Lawsuit Alleges Malpractice, Fraud, and Breach of Contract Resulted in Injury
        And Significant Losses to Peregrine in Excess of $250 Million

    SAN DIEGO, Sept. 23 /PRNewswire-FirstCall/ -- Alleging a conspiracy of
negligence, fraud, concealment, and breach of audit and accounting duties,
Peregrine Systems, Inc. (OTC: PRGN.PK) today announced that it has filed suit
against Arthur Andersen, LLP ("Andersen"), Arthur Andersen Germany, Andersen
Worldwide S.C., (collectively referred to as "Andersen Worldwide") and Daniel
Stulac ("Stulac"), the audit partner in charge of Peregrine's account, plus
other defendants to be named later. Peregrine intends to show how these
actions have resulted in injury and significant losses to Peregrine in excess
of $250 million, subject to proof at trial.
    The lawsuit, which was filed today in the Superior Court for the State of
California in San Diego, claims that "as a result of negligence, fraud and the
breach of audit and accounting duties and responsibilities by Andersen,
Andersen Worldwide and Stulac, two years of Peregrine's previously audited
statements (for the 2000 and 2001 fiscal years) have been withdrawn and
Peregrine is in the process of re-auditing those years of operations.  The
Defendants' conduct has also resulted in a delay in completing Peregrine's
audit of the last (2001) fiscal year, which new independent auditors are in
the process of completing. The negative impact of these events, caused by the
conduct of Andersen, Andersen Worldwide and Stulac, has been significant."

    What Andersen Promised
    Peregrine and Andersen entered into an audit and accounting relationship
in July of 1996, approximately eight months before Peregrine became a public
company in April of 1997.  In Andersen's February 1996 marketing proposal to
Peregrine, Andersen represented that it would perform its audit services with
diligence and care, emphasizing, "We audit the business, not just the
financial statements."  (emphasis added).  In that same proposal, Andersen
asserted:
         "Our inquiries of your business operations and controls will extend
          beyond the accounting and finance functions and include sales and
          marketing, customer service, software development, administration
          and organization and information systems. Accordingly, we anticipate
          maintaining a continuous dialog with Peregrine throughout the year,
          not just at audit time. In short, we want to be a partner of
          Peregrine throughout the year so that the year-end audit is a
          non-event, with no last minute "surprises" or unanticipated
          accounting adjustments." (emphasis added).

    The lawsuit says that, "Andersen, Andersen Worldwide and Stulac asserted
that they understood the nature and complexity of Peregrine's business and the
auditing and accounting issues that relate to the software industry.
Specifically, they represented that they understood that the audit issues
surrounding Peregrine were complex and intricate and required careful auditing
and the installation of appropriate checks and balances into the audit process
in accordance with the normal custom and standard in the software industry."

    The lawsuit states that, "Andersen also boasted about and promoted
Andersen Worldwide as an intricate part of the services being offered
Peregrine:
          With a combined total of over 70,000 professionals operating in 360
          locations in 75 countries, Andersen Worldwide is the world's largest
          professional services organization. You will have working for you a
          strong, dynamic practice that has grown by quality service and
          client satisfaction ... .  The San Diego practice consists of
          approximately 70 professionals and operates as part of our Southern
          California practice.  As such, it has access to the services
          provided by the entire group as well as the worldwide organization."

    It was on the basis of these representations that Peregrine engaged
Andersen in July of 1996 to provide auditing and accounting services.
    The lawsuit notes that, "Defendants also acknowledged that they had a duty
under applicable law, regulations and accounting rules to examine the books
and records of Peregrine in order to discover any unusual or irregular
financial activity and to disclose this activity promptly to Peregrine's Audit
Committee, as well as to Peregrine's Board of Directors, as appropriate."

     The lawsuit states that, "Indeed, in their September 21, 2000 audit
engagement letter to the Audit Committee they acknowledged their obligation to
bring to the attention of Peregrine's Audit Committee any misstatements,
fraudulent or illegal acts of which they became aware, including immaterial
misstatements, asserting:
         " ... an audit is not designed to detect error or fraud that is
           immaterial to the financial statements. However, we will bring to
           your attention immaterial misstatements and any fraudulent or
           illegal acts of which we become aware during our audit." (emphasis
           added).

    The lawsuit continues, "Furthermore, representatives of Andersen,
including Stulac, acknowledged that they were responsible for ensuring that
Peregrine's Audit Committee was aware of any deficiencies relating to internal
controls and to meet with the Audit Committee with respect to these and other
important issues, and they regularly attended Peregrine's Board of Director
and Audit Committee meetings over the years.  Similarly, Andersen Worldwide
had regular and substantial contact with representatives of Peregrine.
Accordingly, Defendants had numerous opportunities to advise the Board of
Directors as well as the Audit Committee about the accounting irregularities
(that were subsequently discovered following the Defendants' dismissal by
Peregrine).

