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Admittedly, my perspective is skewed, but when I look back on the great



debacle of 1998, what I remember most is how very nearly Cendant insiders caught the top. Given the saga that unfolded (indeed, continues to unfold), the 4.7 million shares sold by Cendant officers and directors between Feb. 4 and April 7, 1998 (the last, a mere eight days before the stock plunged some 50%) have been largely forgotten.

For nearly two years, as Cendant has struggled mightily to re-establish its credibility, company insiders have kept a low profile -- by Cendant standards at least. In fact, there were periods, most notably in late autumn of 1998, when insiders were net accumulators of Cendant shares. All that has changed, however. From Feb. 4 through Feb. 8, seven Cendant insiders filed

Form 144

intentions to sell a total of just under 4.7 million shares at indicated prices ranging from $19.88 to $22.25 per share.

Just like old times, Chairman, President and CEO Henry Silverman led the way, disposing of roughly 1.8 million shares -- though to be fair (and as Cendant's Feb. 4 news release makes abundantly clear), Silverman did exercise options to acquire 3 million shares. Among the remaining sellers, Vice Chairman and General Counsel James Buckman filed his intention to sell 418,152 shares, while Vice Chairman Stephen Holmes and Director John Snodgrass accounted for 341,241 shares and 1,341,271 shares, respectively. Notably, all were sellers in the months preceding the 1998 collapse.

Cendant's news release makes no mention of the stock sales by these directors. A Cendant spokesman did confirm the sales, however, characterizing Silverman's transaction as a cashless exercise, whereby he actually increased his common holdings from 300,000 shares to 1.5 million shares. According to Cendant, the 1.8 million shares were sold to cover the cost of exercising the options and to satisfy charitable obligations.

As for the remaining directors and officers, the company spokesman points out that stock options are integral to Cendant executives' compensation, and that the activity was "motivated by personal financial planning reasons." He refused to comment on the timing of the sales.

Unfortunately, more than anything, it's the timing that is of interest -- if for no other reason than because the activity marks the first significant round of sales since the stock's meltdown in April 1998.

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Much more important, the sales occurred not only after Cendant popped from the mid-teens to its 52-week high of nearly 27 on news that

Liberty Media


would invest $400 million for a 2.5% stake in the company, but even as the stock began to give back those gains. As an added twist, Liberty's Chairman and CEO John C. Malone committed to purchase 1 million shares even as Cendant directors were making known their intentions to sell.

To be sure, the luster of the Liberty investment may yet boost Cendant's struggling shares. So too may a recent spate of press features, including an almost flattering

Business Week

cover story, which could hint at a softening regard both for Cendant and for front man Silverman. Investors should have been cheered in December when the company agreed to pay its shareholders $2.83 billion to settle numerous allegations of accounting irregularities stemming from the 1998 misstep.

Many investors remain wary, however, and perhaps they should. Silverman has made known his regret that he accepted the decision to reprice executive options downward in 1998, but what's done is done. What's more, Silverman has already announced that he will be exercising additional options (not repriced) due to expire in 2001. It's less clear what he plans to do with the shares. The recent insider sales at depressed prices are hardly encouraging.

More than anything, I guess, I'm troubled by the corporate release (and ensuing press) touting Silverman's 1.2 million-share "acquisition." Don't get me wrong. I don't dispute the facts -- much less that Silverman holds an extremely healthy Cendant stake. But why all the fanfare? I mean, when an insider exercises 3 million options and dumps more than half of the shares acquired, headlines like "Cendant Chairman Raises Stake" just don't ring true.

Bob Gabele has been tracking and analyzing insider trading since 1978, most recently for First Call/Thomson Financial. This column is not meant as investment advice; it is instead meant to provide insight into the methods of insider trading. At time of publication, Gabele held no position in any of the companies discussed in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Gabele appreciates your feedback at