Cendant Corp. former Chairman Walter Forbes was sentenced to 12 years and seven months years in prison and ordered to pay $3.28 billion in restitution for an accounting fraud that led to the largest shareholder settlement in a 1990s case.
U.S. District Judge Alan Nevas sentenced Forbes, 64, for inflating income by $252 million at CUC International Inc., the company that merged with HFS Inc. in 1997 to create Cendant. Forbes, CUC’s chief executive officer, was convicted Oct. 31 of conspiracy and false reporting about company finances.
Cendant and its auditors, Ernst & Young, paid $3.34 billion to settle investor lawsuits, then a record. The scandal foreshadowed frauds that destroyed Enron Corp. and WorldCom Inc.
Assistant U.S. Attorney Michael Martinez urged Nevas to impose a term within the range of 12 1/2 to 15 1/2 years under advisory guidelines. Martinez said Forbes was being sentenced under 1997 guidelines in effect at the time of the crimes. Current standards would recommend a 25-year term, he said.
Forbes’s attorney Brendan Sullivan asked the judge to impose a term of 10 years.
The market value of Cendant, a travel and real estate services company, fell $14 billion on April 15, 1998, when it disclosed accounting irregularities at CUC. Cendant, with franchises including the Avis car-rental and Days Inn hotel chains, never recovered and split into four companies last year including New York-based Avis Budget Group Inc.
Jurors convicted Forbes of conspiracy and two counts of false reporting to the U.S. Securities and Exchange Commission.
