Risk Management

Cendant’s Forbes Loses Appeal

The conviction of Walter Forbes is upheld by a federal appeals court.
Stephen TaubOctober 2, 2007

Former Cendant Corp. chairman Walter Forbes, a high-profile player in reportedly the largest accounting fraud of the 1990s, lost his appeal, according to the Associated Press.

Last fall, in his third trial, Forbes was found guilty of conspiracy to commit securities fraud and two counts of making false statements. Earlier this year, he was sentenced to 12 years and seven months in prison and ordered to pay $3.275 billion in restitution.

Cendant’s accounting fraud, arguably the largest until the Enron and WorldCom cases, knocked down Cendant’s market cap by $14 billion in one day. In upholding Forbes’ conviction, the Second U.S. Circuit Court of Appeals in New York found that prosecutors’ use of the term “$14 billion fraud” in their opening statement was not misleading and prejudicial. It also found that the District Court was correct when it ruled that references to the company’s decline in stock price and investor losses were permissible.

Forbes was chief executive officer of CUC before the company merged with HFS Inc. to form Cendant in December 1997. Last week, The New York Postreported that new documents introduced in the case seemed to suggest that then-Cendant chief executive Henry Silverman was aware of the accounting scheme at the time the merger was completed.

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