Settling Up on a Half-Billion-Dollar Fraud

A former managing director of KPMG Consulting LLC settled accusations by securities fraud investigators that he aided and abetted a scheme to receive investors in a corporate accounting fraud.

Larry A. Rodda agreed to pay an $80,000 penalty to settle Securities and Exchange Commission charges that furthered the financial fraud orchestrated by senior executives at Peregrine Systems Inc., a San Diego software company that has since been acquired by Hewlett-Packard Co.

Rodda, who did not admit or deny the commission charges, allegedly worked with eight Peregrine executives to fraudulently inflate the company's revenues for two fiscal years, starting in 2000. The federal complaint, filed in 2004, said he signed four sham software license agreements that allowed Peregrine to improperly record approximately $22 million in revenue.

In February 2003, Peregrine restated its financial results for 11 quarters, reducing its previously reported $1.34 billion revenue by more than $507 million.

The licensing agreements Rodda signed made it appear that Peregrine had sold software to customers through KPMG Consulting, Rodda's employer, when that was not the arrangement, the S.E.C. said. The commission also said Rodda signed a false audit confirmation to conceal the actual situation from Peregrine's auditors at Arthur Andersen.

Rodda pleaded guilty in November 2004 to criminal charges. Last month he was sentenced to six months in the custody of the Bureau of Prisons, six months of home detention and two years of supervised release. He was also ordered to pay $100 in a mandatory special assessment.

Twelve others, including Peregrine's chief executive Stephen P. Gardner, have pleaded guilty in the criminal case, which is ongoing. While the executives were falsely inflating rising sales at Peregrine — which was not meeting revenue forecasts — some were, at the same time, selling the software company's stock and reaping millions in gains.

by Elizabeth Olson

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