Comments by Bob Grimes
May 8, 2007 – 8:30 a.m. to 3:15 p.m.
WITNESS DENISE MASTRO
Denise Mastro was the revenue account manager at Peregrine until she was replaced by Patrick Towle. Her second job title at Peregrine was Assistant Controller. Mastro testified on direct examination that while she was the Assistant Controller at Peregrine, she assisted in preparing financial information about Peregrine. Mastro testified that she helped prepare the April 2001 Peregrine Financial Statement in which approximately $30 million worth of accounts receivable were characterized as a non-cash charge. This caused Peregrine’s Earnings Per Share (EPS) number to be significantly higher than it would have been if the accounts receivable were properly booked as a general expense.
Ms. Mastro testified that BJ Rassam and Matt Gless discussed this financial statement with her, and that Gless and BJ told her that Dan Stulac had indicated to them, that he would accept a write-off of account receivables that was under 5% to be an immaterial amount of account receivable.
Denise Mastro testified that she had conversations with Patrick Towle that illustrated that Mr. Towle had knowledge that certain accounts receivables on the Peregrine books were not collectible.
Attorney Attanasio used Denise Mastro’s testimony to portray his client, Daniel Stulac, as a person who delegates a great deal of his job responsibilities to others and who is known to be unconcerned with details.
May 9, 2007 – 9:00 a.m. to 3:15 p.m.
Attorney Gene Iredale asked Denise Mastro questions regarding accounting procedures. He also asked questions regarding court exhibits, which illustrate the financial details of deals between Peregrine and other companies, including Harbinger, KPMG, and Barnhill. At the time of recess today, Iredale informed the court that he estimates that he has approximately 15 minutes of additional questions for Witness Denise Mastro, but he noted that he was not under oath. Most lawyers underestimate the time that it will take them to question a witness, or to do just about anything else in court.
Judge Whelan informed the jury that he has to be in another court in another district this Friday, on an unrelated matter, so there will be no court session on Peregrine this Friday, May 11, 2007.
There is continued speculation as to when Steve Gardner or Matt Gless might testify, but the Government has not yet provided details.
May 10, 2007 – 8:30 a.m. to 1:00 p.m.
WITNESS DENISE MASTRO (continued)
On re-direct, Witness Denise Mastro testified about the time period when she worked at Arthur Andersen, before working at Peregrine. During this time at Arthur Andersen, she said that Daniel Stulac told her that she should look at the date on the signature line of a contract “and nothing more” when trying to determine the date of the contract’s execution. Mastro also testified that during that time period at Arthur Andersen, Mr. Stulac did not seem concerned if other companies that he was auditing had “cushion” on their books. On recross-examination, attorney for Daniel Stulac, Mike Attanasio, brought out the fact that this conversation would have occurred nine to ten years ago, and that Ms. Mastro did not know anything about the details surrounding the “cushion” that was being discussed.
Attorney for Patrick Towle, Kate Leff, elicited through Mastro’s testimony, that the signature line date in a contract is customarily considered to be one factor in determining if the revenue in the contract should be recognized.
WITNESS ROGER LAZARUS
Mr. Lazarus is an accountant who specializes in due diligence. His clients are companies who hire him to evaluate the financial health of another company prior to acquiring it. Roger Lazarus was hired by BMC to evaluate Peregrine because BMC was considering acquiring Peregrine.
Roger Lazarus testified that after reviewing Peregrine documents, he remembers meeting with four people including himself: Daniel Stulac (who he referred to as the engagement partner of AA), the managing partner of AA San Diego (he could not recall this person’s name) and Mr. Frick (part of Mr. Lazarus’s team). Mr. Lazarus remembers that when he asked Daniel Stulac specific questions, Stulac did not give him specific answers. Lazarus characterized Dan Stulac as seeming nervous.
On cross-examination, Attorney Attanasio pointed out that there were seven people at the meeting. This did not refresh the witness’s recollection. Attanasio noted that the AA managing SD partner was not there, but the AA engagement partner at the time, Mr. Baldwin, was present. Mr. Lazarus mistakenly believed that Daniel Stulac was the AA engagement partner at Peregrine at the time.
On re-direct AUSA Beste brought out the fact that Daniel Stulac did most of the talking at the meeting, even though Mr. Baldwin had been the engagment partner for nine months prior to the meeting.
WITNESS ERWIN JALBUNEA
This witness is a financial expert for the FBI. AUSA Beste illustrated through Mr. Jalbunea’s testimony that there were documents in the financial records kept at Peregrine (and available to outside auditors) that showed a different date in the fax header than was shown on the signature line of the contract.