Peregrine Systems faked $250M in revenue — and lost $4B in shareholder equity

Peregrine Systems was founded in 1981 and grew into a $4 billion enterprise software company, selling IT asset management and service management software to large organizations. In 2003, the SEC charged the company with 'massive financial fraud' for inflating revenue. Arthur Andersen, its auditor, was sued for $1 billion for allegedly allowing audits that overstated revenues by as much as $250 million for fiscal years 2000–2002.

The fraud was orchestrated by top executives including CEO Stephen Gardner, CFO Matthew Gless, and EVP of Worldwide Sales Douglas Powanda. A federal grand jury indicted eight former executives, one outside auditor, and two business partners for conspiracy to commit multibillion-dollar securities fraud. The company filed for bankruptcy. More than $4 billion in shareholder equity was wiped out.

The sentences were severe: CEO Stephen Gardner got 97 months (he suffered a fatal heart attack in custody), sales chief Douglas Powanda got 78 months, and CFO Matthew Gless got 63 months. The Peregrine case became a textbook example of how top-to-bottom executive fraud can destroy a company and its shareholders in the enterprise software industry.