Former Cendant Chair Convicted of $3 Billion Fraud

Oct. 31, 2006 — -- A federal jury found former CendantCorp. Chairman Walter Forbes guilty of conspiracy to commitsecurities fraud and two counts of making false statements Tuesdayin a massive fraud scheme that cost the travel and real estatecompany 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 corporateaccounting scandals that sparked outrage from investors in recentyears.

"It's the third time and was worth all the effort," saidMichael Drewniak, a spokesman for the U.S. Attorney's office in NewJersey. "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 inflatethe stock of Cendant's predecessor, CUC International, by $500million. The fraud was reported in 1998, causing Cendant's marketvalue to drop by $14 billion in one day.

Forbes has argued he knew nothing about the fraud. Hisco-defendant, former Cendant Vice Chairman E. Kirk Shelton, wasconvicted 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 stockholdersrenamed Avis Budget Group. The restitution order includes a balloonpayment of $15 million and monthly installments of $2,000 after heis released from prison.

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

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