It has taken six years to bring the top executives charged in Cendant Corp.'s (CD) accounting scandal to trial. But on Apr. 19, jury selection finally began in the trial of Walter A. Forbes, 61, former Cendant chairman, and E. Kirk Shelton, 49, former vice-chairman. Both were top execs at CUC International Inc., where the scandal began and which merged with Henry R. Silverman's HFS Inc. to form Cendant in 1997. The funny numbers surfaced a few months later. Forbes and Shelton, whose lawyers could not be reached for comment, have been indicted on numerous federal charges, including securities fraud and wire fraud. Both plead not guilty.
What took so long for the wheels of justice to turn? An aggressive defense team filed scores of pretrial motions raising everything from whether the two men should be tried separately (they will be tried together) to where the case should be heard. The defense successfully argued that the trial be held in the state where CUC operated, causing further delay as the venue switched to Hartford, Conn., from New Jersey.
Paul A. Weissman, lead prosecutor on the case before leaving for the private sector in February, 2002, says the long lag between the eruption of the scandal and the trial might aid the defense. "Memories fade," he says. "The case acquires a feeling of staleness. Things that seemed urgent a long time ago don't seem urgent."
Whether or not Forbes and Shelton benefit from the passage of time, their lawyers can't complain. Under Delaware law, where Cendant is incorporated, the company has to foot the defendants' attorney bills. Cendant says that recent tabs have hit $1 million a month just for Forbes. The good news for the company is that if Forbes and Shelton are found guilty, they'll have to reimburse Cendant.