Just change the names to prosecute the guilty: "Three Former Executives at Cendant Will
Plead Guilty to Fraud Charges
By ANN DAVIS
Staff Reporter of THE WALL STREET JOURNAL
Three former executives of Cendant Corp. are expected to plead guilty
Wednesday to criminal charges relating to a high-profile accounting fraud
at the New York franchising and marketing company, people familiar with
the matter say.
The executives -- all senior financial officials at CUC International, which
merged with HFS Inc. to create Cendant in 1997 -- are Cosmo
Corigliano, former chief financial officer; Anne Pember, former controller;
and Casper Sabatino, former vice president of accounting and financial
reporting, these people say.
The three will enter their pleas to charges related to the accounting fraud at
a hearing this morning in a Newark, N.J., federal court, the people say.
A Cendant spokesman declined to discuss the plea deals. Attorneys for
Ms. Pember and Mr. Sabatino didn't return phone calls; Mr. Corigliano's
attorney wouldn't discuss the charges.
Federal prosecutors in Newark began investigating fraud involving CUC in
1998. That is when Cendant surprised Wall Street by announcing that its
merger partner had engaged in irregular accounting practices to inflate
earnings. Cendant eventually restated earnings from 1995 through
mid-1998.
Lawyers involved in the case say they don't expect Cendant to face
criminal charges. The company has presented itself to prosecutors as a
victim of the fraud by CUC and has been cooperating with the
investigation.
It is unclear whether executives senior to Mr. Corigliano will face any
action; the government's investigation is continuing, the people say. The
executives have some incentive to strike plea deals in a bid to lessen the
risk of crippling fines under federal sentencing guidelines.
The scandal initially shaved more than $13 billion in stock-market
capitalization off Cendant, whose franchises include hotel brands Days Inn
and Ramada; the Avis car-rental brand name and reservations system; and
Century 21 real-estate brokerage firm.
The accounting mishap sparked a company-wide restructuring. This year,
Cendant has sold several noncore businesses and bought back about $3
billion of stock, all in an effort to boost its stock price. In 4 p.m. New
York Stock Exchange composite trading Tuesday, Cendant fell 12.5 cents
to $12.25, just above the 52-week low of $10.4375 set June 2, and far
below the about $40 the shares were trading at before the scandal.
Since prosecutors began investigating in mid-1998, they have subpoenaed
thousands of pages of internal records and spoken to dozens of Cendant
employees. The plea negotiations have heated up in the wake of
cooperation with prosecutors by several former members of CUC's
financial department.
Late last year, Cendant agreed to settle civil shareholder litigation stemming
from the fraud for $2.8 billion. The settlement must still be approved by the
federal judge overseeing the case. CUC's former outside auditors, Ernst &
Young LLP, agreed this year to pay $335 million, one of the largest
accounting-negligence shareholder settlements in history, to resolve one of
two lawsuits that accuse the New York accounting firm of negligence for
failing to detect the fraud. Ernst & Young couldn't be reached late last night
to comment.
-- Rachel Silverman contributed to this article.
Write to Ann Davis at ann.davis@wsj.com" |
