ANNOUNCEMENT OF FRAUD
The high expectations of management and investors were severely deflated in April 1998, when Cendant announced a massive financial reporting fraud misstating CUC's 1997 financial statements, which were issued prior to the merger with HFS. The fraud was discovered when responsibility for Cendant's accounting functions was transferred from former CUC personnel to former HFS personnel. Initial estimates provided by senior management of Cendant were that CUC's 1997 earnings would need to be reduced by approximately $100 million to $115 million.