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— In this case, the board had been warned of the operational and accounting problems. Board members "had information that the rest of the market didn't have. It was classic insider trading -- no ifs, ands, or buts about it," she says.

Daniel Rubenstein is a deputy assistant director of enforcement for the Securities and Exchange Commission in Washington, D.C. Asked how the Peregrine board could claim ignorance when Gardner repeatedly briefed it on the company's questionable accounting and bad results, he responds, "I understand your question. All I feel comfortable in saying is that the investigation is ongoing."

"It looks like more is to come," says Solomon B. Cera, a San Francisco attorney who is overseeing the consolidated suit against directors in federal court. He has access to records Peregrine gave the government. "The board members were complicit, with knowledge of the accounting shenanigans. It's very clear they were trading on material, nonpublic information. If you know the revenue numbers are being artificially goosed, you cannot benefit by selling at a higher stock price that is caused by the fraud. And the defense of 'I was just an outside director' is extremely feeble." Peregrine's lawyer was telling board members they shouldn't be selling.

Besides, Moores was hardly an outside director, says Cera. He had his office at Peregrine headquarters and participated in day-to-day activities. The company identified him as a member of the "Senior Management Team." He was a de facto officer. He controlled the company, says Cera.

Both Cera and Friese say the Delaware ruling should help the plaintiffs in superior court.

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