Cendant, Ernst & Young deny involvement in probe
NEW YORK, June 7 (Reuters) - Cendant Corp., a real estate and hotel company, on Friday said it was not involved in any new investigation into the accounting scandal stemming from the 1997 merger that formed the company.
The Star-Ledger newspaper of Newark, New Jersey, on Friday reported that federal prosecutors had reopened their investigation of the bookkeeping irregularities at CUC International, with a focus on accounting firm Ernst & Young LLP's auditing of CUC's books.
CUC merged with HFS Inc. in 1997 to form Cendant, which owns Avis car rentals and franchises Days Inn and Ramada hotels. The next year the combined company became the target of an investigation into charges that CUC, before the deal, had artificially inflated earnings. The stock collapsed and several former executives have since been indicted.
"The company or any of its officers or directors are not in any way involved in such investigation," Cendant said in a statement.
Cendant, which agreed to pay $2.85 billion to settle shareholder claims of fraud related to the case, has not been contacted by the U.S. attorney's office with regards to an investigation, company spokesman Elliot Bloom said.
Ernst & Young also denied its practices were being investigated.
"No one is looking into us," Ernst & Young spokesman Ken Kerrigan said, denying the accounting firm was the focus of any new probe into the matter. Ernst & Young is aware of a reopened investigation, and some of its partners have been contacted about it and are cooperating, Kerrigan said.
Shares of Cendant fell 46 cents, or 2.69 percent, to $16.63 on the New York Stock Exchange, underperforming a sell-off in the broad market. The benchmark S&P 500 shed 1.1 percent in Friday morning trade.
"While we don't see anything that would add new financial or legal liabilities to Cendant, we suspect the stock will be weak today simply based on investor uncertainly, especially in the current risk-averse environment," J.P. Morgan analyst Amanda Tepper said in a research report.
Auditors such as Ernst & Young have been in the hot seat since the collapse of energy trader Enron Corp.. Big Five accounting firm Andersen is on trial for obstructing justice in an investigation of Enron and U.S. lawmakers have been calling for industry reform in the wake of the scandal.
06/07/02 11:32 ET |
