Feds Reopen Cendant Investigation
.c The Associated Press
NEWARK, N.J. (AP) - Federal authorities have reopened their investigation into the multibillion-dollar stock collapse of Cendant Corp.
Christopher J. Christie, the U.S. Attorney for New Jersey, confirmed Thursday that his office was ``taking a fresh look at the entire case.'' He declined to discuss specific details.
The Star-Ledger of Newark, citing unidentified law enforcement and other sources, reported in Friday's editions that the probe will focus on what role, if any, auditors played in the collapse.
New York-based Cendant was created in December 1997 when Connecticut-based CUC International, which sold memberships in discount buying clubs, merged with Parsippany-based HFS Inc., franchiser of brand names such as Ramada, Avis and Century 21.
Four months later, Cendant lost nearly half its market value when it disclosed that CUC overstated operating income. The scandal became the largest financial fraud case ever brought by the Securities and Exchange Commission.
Authorities have spoken with representatives of Ernst & Young, the accounting firm that audited the CUC accounts for more than a decade.
Ken Kerrigan, a spokesman for Ernst & Young, said the firm is ``aware that there is an investigation'' but said the company ``has been told we as a firm are not a target, nor are any of the partners.''
Cendant on Friday issued a statement saying neither the company, nor any of its officers or directors, was involved in the investigation.
Last year, a federal appellate court endorsed a record $3.2 billion settlement Cendant and its accounting firm made with stockholders. U.S. District Judge William H. Walls had approved the class-action settlement in March 2000 after at least 64 securities fraud lawsuits were consolidated before him.
Prosecutors claim two former CUC executives, Walter Forbes and E. Kirk Shelton, inflated the firm's value. They each face six charges: conspiracy, securities fraud, wire fraud, making a false statement in a Securities and Exchange Commission report, and two counts of mail fraud.
Three other CUC executives have pleaded guilty in the case, claiming their superiors told them to manipulate revenues.
06/07/02 10:48 EDT |
