Plaintiff, by his undersigned attorneys, alleges upon personal knowledge as to himself and, as to all other matters, upon information and belief, based upon the investigation conducted by counsel, including a review of Securities and Exchange Commission ("SEC") filings, news reports, press releases, and other documents.

2. On December 18, 1997, Cendant was created through the merger ("Merger") of CUC International Inc. ("CUC") and HFS Incorporated ("HFS") with CUC surviving and being renamed Cendant Corporation. The Merger was accomplished through a $14 billion stock swap combining CUC and HFS.

3. During the Class Period, defendants artificially inflated the price of Cendant stock by making material misrepresentations about the Company, its business and its financial results. Defendants purposely or recklessly reported revenue and earnings in contravention of generally accepted accounting principles ("GAAP").

4. By falsely portraying the Company's financial condition, defendants inflated the price of Cendant common stock during the Class Period. On April 15, 1998, Cendant announced that it expects to restate annual and quarterly net income and earnings per share for 1997 (the "Restatement") and may restate certain other previous periods related to the former CUC businesses. The Company further announced that based on presently available information, the effect of the Restatement is expected to be a reduction to net income prior to restructuring and unusual charges of approximately $100-115 million and earnings by about 11 to 13 cents per share, respectively. On April 16, 1998, the first trading day after the April 15 announcement, Cendant's stock price collapsed, trading as low as $ 17 per share, more than fifty percent lower than its price of $35 5/8 per share on April 15 when trading in its stock was halted. The stock price drop resulted in a loss of $14 billion of market capitalization, the equivalent of the Merger's entire value four months ago.

6. Venue is proper in this District because many of the acts complained of, including the dissemination of false and misleading news releases and SEC filings, occurred here.

7. In connection with the acts, conduct and other wrongs complained of herein, defendants, directly and indirectly, used the means and instrumentalities of interstate commerce and the United States mails, and the facilities of the national securities markets.

9. CUC was a corporation organized and existing under the laws of Delaware, with its principal executive offices at 6 Sylvan Way, Parsippany, New Jersey, 07054. CUC engaged in a wide variety of businesses, including, among other things, offering consumer software and discount programs on a wide variety of consumer products and services. The Company's stock was actively traded in the United States on the New York Stock Exchange ("NYSE"), an open and efficient market, under the symbol "CU" and prior to its merger with HFS, Inc. (as more fully described below) it had issued and outstanding approximately 424 million shares of common stock.

10. Cendant is a corporation organized and existing under the laws of Delaware, with its principal executive offices at 6 Sylvan Way, Parsippany, New Jersey, 07054 and 707 Summer Street, Stamford Connecticut, 06901. Cendant is engaged in a wide variety of businesses, including, among other things, offering discount programs on a wide variety of consumer products and services. The Company's stock is actively traded in the United States on the NYSE, an open and efficient market, under the symbol "CD". HFS (not named as a defendant herein) stock was also actively traded in the United States on the NYSE prior to the merger between it and CUC. Under the terms of the Merger between CUC and HFS which was agreed to on May 27, 1997, HFS shareholders received 2.4031 shares of CUC common stock for each share of HFS stock.

11. Defendant E. Kirk Shelton ("Shelton") was at all relevant times president, chief operating officer ("COO") and a director of CUC and Vice-Chairman of Cendant until his resignation, which was announced on or about April 9, 1998. Because of Shelton's positions with CUC and Cendant, he had access to adverse, material, non-public information about CUC's and later Cendant's business, finances, products, markets, and results of operations.

12. Defendant Cosmo Corigliano ("Corigliano") was at all relevant times a senior vice-president and chief financial officer ("CFO") of CUC and then an executive vice-president of Cendant until his resignation, which was announced on or about April 9, 1998. Because of Corigliano's positions with CUC and Cendant, he had access to adverse, material, non-public information about CUC's and later Cendant's business, finances, products, markets, and results of operations.

13. Defendant Walter A. Forbes ("Forbes") was at all relevant times chairman and chief executive officer ("CEO") of CUC and is Chairman of Cendant. As of December 31, 1997, Forbes owned approximately 4.6 million shares of CUC's outstanding common stock, including options. Because of Forbes' positions with CUC and Cendant and substantial stock ownership, he had access to adverse, material, non-public information about CUC's and later Cendant's business, finances, products, markets, and present and future business prospects. On March 9, 1998, and while in possession of materially adverse, non-public information, Forbes sold 300,000 shares of Cendant stock as detailed in paragraph 42 below. By selling the shares, Forbes avoided a loss on April 16 of $5.7 million.

