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U.S. Securities and Exchange Commission


Litigation Release No. 21356 / December 30, 2009

Accounting and Auditing Enforcement Release No. 3091 / December 30, 2009

Securities and Exchange Commission v. Walter A. Forbes et al., , 01 civ 987 (JAP) (D.N.J. filed Feb. 28, 2001)

Former Cendant Corporation Chairman Walter A. Forbes Settles SEC Fraud Action

The Securities and Exchange Commission (the Commission) announced that on December 29, 2009, a settled final judgment was entered by the U.S. District Court for the District of New Jersey against Walter A. Forbes, the former Chairman of Cendant Corporation (Cendant), in the Commission's action against Forbes arising out of his conduct in the Cendant fraud, Securities and Exchange Commission v. Walter A. Forbes et al., 01 civ 987 (JAP) (D.N.J. filed Feb. 28, 2001). The Commission's complaint in that action alleged that Forbes orchestrated an earnings management scheme at CUC International Inc. (CUC), a corporate predecessor of Cendant, and, subsequently, at Cendant itself. The complaint further alleged that over a twelve-year period Forbes directed a scheme that improperly inflated the company's quarterly and annual financial results, and that for the period 1995 to 1997, CUC's operating income was improperly inflated by an aggregate amount exceeding $500 million. When the fraud was disclosed in 1998, Cendant's common stock dropped dramatically, resulting in defrauded investors losing billions of dollars.

The final judgment against Forbes, to which he consented without admitting or denying the Commission's allegations, enjoins him from violating Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act), and Exchange Act Rules 10b 5, 13b2 1, and 13b2 2, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Exchange Act Rules 12b 20, 13a 1, 13a 13, and 14a 9. The final judgment also bars Forbes, pursuant to Section 21(d)(2) of the Exchange Act, from serving as an officer or director of a public company.

Forbes was convicted in a related federal criminal prosecution of conspiracy to commit securities fraud and making false filings with the Commission. In 2007, Forbes was sentenced to 151 months in prison and ordered to pay criminal restitution of $3.275 billion. Later that year, the U.S. Court of Appeals for the Second Circuit affirmed his judgment of conviction. In 2008, the U.S. Supreme Court denied Forbes' petition for a writ of certiorari seeking review of his conviction.

For further information about the Commission's action in Securities and Exchange Commission v. Forbes et al., see Litigation Release No. 16910 (Feb. 28, 2001); see also Litigation Release No. 16587 (June 14, 2000); Litigation Release No. 18711 (May 14, 2004); Litigation Release No. 20089 (Apr. 25, 2007).



Modified: 12/30/2009