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Cendant ex-chief guilty in fraud
He was part of a scheme that cost the company and investors $3-billion.
By ASSOCIATED PRESS
Published November 1, 2006
NEW HAVEN, Conn. - A federal jury found former Cendant Corp. chairman Walter Forbes guilty of conspiracy to commit securities fraud and two counts of making false statements Tuesday in a huge fraud scheme that cost the travel and real estate company and its investors more than $3-billion. He was found not guilty of a fourth count, securities fraud. The case was being tried after two previous juries deadlocked. The Cendant case was among the first in a series of corporate accounting scandals that sparked outrage from investors in recent years. "It's the third time and was worth all the effort," said Michael Drewniak of the U.S. Attorney's Office in New Jersey. "We always believed fully in all the evidence against Mr. Forbes. We are extremely gratified by today's results." A message seeking comment was left with Forbes' attorney. Prosecutors say that Forbes participated in a scheme to inflate the stock of Cendant's predecessor, CUC International, by $500-million. The fraud was reported in 1998, causing Cendant's market value to drop by $14-billion in one day. Forbes, 63, argued he knew nothing about the fraud. His co-defendant, former Cendant vice chairman E. Kirk Shelton, was convicted last year of conspiracy, mail fraud, wire fraud, securities fraud and making false statements to the Securities and Exchange Commission. Shelton was sentenced to 10 years in prison and ordered to pay $3.27-billion restitution to the company. The restitution order includes a balloon payment of $15-million and monthly installments of $2,000 after he is released from prison. Forbes was chief executive of CUC and Shelton was president before CUC, a membership marketing operation, merged with HFS Inc., a travel and real estate services company, to form Cendant in December 1997. Cendant's brands included Ramada, Howard Johnson, Avis, Coldwell Banker and Century 21. In September, Cendant stockholders changed the company's name to Avis Budget Group to reflect its Avis and Budget vehicle rental brands. Its real estate and hotel businesses were spun off as stand-alone companies and the company sold its travel distribution operations.
[Last modified October 31, 2006, 23:52:30]
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