         In fact, in their opinion letter filed on March 31, 2001, Andersen
         wrote:
           "In our opinion, the consolidated financial statements referred to
            above present fairly, in all material respects, the consolidated
            financial position of Peregrine Systems, Inc. and subsidiaries as
            of March 31, 2001 and 2000, and the results of their operations
            and their cash flows for each of the three years in the period
            ended March 31, 2001, in conformity with accounting principles
            generally accepted in the United States."

    What Andersen Delivered
    In this lawsuit, Peregrine alleges that the Defendants failed to meet any
of their professional, legal and contractual commitments and obligations, and,
in fact, conspired among themselves to conceal material, accounting
irregularities from the Board of Directors and the Audit Committee.
    The lawsuit asserts that, "during the Andersen/Peregrine audit
relationship, Andersen, Andersen Worldwide and Stulac not only failed to
implement procedures, protocols and evaluative mechanisms designed to protect
Peregrine from inaccurate, irregular and/or unlawful accounting practices and
entries, but they, in fact, promoted, crafted and encouraged Peregrine and its
management to engage in accounting practices which the Defendants knew to be
irregular and improper."  In particular, Andersen and Stulac:
                  a. Failed to identify and/or failed to alert the Audit
                     Committee to various accounting irregularities;
                  b. Permitted, encouraged and consented to various
                     accounting practices that they knew to be irregular;
                  c. Crafted defective policies on behalf of Peregrine
                     relating to stock options and the "sale' of receivables
                     to financial institutions; and
                  d. Permitted, encouraged and consented to Peregrine and its
                     management to make accounting adjustments that Andersen
                     and Stulac knew were improper, and which were
                     inadequately disclosed in Peregrine's audited statements,
                     all in violation of GAAP, SOP 97-2, GAAS and various
                     other accounting rules and regulations.

    As a result, the lawsuit alleges that, "Andersen, Andersen Worldwide and
Stulac failed to audit properly the books and records of Peregrine and failed
to report to Peregrine's Audit Committee or the Board of Directors numerous
accounting inaccuracies and irregularities, which were implemented and
perpetuated due to the accountancy malpractice of the Defendants."
    The lawsuit alleges that, "During the course of their malpractice,
Andersen, Andersen Worldwide, and Stulac allowed numerous financial statements
to be filed with the SEC (including 10-K's and 10-Q's) and then to be
distributed to investors in the public capital markets, although Andersen,
Andersen Worldwide, and Stulac knew that such financial statements were
misleading in that the statements included, among other things, (a) overstated
accounts receivable, (b) overstated revenues, (c) improperly valued stock
options, (d) understated liabilities, and (e) improperly disclosed or failed
to disclose the write-offs of bad receivables.  Defendants failed to identify
and to report Peregrine's improper treatment of underlying transactions in
accordance with their true nature and failed to identify and to report
Peregrine's deficiencies with respect to its financial statement disclosures."
    The lawsuit claims that, "Because of Defendants' alleged malpractice,
these accounting irregularities remained unchecked for a substantial period of
time. Knowing that the Board of Directors and the Audit Committee were in the
dark about these irregularities, Defendants refused to shine the light on
their malpractice, and thereby kept Peregrine, its Board of Directors and the
Audit Committee in the dark."

    A Pattern of Fraud and Concealment
    The lawsuit alleges that, among other things, "Andersen -- a firm that has
been convicted of felony conduct on June 15, 2002 -- consistently engaged in a
wanton and reckless, and malicious, pattern of aggressively dealing with
Boards and Audit Committees to assure that its fraud is neither criticized nor
uncovered. This was all done for financial gain, and out of greed."
    According to the lawsuit, "Defendant Andersen intentionally concealed
material information from Peregrine and its Audit Committee and intentionally
misled Peregrine concerning various accounting issues in order to protect and
preserve the significant fees it was receiving from Peregrine as a result of
its auditing and consulting work.  Indeed, over the years, Andersen Defendants
received in excess of $4 million from Peregrine in connection with its
auditing, accounting and consulting work."  As stated in the lawsuit, "These
fees were particularly important to the Andersen partners in the San Diego
office, including Defendant Stulac, since their incomes were dependent on the
continued business from Peregrine."
    The lawsuit states, "Because Peregrine's Board of Directors and Audit
Committee were completely unaware of the accounting irregularities (concealed
by Andersen), the Audit Committee continued to engage Andersen as its auditor
until April of 2002. Had Peregrine known the truth about the concealed
information, it would not have continued to engage Andersen and would have
taken action to protect the value of Peregrine by replacing Andersen and
filing accurate and truthful financial statements pursuant to Federal and
State law, as well as accepted accounting regulations."
    The lawsuit asserts that, "The conduct of Andersen, Andersen Worldwide,
and Stulac in concealing these accounting irregularities from Peregrine's
Audit Committee and Board of Directors deprived Peregrine's Audit committee
and Board of Directors the opportunity to take steps -- short of a
catastrophic restatement of earnings -- to rectify the situations before the
irregularities reached the material levels uncovered to date. Indeed, by
permitting the irregularities to fester over several fiscal years, Defendants
Andersen and Stulac left Peregrine no choice but to:
                 (a) Watch as Andersen withdrew previously audited financial
                     statements for two fiscal years;
                 (b) Commence a difficult, expensive and time-consuming effort
                     to re-audit the work of Andersen, Andersen Worldwide, and
                     Stulac; and
                 (c) Issue a series of devastating public announcements
                     relating to the accounting irregularities and monumental
                     restatement of earnings."

