- The Washington Times - Monday, September 23, 2002

SAN DIEGO (AP) Software maker Peregrine Systems Inc. filed for Chapter 11 bankruptcy yesterday and said it planned to bring a $250 million lawsuit against its former auditor, Arthur Andersen LLP, blaming it for Peregrine's dire financial condition.
San Diego-based Peregrine listed assets of $1.7 billion and more than $607 million in liabilities in its filing in U.S. Bankruptcy Court in Delaware. The Chapter 11 petition is the latest move in a downward spiral that began in May with the disclosure of irregularities in financial statements audited by Andersen.
An internal investigation found that the company had inflated its revenue 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 a host of shareholder lawsuits followed the disclosures. Peregrine's stock, which trades for pennies, was removed last month from the Nasdaq Stock Market.
Peregrine said it planned to file suit today against Andersen and audit partner Daniel Stulac in San Diego Superior Court for "negligence, fraud, and breach of audit and accounting duties," a company news release stated.
"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 SEC of suspected financial fraud at the company.
Mr. Greenfield said no additional layoffs were planned. The company slashed half its work force, or 1,400 jobs, and closed some offices in June. He said daily operations would continue as usual.
Also yesterday, the business-software maker announced it was selling its Remedy unit for $350 million to Houston-based BMC Software Inc. In exchange, BMC has committed up to $110 million in financing to help Peregrine pay off loans and meet its daily needs for the next few months.
Peregrine paid $275 million and 27.9 million shares of its stock last year to take over Mountain View, Calif.-based Remedy, one of its main software rivals.
Mr. 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."

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