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Sunday, May 5, 2002 was supposed to be a day off for Andy Cahill.

It had been a difficult few months for Cahill and his sales staff at Peregrine Systems. The technology bust was weighing heavily on the company, which makes "back office" software for corporations. Even so, Peregrine's salespeople appeared to have met their quota for the fiscal year. Just two days later, Cahill and other company executives were scheduled to hold the annual Employee Kickoff, a pep rally at a hotel near Peregrine's San Diego headquarters, where roughly half of the company's 3,000 staffers would gather to be congratulated and pumped up for the new fiscal year.

Now Cahill was getting ready to go to the local ice rink, where he planned to host 30 kids at a skating party for his daughter's eighth birthday. But as he was leaving his house, the telephone rang. The caller was Rick Nelson, a colleague. It wasn't unusual for Cahill to take work-related calls at home, but on this Sunday, Nelson had devastating news:ÊThe following morning, Peregrine would announce the resignations of its chief executive, Stephen Gardner, and its chief financial officer, Matthew Gless. The board of directors was launching an internal investigation into the alleged falsification of $100 million in revenues. But Nelson wasn't calling just to pass along the news. As of that day, he was Peregrine's acting CEO, and he had rung Cahill with the urgency of a general under siege, screaming for reinforcements. "I felt disbelief," Cahill, 46, recalls now. "Disbelief about the condition of the company, but also concern about the people who work here and concern about our customers."

As would soon become clear, the condition of the company was far worse than anyone imagined. The news sent investors fleeing; by August, Peregrine's stock had been delisted from the Nasdaq stock exchange. By September, despite radical cost-cutting measures, the company filed for Chapter 11 bankruptcy protection. When all the forensic accounting was complete--more than a year later--a half-billion dollars of Peregrine's revenues had evaporated, nearly $260 million of it ex-posed as an outright sham. Earnings dating back to April 1999 had to be restated. Three former Peregrine executives, including former CFO Gless, would ultimately plead guilty to various counts of criminal fraud.

"If the CEO and CFO were gone, they were gone. I knew that I couldn't dwell on why. I had to act fast to keep the company going."

In many ways, then, Peregrine looked like just one more dead body to be tossed into the technology charnel house--just another instance of the arrogance, greed, and corporate malfeasance that came to characterize the 1990's boom economy. But Peregrine survives. On August 7, 2003, the company emerged intact from bankruptcy. True, it's just one-quarter its former size, as measured by both head count and annual revenues. And the turmoil and pressure clearly aren't over. Suits against the company's former officers and directors--those who reaped the biggest financial rewards--are still proceeding. And while the SEC's claims against the company have been settled, the U.S. attorney for the Southern District of California continues to investigate the company, including its former officers, now with the cooperation of some who have pleaded guilty, including Gless. But in the assessment of some insiders and customers alike, Peregrine has emerged from its near-death ordeal a revived and refocused company--and with an even larger customer base than before its downfall.