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Chief Executive Was Paid Millions and He Never Noticed the Fraud

Chief Executive Was Paid Millions and He Never Noticed the Fraud

by Rick Turoczy on January 7, 2005

As chief executive of CUC International, Walter A. Forbes presided over a company whose books told lies for more than a decade. When the fraud was uncovered in 1998, after CUC had merged into the Cendant Corporation, it was the largest accounting fraud in American history.

This week, after a trial that lasted seven months and deliberations that lasted another month, a federal court jury convicted CUC’s No. 2 executive, E. Kirk Shelton. But it was unable to reach a verdict on Mr. Forbes.

That there was a fraud is not in question. For many years, CUC inflated its revenues and hid expenses. “The defense of Walter Forbes is that he didn’t know about it,” said Brendan Sullivan, his lawyer, in closing arguments. He blamed it all on Cosmo Corigliano, the former chief financial officer and the prosecution’s chief witness. Mr. Corigliano testified that he briefed Mr. Forbes using “cheat sheets” that showed how the revenues and profits were being inflated, but Mr. Forbes denied that. Mr. Sullivan branded Mr. Corigliano a “serial liar” and a “con man.”

Mr. Forbes said he saw no need to pay attention to what was happening inside the company. He worked on “the strategy vision part, talking to key clients, being the outside voice of the company,” he testified. “I think I was much more valuable to shareholders doing that than being in day-to-day operations.”

Chief Executive Was Paid Millions and He Never Noticed the Fraud

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