Charges were dismissed against former Arthur Andersen partner Daniel F. Stulac in a legal battle lasting three-and-a-half years over the defunct Big Five firm's audits of Peregrine Systems.

A jury had deadlocked in the second trial of Stulac, 43, and former Peregrine revenue-accounting manager Patrick Towle, 39, last month after six weeks of hearings (see Peregrine Auditor's Jury Deadlocks). Last August, following a three-month trial, the original jury deadlocked with eight votes favoring acquittal on all counts. Stulac was indicted in October 2004 and faced a maximum of 30 years in prison if convicted. Charges against Towle have also been dismissed.

Peregrine, a software company, filed for bankruptcy in 2002 after announcing it was conducting an internal investigation of possible misstatements in previous financial reports, which resulted in the resignations of its CEO and CFO. They have since pleaded guilty, along with 10 other defendants.

Stulac's attorney, Michael Attanasio (pictured), a partner with the law firm Cooley Godward Kronish, said he believes the criminal case is over now that the charges have been dismissed.

"He was exonerated because he is innocent and he should never have been charged in the first place," said Attanasio. "He's so gratified that he's been vindicated after this very difficult ordeal, both professionally and personally."

Stulac's future plans are uncertain at this point. "This case wreaked havoc on his professional reputation, even though he's been exonerated," said Attanasio. "His future plans now are to get his life back and to proceed professionally and personally to find employment free from the threat of a very lengthy prison sentence."

Attanasio said that during the case, he explained to the jury about the true functions of auditors. "This whole case against Mr. Stulac was based on a fundamental misunderstanding of what auditors actually do or don't do," he said. "The prosecution portrayed Mr. Stulac as though he must have been an all-knowing, all-seeing policeman who must have known that his client was committing fraud when we proved that the client was perpetrating fraud by lying to Mr. Stulac and to Arthur Andersen."

Stulac still faces a civil complaint from the Securities and Exchange Commission that has been stayed pending the criminal trials. "That's something we'll discuss with the SEC at the appropriate time," said Attanasio.

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