Cendant Reveals That Financial Executive Was Fired
Cendant Corp. said Friday it had fired an executive vice president who announced his resignation last week shortly before Cendant reported accounting problems that triggered a 46% drop in its shares on Thursday.
Cosmo Corigliano, who wasn’t available for comment, was the chief financial officer of CUC International Inc., which along with HFS Inc. merged last December to create Cendant. His decision to leave the direct marketer and owner of brands such as Avis car rentals and Howard Johnson hotels, was announced on April 9.
Cendant initially described the departure as voluntary and part of a routine reorganization after the merger. Also leaving were Vice Chairman Kirk Shelton, CUC’s former chief operating officer, and Executive Vice President Amy Lipton, former general counsel of Stamford, Conn.-based CUC.
Cendant shares stabilized Friday, gaining $2.13 to close at $21.19 in New York Stock Exchange trading. The stock had plunged $16.56 on Thursday and is down nearly 50% from a high of $41.38 on March 6.
The company also reiterated its intention to buy American Bankers Insurance Group Inc., a Miami-based provider of insurance for credit card debt and other consumer loans, for $67 a share in cash and stock. The transaction is expected to close in late summer. American Bankers advanced $2.25 to close at $60 Friday on the NYSE.
Friday’s announcement suggests Corigliano could be blamed for losses in CUC’s membership unit, which provides travel, shopping and other services to fee-paying clients. On Wednesday, Cendant said it would immediately fire “those individuals whom the investigation establishes have had any involvement in or knowledge of the potential accounting irregularities.”
The accounting problems involved failure to properly record the costs of recruiting members for CUC’s membership unit, which inflated the unit’s profit. Only after responsibility for that business was shifted to former HFS workers, Cendant said, did the errors surface.
Correcting the mistakes will force the company to reduce the $872 million of earnings it reported for 1997 by up to $115 million.