    Negative Impact on Peregrine Resulting from the Defendants' Actions
    The lawsuit alleges that, "as a proximate and foreseeable result of the
foregoing malpractice and negligence, Peregrine has suffered the following:
                 (a) The value of its shares has fallen dramatically;
                 (b) Its stock has been delisted by NASDAQ;
                 (c) Its economic opportunities, such as an alliance, merger
                     or acquisition, have been significantly eroded;
                 (d) Its financial situation has deteriorated;
                 (e) It has been forced to reduce its work force by almost
                     one-half; and
                 (f) It has been compelled to spend enormous amounts of
                     money -- in the millions of dollars -- and precious
                     employee resources in order to conduct an internal
                     investigation, commence the re-audit of the work of
                     Andersen, Andersen Worldwide, and Stulac; and
                 (g) To address the necessary legal and regulatory issues left
                     in the wake of Defendants' conduct."

    Peregrine/Andersen Audit Relationship
    Peregrine became a public company in April 1997. From or about July of
1996 Peregrine and Andersen entered into an audit and accounting relationship
that continued until Andersen's engagement was terminated in April of 2002.
    Peregrine is represented in this matter by Charles G. LaBella of LaBella &
McNamara, 401 West A Street, Suite 2300, San Diego, California 92101
(619) 696-9200.

    About Peregrine Systems
    Founded in 1981 and headquartered in San Diego, Calif., Peregrine Systems
is the leading global provider of Infrastructure Management software.
Market-leading application suites delivered by Peregrine and Remedy(R) product
lines address diverse customer needs to better manage and extend the life of
infrastructure and manage business services. Peregrine's Service Management
and Asset Management solutions empower companies to support and manage assets
with best practice processes. Remedy's comprehensive suite of packaged
applications, including IT Service Management and Customer Support solutions,
enable customers to improve reliability and quality of service for both
internal and external service management.  Remedy's Action Request System(R)
provides a comprehensive platform to deliver business process authoring
capabilities to meet the unique requirements of organizations today and into
the future.

    Peregrine Systems, Remedy and Action Request System are registered
trademarks of Peregrine Systems, Inc. or its wholly owned subsidiaries.  All
other marks are the property of their respective owners.

    Forward-Looking Statements
    This press release may contain forward-looking statements about Peregrine
Systems' business, financial condition, operating results, or financial
projections.  These statements are based on management's beliefs and certain
assumptions, estimates, and projections.  As a result, they are subject to
numerous risks and uncertainties, including matters relating to or in
connection with the bankruptcy filing of the company and one of its
subsidiaries.  Investors should also consider the following in connection with
the statements made:

     * The audit of the company's financial statements for fiscal years 2000,
       2001 and 2002, which will include the restated financial results for
       fiscal years 2000 and 2001 and the first three quarters of fiscal 2002,
       is ongoing and not complete and the amount of the restatement, once
       completed, may change, and if the amount does change, the change may be
       material.

     * Since the announcement of the company's internal investigation and
       restatement, the company has been served with numerous shareholder
       lawsuits.  These lawsuits are ongoing and the company can provide no
       assurance when they will be completed or their impact on the company,
       its financial condition, results of operations and liquidity.

     * The company's accounting practices continue to be investigated by the
       Securities and Exchange Commission.  While Peregrine is cooperating
       with the investigation, Peregrine cannot estimate the results of the
       investigation or when the investigation will be completed.

     * The company's bankruptcy filing and uncertainties about the company's
       financial results and condition and the restatement of the company's
       financial statements could cause customers to cancel, delay, or defer
       purchases of its products. Continuing to address these internal
       accounting issues and the pending litigation will require substantial
       management time and attention, which may impair the company's
       relationships with customers, and result in substantial expense.  As a
       result, the company's financial results may be adversely affected in
       future periods.

    For more information about the risks and uncertainties facing Peregrine's
business, please refer to the matters discussed in the company's recent Form
8-K filings and the discussion under the caption "Factors that may affect our
future operating results" in the Form 10-K and Forms 10-Q filed with the
Securities & Exchange Commission."