PEREGRINE CRIMINAL TRIAL
Comments by Bob Grimes and Dana Grimes
May 4, 2009 - 10:15 a.m. to 11:00 a.m.
The last of the Peregrine criminal defendants, Jeremy Crook, was sentenced today by Judge Whelan. Crook will serve 27 months in the Bureau of Prisons for committing wire fraud in connection with Peregrine’s deal with British Telecom PLC (BT).
Crook was hired by Peregrine in November 1998 and acted as Vice President of European operations. He worked out of Peregrine’s offices in the United Kingdom. Crook admitted last January that he and co-conspirators, including Gardner, Gless, and Cahill, knew that in late 2000 Peregrine was negotiating with BT over the sale of Peregrine software for resale to end-users. By January 2001, Peregrine and BT had not reached an agreement on a binding contract for the sale of this software, but the co-conspirators wanted to include revenue from this transaction in the fiscal quarter that had ended on December 31, 2000. In order to convince BT to sign a backdated contract for this deal, Peregrine agreed to grant BT a 30-day out clause. On January 4, 2001, Crook signed the contract, backdated to December 2000, and caused it to be faxed from the UK to San Diego.
Crook’s defense attorneys Timothy Scott and Ben Coleman asked Judge Whelan to sentence Crook to three months of home detention followed by seven months of custody in the U.K. They argued that the Court should consider only the factual basis reflected in the plea agreement as opposed to the Government’s unproven allegations of Crook’s role in the scheme. Attorney Scott indicated that the Court should “take with a grain of salt what the Government says they can prove.” Attorney Scott indicated that Crook only pled guilty to backdating a contract and that, given the continuum of Peregrine defendants, what Crook pled guilty to was on the low-end of the scale of culpability.
AUSA Bill Narus and Eric Beste were present on behalf of the Government. AUSA Bill Narus pointed out that the same probation officer who recommended probation for Defendant Cahill recommended 57 months in custody for Crook. He argued that the BT deal was not an aberration for Crook, and stated that Crook was a sales executive involved in substantive fraud, more in line with Cahill, Spitzer, and Powanda than lower-level defendants such as Nelson and Lenz. He stated Crook was essentially “the European Powanda,” a characterization with which the defense took issue. AUSA Narus stated that, unlike Cahill and Rassam, Crook made over a million dollars executing stock options just weeks after the issuance of a press release that Crook knew fraudulently inflated Peregrine’s reported sales.
Judge Whelan stated that he does not see Crook in the same league with Powanda, but neither does he see him as being in line with Lenz (who essentially pled guilty to being an accessory after the fact by making false statements to the FBI). Judge Whelan gave Crook a self-surrender date of July 10, 2009 at 12:00 p.m., sentenced him to 27 months, and made the recommendation pursuant to the parties’ stipulation that he be allowed to serve his sentence in the UK. Judge Whelan tentatively ruled that Crook will be subject to a $750,000 restitution order – after hearing from Crook’s attorneys, the Court indicated this issue will be addressed further at a restitution hearing on June 8, 2009 at 9:00 a.m.
Peregrine Defendant Sentencing Summary (not including prison designations, fines or restitution):
Stephen Gardner (former Peregrine CEO) pled guilty to Conspiracy, Securities Fraud, and Obstruction of Justice. Sentence: 97 months in the custody of the Bureau of Prisons.
Douglas Powanda (former Peregrine Executive Vice President for World Wide Sales) pled guilty to one count of Conspiracy to Commit Wire Fraud and one count of Securities Fraud. Sentence: 78 months in the custody of the Bureau of Prisons.
Matthew Gless (former Peregrine CFO) pled guilty to one count of Conspiracy and one count of Securities Fraud. Sentence: 63 months in the custody of the Bureau of Prisons.
Andrew Cahill (former Peregrine Executive Vice President for World Wide Sales) pled guilty to one count of Securities Fraud. Sentence: 27 months in the custody of the Bureau of Prisons.
