continued The case makes clear that boardmembers, who are major defendants, knew of or acquiesced in the pervasive fraud. Moores "installed key operating and executive personnel within the company," says the suit. "Moores was hands-on managing the company" through surrogates, says one former employee. Boardmembers massively unloaded their stock as it soared as a result of the fraud. Moores, who was chairman of the board for much of the time, unloaded $400 million during the fraud period (more than $600 million in all).
Two members of the audit committee -- which should have discovered the fraud -- worked for Moores's JMI Equity. One of them was regularly briefed on company affairs by the company's former chief financial officer, who has pleaded guilty to criminal charges. After the fraud was initially discovered, Peregrine claimed that there were no formal minutes of audit-committee meetings. The corporate secretary refused to allow the accounting firm to look at manually prepared notes of the committee.
As the 168-page suit points out in detail, both boardmembers and top executives had close ties to Moores beyond Peregrine. Moores's JMI operations had offices at Peregrine. A former employee said, "It was routine at the end of a quarter to see John Moores, who had an office next door to our offices, roam the halls of our building.... Moores and the others wanted to know how the quarter ended."
When the company went public, Moores and close colleagues controlled a huge percentage of the stock. Even as Moores dumped it, he continued to be the largest shareholder and one of the insiders in control. Peregrine and its board were "controlled and dominated" by Moores, according to the suit.
It is essential to get Moores established as a control person, or one who has a control relationship with the company, says San Diego lawyer Jeffrey Krinsk. Aguirre says that conservative judges are thwarting cases against extremely rich defendants in such cases, but he thinks the evidence is overwhelming that Moores was a control person.