Peregrine To Sue Andersen Over BankruptcySep 22, 2002 | FT.Com
Peregrine Systems, a US business software company hit by revelations of accounting irregularities, on Sunday filed for bankruptcy protection and said it would sue its former auditor, Arthur Andersen.
The troubled company also disclosed an agreement to sell one of its software units to rival BMC for $350m, only a year after itself paying about $1bn for the business.
BMC will commit $110m of the purchase price in the form of an immediate debtor-in-possession loan so that Peregrine can finance its operations while in Chapter 11 bankruptcy protection, the companies said.
The bankruptcy filing, made in Delaware, marks the culmination of a rapid fall that began after Peregrine sacked Andersen as its auditor in April.
In August, the company revealed that its revenues had been overstated by as much as $250m during 1999, 2000 and the first three quarters of 2001.
Peregrine attributed the overstatement to the treatment of receivables that it had sold to banks under factoring arrangements to raise cash. The deals had been treated as sales, boosting the company's reported revenues, when they should have continued to be treated as receivables, the company has said.
The accounting problems had already become the focus of a probe by the Securities and Exchange Commission.
The software maker said it planned to sue Andersen, along with the partner responsible for its audit, Daniel Stulac, for more than $250m for each of four complaints. It claimed that Andersen and Mr Stulac had been "negligent, engaged in fraud and breached their audit and accounting duties and responsibilities".
BMC said the acquisition of Remedy, which makes service management software, would extend its efforts to become a broad-based maker of enterprise software.
Remedy contributed $250m of revenues at Peregrine in the 12 months to the end of June and would add to earnings per share within 12 months, it added.