Stephen Gardner, the former CEO of Peregrine Systems Inc., was sentenced to 97 months in prison Dec. 11 based on his guilty pleas last year to three felony counts relating to one of the largest and most spectacular accounting scandals in local history, according to U.S. Attorney Karen Hewitt.
Gardner, 55, pleaded guilty to conspiracy, securities fraud and obstruction of justice in March 2007. He testified during a trial last year of four defendants in a case that dates to 2004 following the collapse of the local enterprise software firm that was founded by Padres majority owner John Moores.
Once a high-flying success story, Peregrine Systems, which once had about 4,000 employees and annual sales of about $500 million, revealed in May 2002 it found some accounting irregularities. That finding prompted an internal investigation, which was followed by probes by the Securities and Exchange Commission and the Department of Justice into the firm’s books.
Peregrine said in 2002 that it had overstated its revenues by $509 million, and understated its losses by $2.6 billion over a 33-month period beginning in April 1999.
According to federal indictments filed in 2004, Peregrine executives and several outside accountants and partners conspired to inflate the firm’s sales numbers from 1997 to 2002 to ensure the figures met or exceeded Wall Street analysts’ expectations so that the company’s stock price would continue rising.
Because of their actions, the executives and their partners caused the loss of an estimated $4 billion in shareholder value in Peregrine, which filed for Chapter 11 bankruptcy protection in 2002, federal prosecutors said.
Gardner was among the last defendants in the case who pleaded guilty, after about a dozen other defendants in the case pleaded guilty to a variety of fraud charges.
In addition to the prison time, U.S. District Court Judge Thomas J. Whelan ordered Gardner to serve a three-year term of supervised release. He was also ordered to forfeit nearly $1 million from the sale of a parcel of real estate, an undetermined amount on the sale of three other parcels of real estate in Maine, and about $385,000 in his brokerage accounts, prosecutors said.
Hewitt called Gardner’s sentencing an important milestone demonstrating her office’s commitment to combating corporate fraud in San Diego.
, Mike Allen
