Accounting & Tax

Ex-Cendant Chairman Found Guilty

After two mistrials, Walter Forbes is found guilty in one of the nation's largest pre-Enron accounting scandals.
Stephen TaubNovember 1, 2006

Three is certainly not a charm for former Cendant Chairman Walter Forbes. In his third trial, Forbes was found guilty by a federal jury for his role in a massive accounting scandal that was deemed to be the largest corporate fraud in the pre-Enron era, according to published reports.

He was found guilty of conspiracy to commit securities fraud and two counts of making false statements, according to the Associated Press. He was found not guilty of a fourth count, securities fraud. Forbes was permitted to remain free on $1.2 million bail until he is sentenced on January 17. Forbes faces up to five years in prison on the conspiracy count, and up to 10 years on each of the two counts involving false reporting to regulators, noted the AP.

Forbes was tried three times because the first two trials ended with hung juries. The fraud took place when Forbes served as chief executive officer of CUC International. It came to light shortly after it merged with HFS Inc. to form Cendant Corp. in December 1997. According to The New York Times, investors lost $19 billion when Cendant’s stock fell after the disclosure.

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Forbes claimed that he was innocent because he was unaware of what was going on around him, and as chairman, did not take responsibility for the fraudulent actions. Last year, his co-defendant, former Cendant Vice Chairman E. Kirk Shelton, was convicted of conspiracy, mail fraud, wire fraud, securities fraud, and making false statements to the SEC, according to the AP.

“We are gratified by today’s verdict,” said New Jersey U.S. Attorney Christopher J. Christie, according to the wire service. “The innocent victims of this $14 billion fraud engineered by Walter Forbes have waited a very long time for justice to be done. This is a great day for those who believe that everyone in our society must be held accountable for their conduct.”

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