Jeremy Crook (former Peregrine General Manager for Europe) pled guilty to one count of Wire Fraud. Sentence: 27 months in the custody of the Bureau of Prisons.
Berdj J. Rassam (former Peregrine Controller) pled guilty to one count of Securities Fraud. Sentence: 24 months in the custody of the Bureau of Prisons.
Steven Spitzer (former head of Peregrine's Alliance Sales Program) pled guilty to one count of Securities Fraud. Sentence: 1 year and 1 day in the custody of the Bureau of Prisons.
Larry Rodda (former managing director of KPMG Consulting) pled guilty to Conspiracy to Commit Securities Fraud and Wire Fraud. Sentence: Six months in the custody of the Bureau of Prisons.
Michael Whitt (owner of Barnhill Management Group) pled guilty to Obstruction of Justice. Sentence: Six months in the custody of the Bureau of Prisons.
Richard Nelson (former Peregrine Corporate Counsel) pled guilty to one count of Bank Fraud. Sentence: Six months home detention and 200 hours of community service.
Gary Lenz (former Peregrine President & COO) pled guilty to one count of making a false statement to a federal official. Sentence: 90 days of home detention and 200 hours of community service.
John Benjamin (former Peregrine Treasurer) pled guilty to Conspiracy to Commit Wire Fraud. Sentence: Probation.
Ilse Cappel (former Peregrine Assistant Treasurer) pled guilty to Conspiracy to Commit Bank Fraud. Sentence: Probation.
Peter O'Brien (former Peregrine Director of Alliances) pled guilty to Obstruction of Justice. Sentence: Probation.
April 20, 2009
Richard Nelson was sentenced today on one count of Bank Fraud to six months home confinement, 200 hours of community service and $20,000 in fines. The Government and probation department recommended six months custody. AUSA Bill Narus spoke on behalf of the Government, and argued custody was appropriate in light of Nelson’s high level in the company. AUSA Narus stated that Nelson’s position at Peregrine made his role in the fraud more egregious, and he argued that Nelson’s sentence should not be as lenient as the sentences for Ilse Cappel and John Benjamin.
The plea agreement stated that Nelson knew he had a duty under a revolving line of credit at Fleet Bank to correct false and misleading representations that had been made to Fleet. According to the plea agreement, Nelson knew of a high probability that the financial statements provided to Fleet were false and misleading, and failed to disclose the existence of side letters.
Mr. Nelson’s attorney, Bob Brewer, spoke on behalf of his client. Brewer highlighted in oral argument and in his papers that Nelson’s participation in the offense was “primarily that of inaction as he was aware that inaccurate financial reports were being utilized to obtain, or perpetuate, the Revolver, but he did nothing about it.” Attorney Brewer stated in his sentencing memorandum that although Mr. Nelson held a position of high responsibility at Peregrine, his involvement in the offense was very minimal and that Nelson was “plainly the least culpable of those who participated in the offense.”
Attorney Brewer characterized Nelson as having led an exemplary life, and noted that he has suffered through the past seven years without employment. He has lost his law license, and will be unable to renew his inactive CPA license.
Nelson’s voice cracked with emotion when he addressed the Court. He apologized for his conduct, thanked his family and friends for their support, and promised never to re-offend.
Defendant Nelson had an inactive CPA license and an active Texas law license when he was hired as Peregrine’s General Counsel in 1995. By 1997, Nelson was named Corporate Secretary and by 2000, according to the Government’s sentencing papers, he had become the “Vice-President of Corporate Development, responsible for coordinating Peregrine’s loans to, investments in, and mergers with other companies.” Nelson eventually became Peregrine’s Acting CEO when Steve Gardner left in May 2002.
We have received a number of inquiries from readers of this blog regarding the assignment of Peregrine defendants to the Bureau of Prisons. The best way to locate any specific inmate is to go to the official BOP website at http://www.bop.gov/ and click on “Inmate Locator.”