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Non-Tech : Cendant Corporation (NYSE:CD) -- Ignore unavailable to you. Want to Upgrade?

To: Nick who wrote (179)	4/16/1998 2:14:00 PM
From: Jens	Respond to of 3627

To all - Found this on Yahoo: nytimes.com Regards Jens --------------------------------- By DAVID J. MORROW endant Corp., one of the nation's largest franchisers and direct marketers, announced late Wednesday that it had uncovered accounting irregularities that would force the company to lower its 1997 earnings by as much as $115 million. The company -- based in Stamford, Conn., and Parsippany, N.J., and best known for its name brands like Avis car rentals and Howard Johnson hotels -- had reported 1997 earnings of $872 million, or $1 a share, before special charges. The change would drop Cendant's earnings to about $757 million, or 87 cents a share. Investors, who had applauded the company's aggressive expansion, showed immediate alarm. Cendant shares closed at $35.625 before the company's announcement but quickly plunged 27 percent, to $26, in after-market trading once Wall Street received word of the reported improprieties. A person close to the situation said that the accounting problems had stunned the top executives of the company, which was formed in December by the $11 billion merger of CUC International, a catalogue buying-club business, and HFS Inc., an owner of hotel chains and real estate brokerage companies. According to the person close to the situation, CUC International and HFS had not combined their two accounting departments until well after the companies had merged. Last Thursday, this person said, HFS employees took over a CUC department's accounting when Cendant was preparing its first-quarter earnings results. Within a day, they spotted numerous problems, this person said. Cendant president and chief executive Henry Silverman declined interview requests Wednesday, but sought in a statement to control the damage from the announcement. "We're outraged by the actions of a small number of former CUC employees who betrayed the trust that was placed in them by the company and our shareholders," Silverman said. "The company will continue to pursue aggressively the independent and internal investigations that are under way and will take whatever further actions are necessary." Cendant said the discrepancies occurred in a CUC business that is now part of Cendant's Alliance Marketing division, formerly the membership services segment. But the nature of the accounting irregularities was not clear. The person close to the situation said the employees who were believed to be responsible could be dismissed within the next few days. "With all the acquisitions Cendant has made recently, it's no wonder something like this has not happened to them," said Lewis H. Alton, managing partner of L.H. Alton & Co., a research firm based in San Francisco. "But if it turns out that this was criminal activity, that's a real disappointment. But Cendant did the right thing in announcing it quickly." Cendant said that the company remained "strong and highly liquid" and that it planned to go ahead with three recently announced acquisitions, including the purchase of American Bankers Insurance Group Inc. for $3.1 billion. But the problems in Cendant's accounting department may make already skittish investors question just how smoothly CUC and HFS joined together. From its announcement last May, the marriage between the two companies brought cheers from most analysts. CUC and HFS could cross-market their services, from CUC's Welcome Wagon to HFS's lineup of Coldwell Banker, Century 21 and ERA real estate brokers to its Super 8 chain of motels. What was more important was that the two companies operated in the same style. Both thrived on fees from services and franchises and without the encumbrances of inventory or concrete assets such as factories or apartment buildings. The management team also appeared to fit together well. Initially, CUC chairman Walter Forbes is serving as Cendant's chairman, while Silverman is serving as president and chief executive until 2000. At that time, Silverman is to become chairman. Earlier this month, Cendant said that its vice chairman and two executive vice presidents, all from CUC, were leaving to pursue other interests. The company said Wednesday that it was considering lawsuits against former CUC officers and others, but it did not name them.

To: Nick who wrote (179)	4/16/1998 2:30:00 PM
From: 16yearcycle	Read Replies (2) \| Respond to of 3627

Nick, If you are being literal, there is a huge difference between a bubble and a fraud. If cuc was a fraud, we will have one of the great, negative stock market stories in history. HFS will be destroyed by having bought it, and it would seem to me that Forbes is the problem, not Silverman. It is insane to imagine that hfs would merge with cuc, knowing that business was grotesquely puffed up. HFS had a good business going. I don't care how egotistical we may imagine the parties involved were, it is not rational that hfs knew at the time of merger. So, again, if there is much more fraud, anything could happen. The lawsuits to come alone will likely knock this to the low teens. But if there is even twice as much, and they do earn 1.00 this year or next, it will have been a screaming buy in the teens. Are we getting carried away imagining that these companies have manufactured there entire revenue stream withn creative and fraudulent bookkeeping? This could be an incredible opportunity for a cold blooded investor. Can a core group of us generate some rational give and take as to whether this one is best avoided FOR A LONG TIME, or whether it will look like they will be the "salad oil scandal" of the 90's; a solid business, screwed up by sloppiness and fraud, and temporarily derailed, not permanently. Is this bre-x or american express?