Long before Enron and WorldCom, the $3.2 billion fraud by Cendant, revealed in 1998, has spawned numerous lawsuits and landed two key perpetrators in prison. In 2005, E. Kirk Shelton, the company’s former vice chairman, got 10 years; in January 2007, ex-chairman Walter Forbes was hit with more than 12 years. Each was ordered to pay $3.275 billion in restitution.
In the latest development, the U.S. government and the company — which in 2006 was renamed Avis Budget Group (after its real estate and hotel businesses were spun off and its travel-distribution operations sold) — are suing Forbes, seeking $22 million in restitution.
The suit alleges Forbes fraudulently transferred cash, securities, and real estate to his wife and others to avoid creditors and the restitution order, according to an Associated Press report. Forbes engaged in “a flurry of legal and accounting activity” to hide his assets as the fraud was coming to light, New Jersey U.S. Attorney Christopher Christie reportedly stated.
The lawsuit also names Forbes’s wife, other family members, and business associates who managed trusts in which the assets allegedly were transferred. They included Forbes’s interest in property in Montana and Wisconsin, along with multimillion-dollar homes in Connecticut, Florida, and Colorado, Christie told the AP.
The fraud actually took place at CUC International before it was acquired by Cendant’s predecessor company, HFS. Forbes was chief executive officer of CUC.
Last September The New York Post reported that then-Cendant CEO Henry Silverman was not totally in the dark about the accounting scheme at the time the acquisition was completed. While he has always maintained he was an innocent victim, the paper asserted that new legal documents seem to show that in 1998, just days before the deal went through, Silverman may have learned about the accounting fraud.
The Post reported that his knowledge of the scheme was suggested by documents related to a probe that law firm Wilkie Farr & Gallagher conducted for the Cendant board. That investigation was at the heart of a lawsuit filed by CSI Investment Partners, a private-equity firm.