Cendant Fires Accounting Firm; Lawsuit May Be Next
Sources told Reuters that Cendant, Parsippany, NJ, may file a lawsuit against Ernst & Young as early as this week for negligence and failure to perform its duties as an independent auditor. Reports of the accounting irregularities caused Cendant stock to fall to $19 from a high of $41. Cendant closed May 20 down 63 cents at $21.75.
In a separate matter, the company re-affirmed its intent to complete a merger with American Bankers Insurance (ABI), Miami, as a two-step process. The first step, involving a 51 percent cash tender offer will be completed after insurance regulatory approval. The second step is subject to the approval of ABI shareholders.
The process can't start until a financial review involving the accounting irregularities is completed sometime this summer.
Cendant also announced that it has reached a definitive agreement with the Royal Automobile Club's board of directors to purchase the RAC Motoring Services division for $730 million.