Cendant Chairman Steps Down

Cendant Corp. lost its chairman and nine members of its board of directors in a growing accounting scandal that has pummeled its stock, prompted federal investigations and divided company loyalties.

President and CEO Henry R. Silverman said the departures of Walter Forbes and the other directors would help rebuild trust in the franchising company mired in accounting fraud charges.

"Like every other shareholder and employee, I am outraged at what has transpired," Silverman said Tuesday.

But Silverman said, "We must do everything we can to put this episode behind us, to eliminate the cloud hanging over this company, to dispel all of the uncertainty generated by recent events."

Forbes resigned less than a week after 44 senior executives sent a letter to the board calling for his dismissal because of the accounting fraud.

Forbes maintained he had no knowledge of the problems at the former discount service provider CUC International Inc., which merged with hospitality company HFS Inc. in December to form Cendant. Forbes was CUC's president and CEO.

"However, the people of Cendant and its shareholders have suffered in recent months as a result of fraudulent conduct and the uncertainty it has created," Forbes said in a statement. "I now believe it is in the best interest of our shareholders and employees to resolve this uncertainty."

The resignation of Forbes and eight other directors, all associated with CUC International, took effect immediately. A ninth director, Audit Committee Chairman Frederick D. Green, also said he would resign after completing the committee's report on Cendant's accounting troubles.

The 28-member board unanimously elected Silverman as chairman.

Forbes, who earned $1.5 million a year, will leave Cendant with a $35 million severance package. The company said it would record a 3 cents-a-share third-quarter expense to pay Forbes.

Forbes had blamed Silverman last week for the mounting pressure on him to resign, saying Silverman had been trying to wrest control of the company from him since Stamford, Conn.-based CUC and Parsippany-based HFS merged.

But on Tuesday, he said the move was for the best and said he has "tremendous confidence" in Cendant's future.

Cendant is a franchiser that charges fees for the right to operate businesses under brands that include Century 21, Avis, Ramada, and Coldwell Banker. It is the world's largest franchiser of hotels that include Days Inn, Howard Johnson, and Travelodge.

Its stock had topped $40 a share before the accounting problems, but its market value fell by $14 billion in a day when the fraud was first disclosed in April. It fell another 17 percent in April, when it announced that the fraud included fabricated CUC revenues.

Cendant said earlier this month it would reduce its net income by about $450 million because of the "fictitious" revenues posted by UC businesses that sold memberships to travel, discount, entertainment, and shopping clubs.

Cendant also said CUC artificially inflated its revenue by recording long-term revenue as short-term revenue, and delaying recognition of cancellation of memberships.

The company has said it is cooperating with investigations by the U.S. Attorney's Office in Newark and the Securities and Exchange Commission into the fraud. Neither agency will confirm an investigation.

Forty-four senior executives, including the CEOs of its flagship brands Century 21, Ramada Inn, and Coldwell Banker, sent a letter to the board last week asking for Forbes' dismissal.

Written by Amy Westfeldt