former vice president of finance and chief accountant Berdj Rassam, former revenue manager Patrick Towle and former Arthur Andersen audit partner Daniel Stulac.
A criminal trial is scheduled for April 2007.
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Petco goes private again with same owners:
The proposed buyers of Petco Animal Supplies Inc., Leonard Green & Partners LP and Texas Pacific Group, are the same two equity investment groups that first purchased Petco in October 2000 and then sold about a fifth of their holdings in an initial public offering in February 2002.
The sale price of $29 per share translated to an aggregate price of $1.68 billion, but combined with about $120 million in outstanding debt, the total price was more than $1.8 billion, making it the largest public acquisition of a local firm this year.
The $29 price was 45 percent above the July 13 market price, the day before the sale was announced.
James Meyers, Petco CEO, said the sale would provide a nice premium to stockholders, and give the company more flexibility to accomplish its long-term plans. The transaction is expected to close in the fourth quarter.
Petco, with some 800 stores in 49 states, is the second largest seller of pet supplies behind PetSmart Inc., based in Phoenix with about 850 stores.
Traded on Nasdaq under PETC, shares closed July 24 at $28.11, and have ranged from $18 to $28.65 over the past 52 weeks.
Several days after the deal was announced, the Securities and Exchange Commission obtained a temporary restraining order from a federal court in San Diego to stop the sale of about 1,400 Petco stock options.
According to the SEC, some “unknown purchasers” used inside information about the impending sale to acquire the options in June and July, conducting the purchases through financial brokerages in Switzerland and England. The total illicit profits earned through the option purchases and stock sales was $862,000, the SEC states in its complaint.
The purchasers, who were not identified in the complaint, obtained the options contracts in transactions conducted on the Chicago Board Options Board. According to the complaint, the options were all “out of the money,” meaning the strike price was well above the market price at the time they were purchased.
The complaint states that although it is not known whether the options have been sold, they could be at any time, and the profits earned on the sales, could be transferred overseas at any time.
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Advanced Marketing Services launches new unit:
Advanced Marketing Services Inc., the book distributor to club warehouse chains, launched a new division, Bluefin Global Logistics, which provides supply chain expertise to third-party clients in the retail and publishing markets.
AMS is hoping to leverage its 20-year track record in the distribution business, offering services ranging from warehousing, order fulfillment, transportation, returns management, and light assembly.
Traded on the Pink Sheets under MKTS.PK, shares closed at $3.90 on July 24, and have ranged from $3.37 to $5.65 over the past 52 weeks.
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Cohu net earnings decline, but sales rise:
Cohu Inc. reported net income for the second quarter of $4.7 million, compared to $5.6 million for the like period of 2005. For the first six months, Cohu, a maker of semiconductor test handling equipment, reported net income of $8.1 million, compared to $12.1 million for the like period of 2005.
Revenues for the second quarter were $61.9 million, up from $49.7 million in the same period of 2005. Revenues for the six months were $118.7 million, up from $92.1 million in revenues for the same period of 2005.
Cohu said it expects third-quarter sales to come between $55 million and $60 million. The company’s board declared a dividend of 6 cents per share payable on Nov. 3.
Traded under COHU, shares closed at $15.59 on July 24, and have ranged from $15.48 to $29.48 over the past 52 weeks.
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Cubic systems receive Spawar acceptance:
Cubic Defense Applications, a unit of Cubic Corp., said the Navy’s Space and Naval Warfare Systems Command has given final acceptance to the first production unit of a custom designed internal communications systems as part of a contract it had with Spawar in 2003.
According to Cubic, Spawar has already awarded $67.5 million on the contract that has a potential value of $94 million. So far, Cubic has delivered seven of what could be 18 communications systems to Spawar.
The new systems transmit signal imagery intelligence data between reconnaissance aircraft sensors and surface ship processing systems.
Cubic stock, traded under CUB on the American Stock Exchange, closed at $19.67 on July 24, and has ranged from $15.50 to $24.44 over the past 52 weeks.
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Fair Isaac cuts affect San Diego office:
Fair Isaac Corp., the makers of credit scoring software and based in Minneapolis, said last month it would undertake a corporate restructuring that would eliminate 200 positions.
About 30 of those jobs were in its San Diego office, said spokesman Brian Kane. The firm’s local unit has about 400 employees.
In 2002, Fair Isaac acquired HNC Software, a maker of fraud detection software.
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Ticker takes:
Kintera Inc. signed new contracts valued at $10 million during the second quarter American Technology Corp. said it received the largest order for its long-range audio defense systems valued at $700,000
Send any news of San Diego-based public companies to Mike Allen via e-mail at
mallen@sdbj.com
. He can be reached at (858) 277-6359.
