Walter A. Forbes was sentenced to serve 12 years and seven months in federal prison for his role in a multimillion-dollar accounting fraud originating at a company that helped to form real estate and travel services giant Cendant Corp, U.S. Attorney Christopher J. Christie announced Wednesday.

Forbes has also been ordered to pay $3.28 billion in restitution.

Forbes, who had served as chairman, CEO and president at CUC, a consumer-services company that joined with Henry Silverman’s HFS Inc. in launching Cendant, was convicted in October of conspiracy to commit securities fraud and making false statements.

Cendant launched in December 1997, and the following year Cendant officials announced that “a ‘widespread and systemic’ fraud had occurred at the merged company that included improperly recognizing fictitious revenues, falsely coding services sold to consumers, and fraudulently manipulating merger reserves,” according to court documents.

A report adopted by Cendant’s board of directors found that CUC officials had inflated CUC’s operating income by about $500 million from May 1995 to August 1998, court documents state.

Forbes served as Cendant chairman from the company’s formation until his forced resignation in July 1998.

The financial fallout from the accounting debacle led to a $14.2 billion drop in Cendant’s market value in a single day and the company’s stock plummeted 47 percent per share.

U.S. District Judge Alan H. Nevas “rejected defense arguments for a prison sentence of no more than 10 years,” according to the announcement.

Lawyers for Forbes filed a motion for bail pending an appeal of the conviction, the U.S. Attorney’s Office announced, though the government plans to oppose the motion and will seek to set a date for Forbes’ surrender. Forbes remains free on $1.2 million bail, according to the announcement.

Christie said in a statement that Forbes was the principal architect of the accounting fraud.

“We are very pleased with the sentence and restitution order imposed on Forbes,” Christie said in a statement. “It is justified and appropriate given the havoc he wreaked on the company and its shareholders. Like similarly long sentences imposed on other corporate figures, it sends the correct message that everyone in our society should be held accountable for criminal conduct.”

Forbes was convicted by jury on Oct. 31 of one count of conspiracy to commit securities fraud and to make false statements to the U.S. Securities and Exchange Commission, and two counts of making false statements to the SEC. The verdict came in the third trial against Forbes after previous deadlocks.

Forbes’ co-defendant in the first trial, former Cendant Vice Chairman E. Kirk Shelton, was sentenced on Aug. 3, 2005, to 10 years in prison and ordered to pay $3.275 billion, according to the announcement.

The judge ordered Forbes not make any asset transfers valued at more than $10,000 without the court’s approval — Forbes had made asset transfers before his first trial of about $25 million in real estate into his wife’s name and in the names of his children, the U.S. Attorney’s Office reported.

Shelton was president at CUC before CUC merged with HFS Inc. to form Cendant and later served as vice chairman of Cendant’s board.

Cendant last year broke into a series of separate companies — its real estate division launched as an independent, publicly traded company called Realogy. Realogy’s operations include company-owned and franchise real estate brands such as Coldwell Banker, Century 21, ERA and Sotheby’s International Realty.


Send tips or a Letter to the Editor to or call (510) 658-9252, ext. 137.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Thank you for subscribing to Morning Headlines.
Back to top