Ex-Cendant Corp. executives plead not guilty

U.S. District Judge William Walls released the men on $1 million bail each. Walls ordered them not to travel abroad and also ordered Forbes to surrender firearms and Shelton to continue mental health treatment.

Yahoo News
April 5, 2001

Ex-Cendant Corp. executives plead not guilty

NEWARK, N.J., April 5 (Reuters) - Two former top executives of the Cendant Corp. (NYSE:CD - news), the world's largest hotel franchiser, pleaded innocent on Thursday to charges of directing an accounting fraud that resulted in billions of dollars in losses.

Former Chairman Walter Forbes, 58, and former Vice Chairman Kirk Shelton, 46, stood solemnly beside their attorneys as the lawyers entered their pleas in federal court in Newark, New Jersey.

U.S. District Judge William Walls released the men on $1 million bail each. Walls ordered them not to travel abroad and also ordered Forbes to surrender firearms and Shelton to continue mental health treatment.

The men and their lawyers left the courtroom without speaking to reporters. Walls set a tentative trial date of March 25, 2002, for the two executives, who were indicted on Feb. 28.

Each man is charged with one count of conspiracy and one count of wire fraud. In statements made Feb. 28, attorneys said both men are innocent.

In 1998, the men resigned from Cendant, which has co-operated with federal prosecutors since they began their probe in mid-1998.

The indictment alleges Forbes and Shelton conspired with at least three other company officials to routinely use fraudulent accounting that overstated the income of Cendant and its predecessor company CUC International, Inc.

The complaint alleges Forbes directed the fraud from its inception in 1985 and that Shelton joined in the scheme six years later. If convicted, the men, both from Connecticut, face up to five years in prison and a $250,000 fine on each count.

CUC merged with HFS in 1997 to create Cendant, the world's largest hotel franchiser, owner of Days Inn, Ramada and other chains. Cendant also owns the Avis rent-a-car and Century 21 home real estate franchises.

When the fraud became public in April 1998, Cendant's shares plummeted, resulting in an immediate loss of $13 billion to shareholders.

The Securities and Exchange Commission also filed a civil suit against Forbes and Shelton in Newark federal court on Feb. 28, accusing them of inflating quarterly and operating income and earnings. Three former company officers — Cosmo Corigliano, 41, of Old Saybrook, Connecticut; Anne Pember, 41, of Madison, Connecticut; and Caspar Sabatino, 48, of Sherman, Connecticut — pleaded guilty to federal charges on June 14, 2000, and await sentencing.


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