Cendant, Justice Officials Want Receiver to Track Forbes Assets

Cendant Corp. and the U.S. Justice Department are seeking the appointment of a receiver to help trace assets of Walter Forbes, the imprisoned former chairman who owes $3.28 billion in restitution for defrauding investors.

Forbes, 66, is serving 12 years for misleading investors at Cendant, which later split into four companies, including Avis Budget Corp. The Justice Department and Cendant filed a civil lawsuit in June alleging Forbes, family members and others fraudulently transferred assets to hide them from creditors.

The company and Justice Department seek an order "appointing a receiver to administer Mr. Forbes' assets and facilitate the liquidation of those assets in satisfaction of the restitution order," according to a Jan. 16 filing in federal court in Bridgeport, Connecticut. U.S. District Judge Alan Nevas will hold a hearing Jan. 26 on the request.

Forbes was convicted in 2006 of conspiracy and of making false statements to the U.S. Securities and Exchange Commission. Forbes, who was found guilty after two mistrials, was accused of overstating income by $252 million at CUC International Inc., which merged with HFS Inc. in 1997 to form Cendant.

Forbes is serving his term at the Allenwood Federal Correctional Complex in White Deer, Pennsylvania. In an effort to enforce the restitution order, Forbes was deposed about his assets on Aug. 13 in the federal courthouse in Williamsport, Pennsylvania.

Rights Invoked

Forbes invoked his constitutional right against self-incrimination in response to 127 questions, even though he testified at all three of his criminal trials. Forbes attorney Robert Cary said he was concerned that his client could be prosecuted for perjury about disclosures of his assets, according to a transcript of the proceeding.

Assistant U.S. Attorney Jordan Anger, a federal prosecutor in Newark, New Jersey, sought a ruling from U.S. District Judge James McClure Jr., who ordered Forbes to answer questions about his assets.

Anger then queried Forbes about properties that he or his family owned in Connecticut, Florida, Wisconsin and Colorado. Anger also asked about investments that Forbes made in golf courses, real estate, time shares, oil wells, a company that makes artificial gem-quality diamonds, and other ventures.

Regular Income

"Mr. Forbes has income coming on a regular basis from his investments, and we believe that income should be used to fulfill the restitution order," Anger said in an interview. "We need somebody in place with the ability to sign the checks and deposit them into the court registry, as well as several other tasks necessary to handling Mr. Forbes' assets."

Cary, of the Washington law firm Williams & Connolly LLP, declined to comment yesterday in an e-mail.

In a Dec. 8 letter filed with the court, Cary said that Forbes owed his firm more than $10 million at the end of 2006. Cary said his firm "provided substantial services to Mr. Forbes since then (including the appeal) without compensation."

The letter said Forbes "granted certain security interests to Williams & Connolly LLP in order to secure payment of his legal fees."

The case is U.S. v. Forbes, 08-cv-933, U.S. District Court, District of Connecticut (Bridgeport).

(Published by Bloomberg - January 23, 2009)