Battle-weary Cendant Chairman Walter Forbes reversed his earlier position to stay at the helm of Cendant and instead resigned in disgrace yesterday after weeks of pressure from the board of directors, senior executives and major shareholders.

After a grueling six and a half to seven hour meeting yesterday, in which accounting representatives from Arthur Andersen and Deloitte & Touche detailed $500 million in accounting deceptions and over $200 million in errors for the past three-year period at CUC, Forbes and eight of his CUC allies on the board submitted their resignations. The investigators told the directors that 61% of CUC's 1997 net income last year was "nonexistent" and "90 percent of that was fraud." Forbes, the CEO of CUC when it merged in January with HSF to form Cendant, has denied knowing about the accounting discrepancies.

In a prepared statement, Forbes said, "Today, it is apparent that the actions of a few have profoundly hurt us all. And, as I have said on many occasions, I had absolutely no knowledge of the accounting irregularities."

Pointing the finger of blame elsewhere, Forbes spokesperson, Nicole Reily said last week, after Cendant executives had written a letter requesting Forbes' resignation, "Walter believes this is more of Henry Silverman (Cendant's president and CEO) attempting to take control, which he's done since this merger was consummated. Under the terms of the HSF/CUC International merger, Silverman and Forbes would have traded jobs in the year 2000. Also under fire for not knowing more about the assets of the merger, but emerging victorious, Silverman was elected by the board to take Forbes' place as chairman. He will continue to serve as CEO and president of Cendant.

The 28-member Cendant board, was split evenly between executives from HSF and CUC International executives before the purge.

The resignation is a sad exit for a visionary such as Forbes. Forbes had spent his life in the successful effort to bring together technology and retailing. After several failed efforts as a young pioneer in on-line shopping, Forbes finally struck gold with CUC. The company, which charged a membership fee for consumer access to discounted goods, went public in 1983 with a value of $100 million. By 1994, CUC offered more than 1 million items for sale on its web site, www.netMarket.com. In 1997, consumers spent more than $100 million a month through the Web site.

When HSF joined forces with CUC, Silverman's goal was to enroll new consumers in CUC shopping clubs through its brand names Ramada, Century 21 and Avis.

Forbes leaves with a $35 million severance package that will result in an "unusual expense," a charge of approximately a $0.03 per share in the third quarter.

Published: July 29, 1998

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