Cendant pair on fraud charges

US regulators last week charged two top officers at Cendant Corporation, one of the world's largest hotel franchisors, with directing a massive financial fraud which has cost the company billions of dollars.

The fraud was unearthed in April 1998, after CUC International merged with HFS International in late 1997 to form Cendant, whose hotel brands include Howard Johnson, Days Inn and Ramada.

The US Securities and Exchange Commission (SEC) claims that Walter A Forbes, chairman and chief executive officer at CUC, directed the fraud from its start in 1985 and was joined by president and chief operating officer E Kirk Shelton in 1991.

They are accused of making false financial statements to sell company shares at higher prices. According to the commission, they inflated pre-tax income for 1995 to 1997 by over $500m (£340m).

Nine directors resigned after Cendant discovered the fraud in April 1998, including Shelton, who became a director and vice-chairman after the merger, and Forbes, who became Cendant's chairman.

Cendant's stocks plummeted after the disclosure and the company said last summer it was seeking substantial damages from former CUC executives Shelton and Stuart Bell. It warned it would take action against Forbes if he was convicted of the fraud.

The company has paid out $340m (£232m) to settle an action from shareholders and last year announced it would pay another $2.83b (£1.93b).