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July 14, 1998

CENDANT TO RESTATE FIGURES AFTER ‘INTENT TO DECEIVE’

By CBR Staff Writer

Cendant Corp, the direct marketing company with ambitions to be a big player in software and multimedia, revealed a major financial scandal that will force the company to restate figures for the past three years. The shares, which have been over $40 in the past year, slumped 10% to a new low of $16,87 after the company discovered what it and its auditors refer to as accounting errors made with an intent to deceive. Cendant was created last December by an $11bn merger of HFS Inc and CUC and the board puts the blame firmly on former CUC officers. While Cendant warned of the fraud in April, it has proved much worse than expected and both the Securities and Exchange Commission and the United States Attorney’s office are showing an intense interest. A forensic audit discovered a string of irregularities including recording of fictitious revenues and irregular charges against merger reserves. On top of all its other problems, Cendant says that lower earnings at its consumer software unit will leave overall earnings one cent less than expected in the second quarter. Cendant owns leading consumer software brands such as games developer Sierra On-Line, multimedia educational and entertainment outfit Davidson & Associates, games developer Blizzard Entertainment and Knowledge Adventure, which specializes in educational software. It also runs World Opponent Network, a free internet games site.

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