In December 1997 Hospitality Franchise Systems, Inc. (HFS) and CUC International Inc. merged to form Cendant Corporation. Cendant operated as the world’s largest hotel franchiser bearing the names Ramada Inn, Super 8, and Fairfield Resorts to name a few. Cendant also operated the second largest rental car business in the world through its Avis brand. They also operated real estate franchises, membership programs, and travel services such as Century 21 Real Estate, Coldwell Banker, Shopper’s Advantage, AutoVantage, CheapTickets, Orbitz, and others. In 2005 Cendant’s board of directors approved a deal to spinoff three of its businesses in 2006 and the Cendant name was completely retired and took on the name Avis Budget Group. Before the spinoff…show more content… Although this fraud was charged against Cendant Corporation, most of the fraud was committed at CUC International, Inc. prior to the merger with Hospitality Franchise Systems, Inc. The activities persisted for a short period at Cendant which is believed to be facilitated by former CUC employees. Cosmo Corigliano, CFO of CUC, told the judge that fraud activities started around 1983 when the company went public. Corigliano was 23 years old and joined the company after he left his former employer Ernst & Whinney (Sweeney, 2000). The auditors did not trace the fraud back that far and only focused on fiscal years 1995 to 1997. Shortly after the merger, Arthur Andersen & Co., New York law firm Willkie Farr & Gallagher, and assistance from Cendant’s auditors Deloitte & Touche released a 260-page forensic audit report that brought the CUC fraud to light. The report concluded that CUC and Cendant fabricated roughly $500 million in revenue and pretax income from 1995 to 1997 and also overstated its earnings by another $200 million through improper accounting. The fraud was detected by HFS executives and disclosed by Cendant just days after the $14 billion merger. The fabricated revenue came from a few sources. The report found that operating income of CUC had been inflated in 17 of their 22 operating units from numerous unsupported entries that were made by CUC subsidiaries (CNN Money, 1998). The direction for these…show more content… The two individuals that received the worst punishment are Walter Forbes and E. Kirk Shelton. It is said that there was no direct evidence of Walter Forbes being involved with the fraud, but arguments suggest being the CEO of CUC he should have put adequate checks and balances in place. Forbes was convicted in 2007 on one count of conspiracy to commit securities fraud and two counts of making false statements for inflating income. He was sentenced to over 12 years in prison and ordered to pay restitution of $3.28 billion (Bio, 2014). It’s mentioned that Shelton was one of the executives that passed down orders to make certain journal entries to boost CUC’s earnings to meet Wall Street’s expectations. For Shelton’s role in the fraud he was convicted in 2005 on 12 counts of conspiracy, mail fraud, wire fraud, securities fraud and making false statements to the SEC. He was sentenced to 10 years in prison and ordered to pay restitution of $3.28 billion (Haigh, 2005). Cosmo Corigliano, former CFO of CUC, pleaded guilty in 2007 to two counts of fraud. He served three years of probation, including six months of home confinement with electronic monitoring, and 300 hours of community service. He also had to pay $14 million in civil charges. He served no jail time because he testified against Forbes and Shelton (Taub, 2007). Anne