April 17, 1998

**Cendant Turmoil Slam Stock Price

Cendant Corp. suffered a major blow as the Wall Street darling unraveled amid an investigation of major accounting irregularities. Cendant, the result of an $11 billion merger of hotel franchiser HFS Inc. and CUC International, announced after the stock market closed April 15 that it would re-state earnings for the 1997 quarters and year and possibly other periods. The company expects to lower its 1997 operating income by as much as $115 million, or about 13 cents a share. It previously reported 1997 net income before restructuring and other charges of $872 million. In response, stock prices plummeted in after-hours trading and closed at $19 1/16 on April 16 and a class action lawsuit was filed in New Jersey on behalf of all persons who acquired Cendant common stock between May 28, 1997, and April 15, 1998. Cendant said it may take legal action against former CUC officials and other potential defendants, though it wasn't specific on what the irregularities are. The problem was discovered as responsibility for Cendant's accounting functions was transferred from former CUC employees to former HFS accounting staff while preparing to report first-quarter 1998 results. "We're outraged by the actions of a small number of former CUC employees who betrayed the trust that was placed on them," Henry Silverman, Cendant's president and CEO, said in a prepared statement. Outside observers indicated that the problems may stem from three top-level resignations earlier this month. On April 9, Cendant confirmed that deputy general counsel Amy Lipton, vice chairman E. Kirk Shelton and executive vice president Cosmo Corigliano had resigned. The stock problems may jeopardize Cendant's $3.1 billion acquisition of American Bankers Insurance Group Inc., which is partially financed with Cendant shares. The company said it remains committed to that deal as well as previously announced ones with National Parking Corp. and Providian Insurance.