Litigation Release No. 18102 / April 24, 2003
Securities and Exchange Commission v. Kenneth Wilchfort and Marc Rabinowitz, 03 Civ. 0933-RCL (D.D.C.)
SEC To Suspend Two Auditors of Cendant Corporation and CUC International from Practicing before the Commission
On April 23, 2003, the Securities and Exchange Commission filed a settled Complaint in the United States District Court for the District of Columbia against two Ernst & Young LLP ("E&Y") partners, Kenneth Wilchfort and Marc Rabinowitz, in connection with audits of Cendant Corporation ("Cendant") and its predecessor, CUC International ("CUC"). The Complaint alleges that the two partners aided and abetted Cendant's and CUC's violations of Section 13(a) of the Securities Exchange Act of 1934 ("Exchange Act") and seeks a permanent injunction. Without admitting or denying the Commission's allegations, Wilchfort and Rabinowitz consented to the entry of judgments enjoining them from violating the reporting provisions of the federal securities laws. Without admitting or denying the findings in the Commission's Orders, Wilchfort and Rabinowitz also consented to the issuance of administrative orders, based on the injunctions, suspending them from appearing or practicing before the Commission as accountants and providing that they may apply for reinstatement after four years.
The Complaint alleges that Wilchfort and Rabinowitz were E&Y's partners responsible for providing audit and accounting advisory services to Cendant and CUC. The Complaint further alleges that, despite the fact that Cendant and CUC provided them with false documents and otherwise lied to them, Wilchfort and Rabinowitz improperly failed to detect that Cendant's and CUC's financial statements were not presented in conformity with generally accepted accounting principles. The Complaint allleges that Wilchfort and Rabinowitz had a duty to withhold their firm's audit report containing an unqualified opinion and take appropriate steps to prevent these financial statements from being filed with the Commission and circulated to investors. The Complaint also alleges that, by failing to do so, Wilchfort and Rabinowitz aided and abetted Cendant's and CUC's violations of the reporting provisions of the federal securities laws.
The judgments will permanently enjoin Wilchfort and Rabinowitz from, directly or indirectly, aiding and abetting any issuer of a security registered pursuant to Section 12 of the Exchange Act by filing any report required by the Securities Act of 1933 or the Exchange Act and the rules of the Commission that fails to contain information and documents as the Commission requires to keep reasonably current the information and documents required to be included in the report, in violation of Section 13(a) of the Exchange Act or Rules 12b-20, 13a-1 or 13a-13 promulgated thereunder.
The Commission previously brought related civil actions and administrative proceedings against nine individuals, as well as against the issuer. In those actions, the Commission charged among others, CUC's former Chairman and Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer, Controller and Senior Vice President, Vice President of Accounting and Reporting, and Director of Financial Reporting. See Litigation Release No. 16910 (February 28, 2001); Litigation Rel. No. 16587 (June 14, 2000); Exchange Act Rel. No. 42933 (June 14, 2000); Exchange Act Rel. No. 42934 (June 14, 2000); Exchange Act Rel. No. 42935 (June 14, 2000); Exchange Act Rel. No. 42936 (June 14, 2000); Exchange Act Rel. No. 43034 (July 13, 2000). These actions remain pending as to four of these individuals.
The Commission acknowledges the assistance provided by the U.S. Attorney for the District of New Jersey.
Person to Contact: Thomas C. Newkirk
(202) 942-4550
James T. Coffman
(202) 942-4574
