A former assistant treasurer at Peregrine, has admitted that she and other company officials conspired to disguise the company's financial condition. Earlier this year, Peregrine filed for bankruptcy protection and filed a lawsuit against Arthur Andersen, seeking to blame Andersen for failing to detect the fraud.
According to press accounts, the former treasury official said she and others, including the chief financial officer, conspired to sell false and uncollectible receivables to Wells Fargo HSBC Trade Bank to improve the company's financial results. Among other things, the scheme involved overstating cash flow and understating receivables by creating a false $29.58 million invoice and selling it to the bank. ("Ex-Peregrine Official Pleads Guilty," Washington Post, November 22, 2002)
Federal regulators have filed a criminal suit against the former manager, and the Securities and Exchange Commission has filed a civil suit. An SEC enforcement attorney said the civil complaint is the first such action in its ongoing investigation of alleged improper accounting at Peregrine.
The SEC's complaint explains that the difficulties arose because the company recorded revenue on contingent sales and other non-binding arrangements it entered into with customers. It added that the former treasury official's role was only "one portion of a wide-ranging fraud" that resulted in a $100 million overstatement of revenue over nearly three years.