14. Throughout the Class Period, CUC and later Cendant acted through Shelton, Corigliano and Forbes (collectively the "Individual Defendants") whom it portrayed and represented to the financial press and the public as its valid representatives.

15. By reason of their positions of control as senior executives of the Company, the Individual Defendants were able to and did, directly or indirectly, control the contents, timing and issuance of the statements and press releases to the public and to the investment community during the Class Period. The Individual Defendants had access to and/or had actual knowledge of material facts about the Company and had a duty to disseminate only truthful and accurate information to the public and to the investment community, and to promptly correct materially false and misleading statements disseminated by CUC and Cendant so that the price of its stock would be based on accurate and complete information. Accordingly, the Individual Defendants are controlling persons within the meaning of Section 20 of the Exchange Act.

17. The members of the Class are so numerous that joinder of all members is impracticable. While the exact number of Class members is unknown to plaintiff at this time, and can be only ascertained through discovery, there were as of March 20, 1998, 11,727 shareholders of record of Cendant and likely tens of thousands more beneficial shareholders. Cendant had approximately 843 million shares of common stock issued and outstanding as of March 20, 1998. Record owners and members of the Class may be identified from records maintained by CUC and Cendant and/or their transfer agents who may be notified of the pendency of this action using the form of notice similar to that customarily used in securities class actions.

18. Plaintiff's claims are typical of the claims of the members of the Class. Plaintiff will fairly and adequately protect the interests of the Class and has retained counsel competent and experienced in class and securities litigation.

19. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. Since the damages suffered by the Class may be relatively small, the expense and burden of individual litigation makes it virtually impossible for members of the Class to seek redress individually for the wrongful conduct alleged.

20. Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting solely individual Class members. Among the questions of law and fact common to the Class include whether:

(a) defendants violated the federal securities laws as alleged herein;

(b) defendants participated in and pursued the common course of conduct complained of;

(c) documents, releases, and financial statements disseminated to the investing public during the Class period omitted and/or misrepresented material facts about Cendant's financial condition;

(d) defendants acted knowingly or recklessly in omitting and/or misrepresenting material facts about CUC's and Cendant's financial condition;

(e) the market prices of CUC and Cendant common stock were artificially inflated or maintained due to the material non-disclosures and/or misrepresentations complained of herein; and

(f) the members of the Class have sustained damages and, if so, what is the proper measure of such damages.

(a) CUC common stock met the requirements for listing, and was listed and actively traded, on the NYSE, a highly efficient market;

(b) as a regulated issuer, Cendant filed periodic public reports with the SEC and the National Association of Securities Dealers;

(c) Cendant regularly communicated with public investors via established market communication mechanisms, including through regular disseminations of press releases on the national circuits of major newswire services and through other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services; and

(d) Cendant was followed by several securities analysts employed by major brokerage firms who wrote reports that were distributed to the sales force and certain customers of their respective brokerage firms.

Defendants' False And Misleading Financial Statements

25. The financial information contained in the May 28 press release was reiterated in CUC's Form 10-Q for the quarter ended April 30, 1997, filed with the SEC on or about June 16, 1997 ("1Q 10Q"). In the 1Q 10-Q, signed by defendants Forbes and Corigliano, defendants falsely represented that:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted principles for the interim financial information.... .

In the opinion of management of CUC International, Inc. (the "Company"), all adjustments (consisting of normal occurring accruals) considered necessary for a fair presentation have been included.

27. On September 4, 1997, CUC announced its financial results for its second fiscal quarter ended July 31, 1997 ("September 4 press release"). CUC stated that its revenues for the second quarter increased 21% to $672.7 million, as compared to $555.7 million for the same quarter a year ago. CUC's net income increased 128% to $92.3 million versus $40.5 million for the same period a year ago. On a per share basis, CUC reported $0.22 per share for the second quarter.

28. For the six-month period ended July 31, 1997, CUC stated that its revenues increased 21% to $1,297.4 million from $1,071.2 million for the same period a year earlier, and that year-to-date net income grew 76% to $162.8 million, as compared to $92.6 million for the same period a year earlier. On a per share basis, CUC reported net income for the first six months of $0.38 per share versus $0.29 per share for the same period a year earlier, which excludes after tax costs ($0.06 per share) incurred in conjunction with the acquisitions of Sierra On-Line, Inc. and Davidson & Associates, Inc.

