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. Attorney Chris Christie, whose office prosecuted the case. “The public has waited many years for Walter Forbes to be brought to justice.”
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 intends to appeal. Both Sullivan and Forbes declined to comment as they left U.S. District Court.
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 between 12 years and seven months and 15 years and eight months under federal guidelines. The 64-year-old New Canaan 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 Senior U.S. District Judge Alan H. 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 say that Forbes participated in a scheme to inflate the stock of Cendant’s predecessor, CUC International, 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 he knew nothing about the fraud. His co-defendant, 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.
Shelton was sentenced to 10 years in prison and ordered to pay $3.27 billion restitution to the company, which stockholders renamed Avis Budget Group. He is appealing his convictions.
Forbes was chief executive officer of CUC and Shelton was president before the membership marketing operation merged with travel and real-estate services company HFS Inc. to form New York-based Cendant in December 1997.
Cendant’s brands included Ramada, Howard Johnson, Avis, Coldwell Banker and Century 21.
Cendant was based in New York, but the litigation has been in Connecticut because the CUC division was headquartered in Stamford at the time the fraud occurred. The case was prosecuted by the New Jersey U.S. Attorney’s office because HFS was headquartered in Parsippany, N.J.
In September, Cendant stockholders changed the company’s name to Avis Budget Group to reflect its Avis and Budget vehicle rental brands. Its real estate and hotel businesses were spun off as stand-alone companies and the company sold its travel distribution operations.