Accounting & Tax

Judge May Lighten Cendant Prison Term

Restitution by former vice chairman E. Kirk Shelton, on the other hand, may amount to billions of dollars.
Craig SchneiderJuly 26, 2005

A federal judge is considering a prison sentence of 10 to 13 years for former Cendant Corp. vice chairman E. Kirk Shelton, according to reports. Prosecutors had requested a term of 12 to 15 years.

U.S. District Judge Alvin Thompson made the announcement during a sentencing hearing in a Hartford courtroom on Tuesday, according to the Associated Press. The wire service also reported that Shelton might be required to pay restitution of $3.275 billion to cover investors’ stock losses in one of the biggest accounting scandals before Enron’s collapse.

During the sentencing hearing, Shelton’s sister, Vicki Shelton De Angeli, reportedly described him as a family man and an honest man who cared about people, and that the fraud case had devastated the family, emotionally and financially. Shelton’s lawyer, Thomas Puccio, added that Shelton’s case differs from the Enron and WorldCom cases because the former Cendant executive did not directly benefit from the scheme. “Those cases are about looting companies, people putting huge sums of money in their pockets,” said Puccio, according to the wire service.

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Charges against Shelton and former chairman Walter Forbes stemmed from the overstatement of $286 million in earnings at CUC International Inc., which in 1997 merged with HFS Inc. to form Cendant. According to Bloomberg, Cendant eventually restated earnings downward by $571 million and shelled out $3.2 billion to settle investor lawsuits.

Shelton was convicted in January on 12 counts of conspiracy, mail fraud, and securities fraud, and making false statements to the Securities and Exchange Commission. The case against Forbes, his co-defendant, ended with a hung jury; a new trial for Forbes is scheduled for September, according to the AP.

Judge Thompson’s decision on Shelton’s sentence is still pending; the case will reconvene on August 3.