29. In commenting on the second quarter results, defendant Forbes stated, "Our second quarter represented a milestone for CUC, the members we serve, and our shareholders. CUC reported record financial results, which reflect the continued strength of our core membership services. We continue to successfully market our services to consumers throughout the world and follow-up with superior customer service. The result is a highly satisfied membership base and the attendant high renewal rates."

30. The financial information contained in the September 4 press release was reiterated in CUC's Form 10-Q for the quarter ended July 31, 1997, filed with the SEC on or about September 15, 1997 ("2Q 10Q"). In the 2Q 10-Q, signed by defendants Forbes and Corigliano, defendants falsely represented that:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted principles for the interim financial information . . . .

In the opinion of management of CUC . . . , all adjustments (consisting of normal occurring accruals) considered necessary for a fair presentation have been included.

32. On December 2 1997, CUC announced its financial results for its third fiscal quarter ended October 31, 1997 ("December 2 press release"). CUC announced that its revenues for the third quarter increased 22% to $774.7 million from $633.3 million for the same quarter a year earlier. Net income increased 38% to $100.9 million, as compared to $73.2 million, before a one-time restructuring charge related to Ideon Group, Inc., for the same period a year earlier. Earnings per share increased 35% to $0.23.

33. CUC further announced that for the nine month period ended October 31, 1997, revenues increased 22% to $2.2 billion from $1.8 billion for the same period a year ago. Year-to-date net income increased to $268 million versus $192.1 million for the same period a year ago. On a per share basis, net income for the nine month period was $0.61 per share versus $0.46 per share for the same period a year ago, which excluded after-tax costs ($0.28 per share) incurred in conjunction with the acquisitions of Sierra On-Line, Inc., Davidson & Associates, Inc. and Ideon Group, Inc.

34. In commenting on the third quarter results defendant Forbes stated "We are pleased to report another quarter of record results for CUC. Our ability to continue experiencing strong membership growth reflects the value our services offer consumers. Our core business remains strong, with solid growth prospects both in domestic and international markets."

35. The financial information contained in the press release was reiterated in CUC's Form 10-Q for the quarter ended October 31, 1997, filed with the SEC on or about December 15, 1997 ("3Q 10Q"). In the 3Q 10-Q, signed by defendants Forbes and Corigliano, defendants falsely represented that:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted principles for the interim financial information . . . .

In the opinion of management of CUC, all adjustments (consisting of normal occurring accruals) considered necessary for a fair presentation have been made.

37. In connection with the Merger, a registration statement on Form S-4, containing a prospectus and proxy statement (the "Offering Materials") was disseminated by, among others, CUC. The Offering Materials incorporated by reference, inter alia, the 3Q 10Q, which was false and misleading for the reasons described above.

38. On February 4, 1998, Cendant (CUC and HFS having consummated their merger in December, 1997) announced its financial results for its fourth fiscal quarter ended December 31, 1997. Cendant announced, on a diluted earnings per share basis, record results of $.28, excluding one-time charges related to the merger between HFS and CUC and other unusual charges, representing a 47 percent increase over the $.19 earnings per share reported for the same quarter in 1996. Revenues increased 28 percent to $1,424.7 million versus $1,108.8 million for the same quarter a year ago. Net income for the 1997 fourth quarter increased 51 percent to $244.5 million, excluding the one-time charges, versus $162.2 million for the 1996 fourth quarter.

39. For the year ended December 31, 1997, Cendant reported diluted earnings per share of $1.00, a 49 percent increase over the $.67 earnings per share reported for 1996, excluding one-time charges recognized in both 1997 and 1996. Revenues increased 36 percent to $5.3 billion as compared to $3.9 billion for the year ended December 31, 1996. Net income for 1997 increased 61 percent to $872.2 million, excluding one-time charges. When giving effect to one-time charges, Cendant reported $.06 diluted earnings per share for the year ended December 31, 1997.

40. Defendant Forbes noted at the time: "We believe we have created one of the most dynamic growth companies in the world. Together with Henry (Silverman) and the rest of our management team, we have the resources to create revenue and earnings growth across all of our industry segments. We have already proven that we can successfully market membership programs to hotel guests and mortgages to home buyers, and this is just the beginning."

41. The financial information contained in the February 4 press release was reiterated in Cendant's Form 10-K for the year ended December 31, 1997, and filed with the SEC on or about March 31, 1998 ("10-K"). In the 10-K, signed by, among others, all of the Individual Defendants, the defendants' auditors, Deloitte & Touche LLP represented that the consolidated financial statements in the 1997 10-K present fairly in all material respects the financial condition of Cendant and its subsidiaries as of December 31, 1997.

