As investors take a closer look at the Cendant (CD) debacle, they will surely ask: Who knew what when?

It's a darn good question.

Last Thursday, the company announced the resignations of several top Cendant executives -- all former employees of CUC International: Cosmo Corigliano, former chief financial officer at CUC in charge of accounting; Kirk Shelton, former CUC chief operating officer; and Amy Lipton, former general counsel at CUC. Cendant was formed when CUC and HFS merged last year.

This Wednesday, after the market closed, Cendant announced the discovery of "potential accounting irregularities" in former CUC business units.

Cendant said the CUC business units involved had become a part of Cendant's newly named Alliance Marketing Division, which is headed by John Fullmer and Tony Menchaca -- the two who had replaced Shelton a week before.

Included in the release that announced the resignations were bullish statements made by Cendant's chairman, Walter Forbes, and its president and CEO, Henry Silverman. "Cendant expects to report first-quarter 1998 earnings on May 5th and expects to meet or exceed current Street estimates," the release said. "Our fundamentals remain extremely strong. We continue to be excited about our business," stated Forbes and Silverman in the press release.

Now, it's perfectly possible that the resignation of the former CUC executives occurred prior to Cendant's discovery of accounting irregularities. Perhaps, the irregularities were discovered after the resignations and are not at all related. If that's the case, the bullish statements made by the Cendant execs were not made with prior knowledge of a material fact that could possibly be related to the company's outlook.

Cendant declined to comment on the sequence of events. "We're not going to comment on timing," a spokesman said.

But here's another piece: The New York Times reported Thursday that, on the day Cendant issued its press release about the resignations, HFS employees took over a CUC department's accounting operations as part of preparing for its first-quarter earnings results. "Within a day, they spotted numerous problems," the Times said, citing a "person close to the situation."

Thus, if the Times is accurate, then the press release about resignations was issued on the same day the company spotted numerous problems in CUC's accounting. That raises the question of how many of these problems were known when the release was issued.

If the company knew there were problems when it issued a bullish press release, it could be a "material misstatement of fact" or a "material omission."

"There are a lot of questions here that are being analyzed, and there may be material statements and omissions that were made by people at Cendant," says securities lawyer Joel Bernstein of New York's Goodkind, Labaton, Rudoff & Sucharow.

Weakening the notion that the company knew about the irregularities last week is another statement in The New York Times' story. The Times' source "close to the situation" said that "employees who were believed to be responsible could be dismissed within the next few days." If that's the case, it would be tougher to tie last week's resignations to this week's announcement of accounting irregularities.

Also in Cendant's favor, the company did reaffirm last night that it planned to make its first-quarter earnings estimates, as the Thursday release said. And it remained bullish on its prospects.

It's one thing to be bullish on your prospects when everyone knows your bad news. And it's another when no one does.

For an earlier TSC story on insider activity at Cendant, please click here .