Cendant chairman, 9 directors quit Forbes due severance of $47.5 million from troubled company

Accounting errors

July 29, 1998|By BLOOMBERG NEWS

NEW YORK -- Cendant Corp. Chairman Walter Forbes resigned yesterday, along with nine other board members, less than a month after the marketer and franchiser found accounting fraud in the unit Forbes formerly ran. Henry Silverman, Cendant's chief executive, was elected chairman by the board, the company said.

Forbes will receive a severance package that includes $35 million in cash and stock options worth $12.5 million, according to an April 6 proxy filing. Cendant said it will take a charge of 3 cents a share against third-quarter earnings for the severance payment.

Silverman, 57, said in a statement that the changes will "end any uncertainty about the future direction and leadership of Cendant."

Shareholders and Cendant executives had called for Forbes' ouster, saying that if he wasn't involved in the fraud, he should have known what was going on.

Forbes, 55, repeated in a separate statement that he was unaware of accounting fraud when it was committed at CUC International Inc., the company he founded.

CUC, which sells discount shopping and other services to fee-paying members, merged with HFS Inc., a franchiser of brands such as Avis and Howard Johnson run by Silverman, to create Cendant in December.

In recent weeks, Forbes had said he would stay on, even though some held him responsible for accounting problems at CUC. Yesterday, he said he had concluded that "it is in the best interest of our shareholders and employees to resolve this uncertainty" over Cendant's management.

Silverman said in a statement that he is "outraged" at what he called "an unconscionable fraud perpetrated against the company by a few individuals at the former CUC."

After the board members leave, Cendant will have 18 directors, down from 28 after the CUC-HFS merger.

Cendant reported July 14 that accounting fraud and errors in the CUC unit would cause it to cut earnings for the last three years by at least $300 million.

Pub Date: 7/29/98

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