42. The statements and financial results discussed in the February 4 press release and 10-K were false and misleading because, as explained in detail below, these documents did not accurately report Cendant's earnings, and defendants failed to disclose that CUC's reported financial results did not comply with generally accepted accounting principles ("GAAP").

43. During the Class Period, defendant Forbes and other senior CUC and Cendant executive officers and/or directors sold substantial amounts of CUC and/or Cendant common stock with knowledge of material, non-public, adverse information, as set forth in this Complaint, and realized substantial proceeds therefrom, for example, defendant Forbes sold Cendant stock as detailed on the chart below:
 

44. The statements and financial results described above were false and misleading because, on April 15, 1998, Cendant announced that it expected to restate annual and quarterly net income and earnings per share for 1997 and might restate certain other previous periods related to the former CUC businesses. The Company further announced that based on presently available information, the effect of the restatement on 1997 results is expected to be a reduction to net income prior to restructuring and unusual charges of approximately $100-115 million and earnings by about 11 to 13 cents per share, respectively. Moreover, defendants admitted that 1998 financial results would also be adversely impacted by accounting irregularities that had characterized CUC's and Cendant's financial reporting practices.

45. Defendants knew, or recklessly disregarded, that Cendant's financial statements, were materially false and misleading for the reasons set forth herein, and were presented in a manner that violated the principles of fair financial reporting and the following GAAP, among others:

a. the principle that financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit and similar decisions (FASB Statement of Concepts No. 1);

b. the principle that financial reporting should provide information about an enterprise's financial performance during a period (FASB Statement of Concepts No. 1);

c. the principle that financial reporting should be reliable in that it represents what it purports to represent (FASB Statement of Concepts No. 2);

d. the principle of completeness, which means that nothing material is left out of the information that may be necessary to ensure that it validly represents underlying events and conditions (FASB Statement of Concepts No. 2);

e. the principle that conservatism be used as a prudent reaction to uncertainty to try to ensure that uncertainties and risks inherent in business situations are adequately considered (FASB Statement of Concepts No. 2);

f. the principle that the accounting method applied should be appropriate in the circumstance (AU 411.04);

g. the principle that the financial statements should reflect the underlying events and transactions in a manner that presents the financial position and the results of operations within a range of acceptable limits that were reasonable and practicable to attain accuracy in financial statements (AU 411.04);

h. the principle that the quality of reliability and, in particular, of representational faithfulness leaves no room for accounting representations that subordinate substance to form (Statement of Financial Accounting Concepts No. 2, paragraph 160);

Defendants' Knowledge or Reckless Disregard of
the False and Misleading Financial Statements

(a) During the Class Period, the Defendant Forbes and other CUC and Cendant executives sold substantial amounts of CUC and Cendant stock on the open market, reaping substantial profits; and

(b) Defendants Forbes and Corigliano were signatories on the 10Qs and all of the Individual Defendants, among others, were signatories on the 10-K.

(c) Both CUC and Cendant used, at least in part, their artificially inflated stock as currency during the Class Period (and intended after the Class Period) to acquire several different companies totaling several billion dollars, to wit: (i) On August 13, 1997 CUC signed a definitive share purchase agreement to acquire Hebdo Mag International, Inc. in a stock transaction valued at approximately $440 million dollars and; (ii) In March, 1998 Cendant entered into an agreement to acquire American Bankers Insurance Group ("ABI") for $3.1 billion for cash and stock.

49. Throughout the Class Period, defendants individually and in concert, directly and indirectly, used the means or instrumentalities of interstate commerce or of the mails to engage and participate in a continuous course of conduct and conspiracy to knowingly or recklessly disseminate false and misleading information and to conceal and omit to disclose adverse material information about CUC's and Cendant's financial conditions, as specified above. Defendants knowingly and recklessly employed devices, schemes, and artifices to defraud, and engaged in acts, practices, and a course of conduct designed to assure investors of CUC's and Cendant's strong financial conditions. Such course of conduct by defendants included the making of, or participation in the making of, untrue statements of material facts necessary in order to make the statements made about CUC and Cendant, in the light of the circumstances under which they were made, not misleading, and engaged in transactions, practices and courses of business, which operated as a fraud and deceit upon the purchasers of Cendant's common stock during the Class Period.

