, the software maker whose top executives resigned earlier this week amid the discovery of
accounting irregularities, is the subject of a suit that charges its new CEO with artificially boosting revenue.
In its suit filed in DeKalb County Superior Court in Decatur, Ga., Success Systems, a minority shareholder in Peregrine subsidiary eXchangeBridge, charges that acting Peregrine CEO Richard Nelson, then a Peregrine executive and director at eXchangeBridge, renegotiated the company's largest service agreement at a huge loss over the term of the three-year contract. Nelson cut the price of the license fee to get a large upfront payment in order to artificially boost quarterly revenue for eXchangeBridge and Peregrine, the suit stated.
The suit said that on June 30, 2001, Nelson renegotiated the agreement against the wishes of the two other members of the eXchangeBridge board. It charges that Nelson then arranged for Peregrine to fire one director on its board -- the representative from Success Systems -- on the day the new deal was signed. Success Systems charges eXchangeBridge's CFO also was fired after opposing the recognition of the entire payment in June 2001.
The suit reports that the size of the upfront software license payment totaled $1.6 million. In the quarter ending June 30, 2001, Peregrine reported $172 million in revenue, up sequentially by only $1 million from the previous quarter.
Peregrine officials declined to comment.
The suit filed by Success Systems follows more than a dozen class-action suits filed against San Diego-based Peregrine since it announced on Monday the discovery of as much as $100 million in accounting irregularities.
Nelson, formerly executive vice president of Peregrine, stepped in as CEO on Monday after the company said CEO and Chairman Steve Gardner and CFO Matt Glass resigned.
Peregrine, whose software helps companies manage IT resources and other assets, said its board audit committee was launching an internal investigation of potential accounting inaccuracies discovered by KPMG, the independent auditors hired to replace Arthur Andersen in early April. The company said certain transactions involving revenue recognition irregularities of up to $100 million have been called into question and may have been recorded in fiscal 2001 and fiscal 2002. The transactions were recorded as revenue from the company's indirect channels and then may have been written off in later quarters.
Shares of Peregrine rose 44 cents, or 51%, to close at $1.30 Friday. The stock has lost 91% of its value since the beginning of the year.