Matthew Gless admitted taking part in a scheme to prematurely recognize revenue in an effort to boost the company's share price and mislead investors

InformationWeek Staff, Contributor

March 4, 2003

2 Min Read

SAN DIEGO (AP) -- The former chief financial officer at Peregrine Systems Inc. pleaded guilty Wednesday to conspiracy and securities fraud after agreeing to cooperate with prosecutors who are investigating accounting irregularities at the software company.

Matthew C. Gless, Peregrine' chief financial officer from November 2000 to May 2002, admitted taking part in a scheme to prematurely recognize revenue, an effort to boost the company's share price and mislead investors.

Gless, who stood with his hands held behind his back during the 15-minute hearing, was released on $75,000 bond. He could get up to 15 years in prison at his sentencing Sept. 15.

San Diego-based Peregrine, which develops business management software, filed for bankruptcy protection last year. An internal investigation found the company had inflated its revenue by as much as $250 million from April 1999 to the end of 2001.

John C. Moores, the owner of the San Diego Padres, resigned as Peregrine chairman in February as part of the company's Chapter 11 reorganization. Three other board members, Christopher Cole, Charles E. Noell III and Thomas G. Watrous, also resigned, and the company agreed to restate finances for the last three years.

Gless is the highest-ranking official from Peregrine to plead guilty to criminal charges. Later Wednesday, the Securities and Exchange Commission filed a civil complaint that accused him of profiting from the revenue-inflation scheme by selling about $4 million worth of company stock.

The complaint said Gless recorded millions of dollars in revenue from resellers of Peregrine products even when the resellers had nonbinding or contingent agreements to pay Peregrine.

In November, Peregrine's former assistant treasurer, Ilse Cappel, admitted her role in the scheme, pleading guilty to conspiracy to commit bank fraud.

U.S. District Attorney Carol Lam declined to comment Wednesday on who else might be targeted in the investigation.

"The underpinnings of the system just fell apart," she told reporters. "These are pure and simply lies to the public about the financial health of the company."

Gless declined to comment to reporters.

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