Last week, the news about the trials of former Cendant executives E. Kirk Shelton and Walter Forbes got us thinking about how well Cendant chieftain Henry Silverman and his number one lieutenant Richard Smith have guided Cendant in the last 10 years.

In split decisions, Shelton was convicted of fraud but the judge declared a mistrial on 16 counts against Forbes after the jury could not reach a verdict.

We remember when CUC International, the company Forbes led before it was merged with Silverman’s HFS, was considered one of the smartest and most creative marketing companies in the country. The hotshot direct marketer gang that ran CUC had a glow; they were smooth, cutting-edge and a tad eccentric. Their books were also being cooked, which came to light after the merger.

In the post-Enron era, Cendant may not have survived the $500 million fraud case. Indeed it looked like the entire Cendant enterprise might go down with the scandal as its stock plummeted and the company paid $2.85 billion to settle shareholder lawsuits.

But Silverman took the wheel of the sprawling franchise and hospitality venture and steered it to safety. Most experts agree that strong management saved the company.

But one scandal was not enough. Cendant also was in bed with Homestore just before the California online company imploded because of another accounting scandal. Again, Cendant crawled away from the mess, more or less unscathed. The only fallout may have been missing a couple of years of innovation on the Internet, as the corporation appeared to be gun shy after the Homestore association embarrassment.

Despite these two events, Cendant has become the clear leader in the real estate industry. It entered the real estate franchise business in 1996 when it purchased Coldwell Banker and then Century 21.

The East Coast franchiser made some very small waves when it terminated the Century 21 gold coats. That proved to be a tiny business cultural hiccup as Cendant moved quickly to consolidate real estate brands, buying up other franchises, brokers and regional real estate companies.

Sitting with nearly 30 percent market share, Cendant has soared to the top of the real estate food chain, becoming the dominant company in a highly fragmented industry.

This consolidation has not led to a radical change in the classic real estate business model of commission-splitting among brokers, agents or franchises where listings are shared and fees are more or less evenly divided.

But it has led to other smart titans investing in the business, including Barry Diller and Warren Buffet. And big commercial banks are not far behind in this wave of enthusiasm about real estate.

The next big challenge for Cendant is confronting eroding commission base, changes brought on by the Internet and a slowing real estate market.

We know that Smith, the quiet-spoken Cendant CEO, has had a plan B for a more level-headed real estate market and the Cendant real estate czar Alex Perriello is guiding the company aggressively onto the Web once again. But a structural shift in the industry may be more challenging for the Parsippany, N.J., crowd.

But we would not be so stupid as to bet against the steady hand of Henry Silverman.


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