Officials Charged in Largest Accounting Fraud Ever

In a civil suit filed by the SEC in federal court Wednesday, the former chairman and vice chairman of Cendant Corporation were indicted for conspiracy and wire fraud and accused of doctoring the books of predecessor company, CUC International Inc., for the purpose of misleading shareholders. The two had resigned from the company in 1998.

Cendant, a conglomerate which controls such diverse companies as Avis car rental, Days Inn motels, Century 21 Real Estate, and Jackson Hewitt tax preparation service, was formed when CUC merged with HFS Inc. in 1997.

The case is described as the largest accounting fraud ever, with investors reportedly losing $19 billion.

Walter A. Forbes, the former chairman of Cendant, and Kirk Shelton, the former vice chairman, were indicted for fraud by a grand jury Wednesday in New Jersey at the same time that the SEC civil charges were filed. The two former executives are charged with conspiring to inflate quarterly and annual earnings reports while shareholders helplessly watched the value of their stock plummet.

The SEC suit claimed that, "By inflating income and earnings, CUC management intentionally created for investors the illusion of a growing, highly profitable and successful enterprise." The SEC added that from 1995 to 1997, pre-tax operating income was inflated by more than $500 million.

The SEC hopes to make the two men personally responsible for repaying the gains they made and to bar both men from serving in executive positions in a publicly-held company. Three other officials of Cendant were charged with similar offenses last year.

You may like these other stories...

There’s a way for investors to brave the world beyond stocks and bonds of a traditional Individual retirement arrangement (IRA) and venture into real estate, tax liens, unregistered securities and so on. Their avenue...
KPMG LLP has agreed to shell out $8.2 million to settle charges from the US Securities and Exchange Commission (SEC), which found that the Big Four firm violated auditor independence rules by providing certain nonaudit...
By Jason Bramwell, Staff WriterJuly 1, 2014, is the date when the first set of municipal advisors will be required to register under new rules the US Securities and Exchange Commission (SEC) finalized last year.The SEC...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.