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Ex-chairman of Cendant is sentenced

Walter Forbes gets a prison term of more than 12 years and must pay $3.275 billion in a securities fraud case.

January 18, 2007|From the Associated Press

BRIDGEPORT, CONN. — Former Cendant Corp. Chairman Walter Forbes was sentenced Wednesday to 12 years and seven months in prison and ordered to pay $3.275 billion in restitution for leading the largest accounting fraud of the 1990s.

In October, a jury found Forbes guilty of conspiracy to commit securities fraud and two counts of making false statements in a massive fraud scheme that cost the travel and real estate company and its investors more than $3 billion. He was found not guilty of a fourth count, securities fraud.

The Cendant case was among the first in a series of corporate accounting scandals that sparked outrage from investors in recent years.

"We're very pleased with the result," said New Jersey U.S. Atty. Chris Christie, whose office prosecuted the case. "The public has waited many years for Walter Forbes to be brought to justice."

It was the latest lengthy sentence handed down to a corporate executive convicted of corruption.

"It is justified and appropriate given the havoc he wreaked on the company and its shareholders," Christie said. "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."

Former Enron Corp. Chief Executive Jeffrey K. Skilling was sentenced to 24 years and four months in prison. WorldCom Inc. CEO Bernard J. Ebbers received 25 years for his role in an $11-billion accounting fraud, and L. Dennis Kozlowski of Tyco International Ltd. received a sentence of eight and one-third to 25 years in prison in another fraud case.

Forbes was released Wednesday on $1.2 million bond. No date was set for him to report to prison. His attorney, Brendan Sullivan, indicated in court that Forbes planned to appeal. Both Sullivan and Forbes declined to comment as they left U.S. District Court.

Prosecutors said they would oppose a defense request for Forbes to remain out on bail pending his appeal. Senior U.S. District Judge Alan H. Nevas agreed to a defense request to recommend that Forbes serve his time at a minimum-security federal prison camp in Otisville, N.Y.

The case was being tried after two previous juries deadlocked. Jurors reached the verdict after nearly three days of deliberations.

Forbes faced a sentence of 12 years and seven months to 15 years and eight months under federal guidelines. The 64-year-old New Canaan, Conn., resident asked for leniency based on his age and charity work.

"He has a long history of good conduct, a long history of being helpful in the community," said Sullivan, who had asked for a 10-year sentence.

But Nevas noted that Forbes was worth about $200 million when he was giving to charity.

"Relatively speaking, it seems to me with that net worth, and that amount of income, that $2.5 million of charitable giving is very modest," Nevas said.

Prosecutors said that Forbes participated in a scheme to inflate the stock of Cendant's predecessor, CUC International Inc., by $500 million.

The fraud was reported in 1998, causing Cendant's market value to drop by $14 billion in one day. Prosecutors said Wednesday that there were 119,000 victims.

Forbes, who testified during the trial, has argued that he knew nothing about the fraud. His codefendant, former Cendant Vice Chairman E. Kirk Shelton, was convicted in 2005 of conspiracy, mail fraud, wire fraud, securities fraud and making false statements to the SEC.

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