Ex-Cendant chairman found guilty in accounting fraud case

Walter Forbes, the former chairman of Cendant Corp., was convicted Tuesday for his role in the accounting fraud that caused the company’s market value to drop $14 billion in one day in 1998.

Jurors in Bridgeport, Conn., convicted Forbes of one count of conspiracy and two counts of false reporting. He was found not guilty of securities fraud.

Forbes was accused of overstating income by $252 million at CUC International Inc., the company that merged with HFS Inc. in 1997 to create Cendant.

“Americans don’t buy the lame excuse that a person being paid millions knew nothing about what he was getting paid for,” said Lynn Turner, former chief accountant at the Securities and Exchange Commission. “I’m really glad the jury understood the case and reached the verdict they did.”

The fraud was the largest of the 1990s and produced a $3.2-billion settlement with shareholders, a record at the time.

U.S. prosecutors spent eight years pursuing Forbes, opting for a third trial when two earlier juries deadlocked. Jurors at the third trial, which began Oct. 10, rendered their verdicts on the third day of deliberations.

U.S. District Judge Alan Nevas set a sentencing date of Jan. 17. The false reporting counts carry a maximum prison term of 10 years each; conspiracy carries a five-year sentence.

“There will be an appeal,” Brendan Sullivan, Forbes’ lawyer, said after the verdict.

The judge raised Forbes’ bail to $1.2 million from $1 million.

Shares of Cendant, a travel and real estate services company with franchises including the Avis car-rental and Days Inn hotel chains, never recovered after plunging 46% on April 15, 1998, when the company disclosed accounting irregularities at CUC.

Prosecutors said Forbes, who was chief executive at CUC, made $100 million while inflating income to satisfy analysts.