50. Defendants, individually and in concert, directly and indirectly, by the use, means or instrumentalities of interstate commerce and/or the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about the businesses and operations of CUC and Cendant as specified herein. In the course of such activities, they issued materially false and misleading statements as alleged above. Defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a course of conduct as alleged herein in an effort to encourage investors to believe in CUC's and Cendant's value and performance and likely substantial growth, which included the making of, or the participation in the making of, untrue statements of material facts and omissions to state material facts necessary in order to make the statements made about CUC and Cendant and their business operations, in the light of the circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a course of business which operated as a fraud and deceit upon the purchasers of CUC and Cendant securities during the Class Period.

51. The primary liability and controlling person liability of the Individual Defendants arises from the following facts: they were high-level executives of both CUC and Cendant during the Class Period; by virtue of their responsibilities and activities as senior executive officers of the Company, each was privy to and participated in the creation, development, and reporting of the CUC's and Cendant's internal budgets, plans, projections and/or reports; each defendant enjoyed significant personal contact with and had access to other members of CUC's and Cendant's management team, internal reports, and other data and information, and each was aware of the CUC's and Cendant's dissemination of information to the investing public, which each knew, or recklessly disregarded, was materially false and misleading.

52. Defendants had actual knowledge of the misrepresentations and omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to disclose such facts, even though such facts were available to them. Such material misrepresentations and/or omissions were made knowingly or recklessly and for the purpose and effect of concealing CUC's and Cendant's true financial condition from the investing public and supporting the artificially inflated price of their respective stocks. As demonstrated by the defendants' overstatements and misstatements of CUC's and Cendant's businesses, operations and earnings through the Class Period, the defendants, if they did not have actual knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining from taking those steps necessary to discover whether those statements were false and misleading.

53. As a result of the dissemination of the materially false and misleading information and failure to disclose material facts, as set forth above, the market price of CUC's and Cendant's common stock were artificially inflated during the Class Period. In ignorance of the fact that market prices of CUC's and Cendant's publicly-traded securities were artificially inflated, and relying directly or indirectly in the false and misleading statements made by defendants, or upon the integrity of the market in which they securities trade, and the truth of any representations made to appropriate agencies as to the investing public, at the time at which any statement was made, and/or on the absence of material adverse information that was known to or recklessly disregarded by defendants but not disclosed in public statements by defendants during the Class Period, plaintiff and the other members of the Class purchased or otherwise acquired CUC's and Cendant's common stock during the Class Period at artificially inflated prices and were damaged thereby.

54. As a direct and proximate result of defendants' wrongful conduct, plaintiff and the other members of the Class suffered damages in connection with their purchase of the CUC and Cendant's common stock during the Class Period.

55. Had plaintiff and the other members of the Class known of the material adverse information not disclosed by defendants, or been aware of the truth behind defendants' material misstatements, they would not have purchased CUC or Cendant common stock at artificially inflated prices, if at all.

56. This action is brought within three years after the securities at issue were purchased and within one year after the discovery of the untrue statements and omissions or after such discovery should have been made by the exercise of reasonable diligence.

57. By virtue of the foregoing, defendants have violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder and are liable to plaintiff and the Class is an amount to be determined at trial.

59. Plaintiff asserts this Count for violation of Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), against the Individual Defendants.

60. As senior executive officers of CUC and Cendant, the Individual Defendants are liable as direct participants in the wrongs complained of herein. Through their positions of control and authority, and/or their stock ownership, each defendant was able to and did control, directly or indirectly, the content of the public statements and financial statements disseminated by CUC and Cendant. With knowledge of the falsity of the statements contained herein and/or in reckless disregard of CUC's and Cendant's true financial condition, the Individual Defendants caused or controlled the issuance of financial statements and other public statements to contain misstatements and omissions of material facts as alleged herein.

61. The Individual Defendants are liable as controlling persons as that term is used in Section 20 of the 1934 Act. By reason of the foregoing, plaintiff and members of the Class have suffered damages in an amount to be determined at trial.

declaring this action to be a proper class action maintainable pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure and declaring plaintiff to be a proper Class representative;

awarding plaintiff and other members of the Class the damages suffered as a result of the wrongs complained of herein, plus prejudgment interest;

awarding plaintiff and the other members of the Class their costs and expenses in this litigation, including reasonable attorney's fees and expert fees, and other costs and disbursements; and

awarding plaintiff and the members of the Class such other and further relief as the Court may deem just and proper.

Source: File to epost from Chimicles, Jacobsen & Tikellis