Norcross based Peregrine sued over renegotiated service pact

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Posted 12:29PM on Friday, May 10, 2002

NORCROSS, Ga. - Peregrine Systems Inc. has been hit with a shareholder lawsuit alleging mismanagement of its eXchangeBridge Inc. unit. Success Systems, a minority shareholder in eXchangeBridge, alleges in a lawsuit Friday that acting Chief Executive Richard Nelson, as a director at eXchangeBridge, renegotiated the company's largest service agreement for a large upfront license fee at a huge loss. The purpose was to artificially boost quarterly revenue for the company and San Diego-based software maker Peregrine, according to the lawsuit filed in state court in Decatur, Ga. Peregrine officials weren't immediately available for comment. The complaint alleges that Nelson renegotiated the agreement against the wishes of two other members of the board and arranged for Peregrine to fire one of them, the representative from Success Systems, on the day of signing the new deal. After eXchangeBridge's chief financial officer opposed the recognition of the entire payment in the June 2001 quarter, she was terminated as well, the suit alleges. On Monday, Peregrine launched an internal investigation into possible accounting problems and announced the resignation of its chairman and chief executive and chief financial officer. Peregrine's board authorized an audit committee investigation into possible inaccuracies brought to its attention by KPMG, the company's independent auditors. KPMG was hired by Peregrine in April to replace Arthur Andersen LLP for the audit of the company's recently completed fiscal year. Based on the preliminary information reviewed to date, certain transactions involving revenue recognition irregularities, totaling up to $100 million, were called into question and possibly were recorded during periods in fiscal 2001 and 2002. These transactions were recorded initially as revenue from Peregrine's indirect channels and may have been written off in later quarters, the company said at the time.