Former Cendant Chair Convicted of $3 Billion Fraud

A federal jury found former Cendant Corp. Chairman Walter Forbes guilty of conspiracy to commit securities fraud and two counts of making false statements Tuesday in a massive fraud scheme that cost the travel and real estate company and its investors more than $3 billion.

He was found not guilty of a fourth count, securities fraud.

The case was being tried after two previous juries deadlocked.

The Cendant case was among the first in a series of corporate accounting scandals that sparked outrage from investors in recent years.

"It's the third time and was worth all the effort," said Michael Drewniak, a spokesman for the U.S. Attorney's office in New Jersey. "We always believed fully in all the evidence against Mr. Forbes. We are extremely gratified by today's results."

A message seeking comment was left with Forbes' attorney.

Prosecutors say that Forbes participated in a scheme to inflate the stock of Cendant's predecessor, CUC International, by $500 million. The fraud was reported in 1998, causing Cendant's market value to drop by $14 billion in one day.

Forbes has argued he knew nothing about the fraud. His co-defendant, former Cendant Vice Chairman E. Kirk Shelton, was convicted last year of conspiracy, mail fraud, wire fraud, securities fraud and making false statements to the SEC.

Shelton was sentenced to 10 years in prison and ordered to pay $3.27 billion restitution to the company, which stockholders renamed Avis Budget Group. The restitution order includes a balloon payment of $15 million and monthly installments of $2,000 after he is released from prison.

Forbes was chief executive officer of CUC and Shelton was president before CUC merged with HFS Inc. to form New York-based Cendant in December 1997.

CUC, which ran a membership marketing operation, merged in 1997 with HFS Inc., a travel and real-estate services company, to form Cendant. Cendant's brands included Ramada, Howard Johnson, Avis, Coldwell Banker and Century 21.

Cendant was based in New York, but the litigation has been in Connecticut because the CUC division was headquartered in Stamford at the time the fraud occurred. The case was prosecuted by the New Jersey U.S. Attorney's office because HFS was headquartered in Parsippany, N.J.

In September, Cendant stockholders changed the company's name to Avis Budget Group to reflect its Avis and Budget vehicle rental brands. Its real estate and hotel businesses were spun off as stand-alone companies and the company sold its travel distribution operations.

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