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A federal grand jury in New Jersey indicted two former top officials of Cendant (CD) - Get Free Report and CUC International on Wednesday, charging them with conspiracy to commit wire fraud and making false statements in reports filed with federal securities regulators.


Securities and Exchange Commission

also filed civil charges against the officials, former Cendant Chairman Walter Forbes and the company's former vice chairman, Kirk Shelton. The SEC claims the men committed "a massive financial fraud" while selling CUC stock, including inflating the company's operating income by over $500 million between 1995 and 1997.

"As this case graphically illustrates, large, complex and long-running financial frauds often originate at the highest levels of a company," SEC Director of Enforcement Richard Walker said in a statement.

Shelton, who was president and chief operating officer of CUC when it merged with


in 1997 to form Cendant, is innocent of all of the charges leveled against him Wednesday, according to his lawyers. "Mr. Shelton did not participate in the fraud that occurred at CUC/Cendant," Shelton's legal counsel said in a statement. "When all of the evidence emerges, Mr. Shelton's innocence will be clear."

Forbes had been chief executive officer of CUC before Cendant was formed. In a statement after the indictment and SEC charges were filed Wednesday, Forbes said: "I am totally innocent of the charges brought against me, and will fight them in court."

Both Forbes and Shelton resigned from Cendant in 1998 amid

widely publicized concerns about the company's financial health.

Cendant on Wednesday declined to comment on the specific charges against the two men. "Since the discovery of the fraud at the former CUC nearly three years ago, we have supported any effort seeking to hold accountable all persons responsible," the firm said in a statement. "The employees and shareholders of our company have moved well beyond this episode in our history and will await the outcome of this issue as determined by the civil and criminal justice system."

The indictment announced Wednesday accuses Forbes and Shelton of inflating CUC's earnings reports and its projections of future earnings to induce HFS to merge with CUC.

The SEC, in its action, said that when the fraud committed by Forbes and Shelton was made public in 1998, Cendant's stock plummeted, costing the company's investors billions of dollars overnight. That stock price plunge garnered considerable

press attention.

Cendant is a New York-based franchiser of hotels, rental car agencies, tax preparation services and real estate concerns, including

Century 21




Days Inn