Surviving a Corporate Death

It was a relief, he says, to see that in addition to appointing Nelson acting CEO, the board had installed John Moores as chairman and Fred Gerson as CFO. Moores, the billionaire owner of the San Diego Padres baseball team, was an early investor in Peregrine and had previously served as the company's chairman. Gerson is the finance chief of the Padres. Better still, Aboudara says, while the letter acknowledged the current situation to be "difficult," it also placed huge emphasis on customers. As Aboudara remembers it, the letter implored employees to focus first on customers' needs, including answering whatever questions they might have. "The gist of it was that without them, there was no point to getting through any of this," Aboudara recalls. "At that point, my feeling was, 'Okay, we have a plan, we have in place some seasoned people who know our business to help get us through this. Now let's get on with it.' "

This much is certainly true: As at many high-flying public companies in the 1990s, executives at Peregrine lived large while the going was good.

Barely past 7:30 a.m., Aboudara settled down to his desk, a list of customers in his hand, and picked up his phone. Throughout the rest of the day, Aboudara and hundreds of other salespeople like him in San Diego and at field offices all over the world worked their way down such lists, paying particular attention to "open accounts"--customers contemplating new deals with Peregrine.

The effort clearly paid off. When Cahill stood to speak at the Employee Kickoff the following day, he concluded his explanation of the "bad news" with the upbeat disclosure that, even on Black Monday, Peregrine had actually signed a new contract with the Canadian government potentially worth millions in annual fees. "The size of the deal didn't matter," says one staffer who was there. Says another: "It gave a lot of people confidence that we were not that far off track."

Peregrine's employees may have focused on the job at hand, but many were wrestling with understandable feelings of anger. "That morning sparked long-term uncertainty for every aspect of our jobs," says Nancy Pratt. "I was extremely dismayed at hearing the news, and felt betrayed." Pratt, a cheerful 39-year-old blonde, had more reasons than most to feel that way. A supervisor in Peregrine's accounts-payable division, she worked in the same department as former CFO Gless and his deputy, Peregrine's former assistant treasurer, Ilse Cappel. (Cappel has since pleaded guilty to bank fraud for improperly selling accounts receivable, a tactic used to make outstanding revenues appear stronger than they actually were.) Pratt had been drawn to Cappel and had once asked her for a job in Peregrine's finance department. "I really, really respected her. Who would've thought?"

In retrospect, Pratt says, there was at least one sign that Peregrine was about to implode. Less than a week before Gless resigned, Pratt had spoken to the CFO about her desire to continue to advance at the company. "I [told Matt] that I really liked working here and that I believed in the company. His reaction at the time seemed odd. He just stared blankly at me and said, 'Work hard.' "

Several current and former employees of Peregrine express even stronger feelings of resentment and anger toward management. An engineer who lost his job during one of Peregrine's many rounds of layoffs attributes the company's demise to "the hubris and 'frat boy' party atmosphere" that he claims characterized the executive suite.

"Management's catchphrase was 'perception is reality' as in, if a product or acquisition is perceived to work by Wall Street, that's good enough," says Michael Slavitch, another former employee. "Management had it all! They had the best products and had bought all the companies that they needed to be the 500-pound gorilla in IT asset management. But they dropped the ball." Slavitch, 37, helped found a Canadian company called Loran Technologies that was acquired by Peregine in 2000. He was laid off in the summer of 2002.

Others, in interviews and in lawsuits filed against the company, rage over the fact that several former company officers, chief among them former chairman Moores, earned hundreds of millions of dollars by selling their Peregrine shares before the company's problems came to light. One investor lawsuit, spearheaded by San Diego lawyer Michael Aguirre, who has had business dealings with Moores, includes SEC records of some 100 stock sales by Moores alone between Peregrine's 1997 IPO and March 2001. From these sales, the suit alleges, Moores is believed to have garnered more than $611 million. (Moores was ultimately forced to resign his post as interim chairman as part of the reorganization plan approved by the bankruptcy court.)