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Former Peregrine CEO pleads guilty to fraud

March 14, 2007|From the Associated Press

SAN DIEGO — The former chief executive of business software firm Peregrine Systems Inc. pleaded guilty Tuesday to three criminal charges for his role in the accounting fraud scheme that bankrupted the company.

Stephen Parker Gardner appeared in federal court to change his earlier not-guilty plea on one count each of conspiracy, securities fraud and obstruction of justice.

The charges stem from a 2004 indictment naming Gardner and seven other former executives of San Diego-based Peregrine along with three other defendants.

The company began backdating contracts and improperly recognizing revenue in prior quarters as early as 1999 to keep the stock price from falling, according to court filings.

Gardner, who joined Peregrine in 1997, became CEO in 1998 and chairman in 2000. According to his plea agreement, Gardner negotiated a $150-million corporate line of credit using false and misleading financial statements and gave misleading testimony under oath to Securities and Exchange Commission investigators looking into another software firm.

Gardner also exercised stock options worth $14 million despite knowing that the stock price was inflated, according to the plea.

"You engaged in a series of deceptive practices," said U.S. District Judge Thomas Whelan as he read the charges.

Gardner replied, "Yes, your honor."

Both Gardner and his attorney, Reid Figel, declined to comment after the brief hearing.

Gardner remains free on bond. Whelan agreed to delay setting a sentencing date after a request from prosecutor Eric Beste, who said Gardner might cooperate in criminal proceedings against the other defendants. Trial is set to begin April 10 in San Diego federal court.

Peregrine filed for bankruptcy protection in 2002. An internal investigation found revenue had been inflated by as much as $250 million from April 1999 to the end of 2001.

The company emerged from bankruptcy and was bought by Hewlett-Packard Co.

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