NEW YORK (CNNfn) - Cendant Corp. said Thursday the Securities and Exchange Commission had requested further changes to its accounting procedures following a four-month investigation centering on allegations that a former business unit booked about $500 million in phony revenue over three years.
Cendant, formed by the merger late last year of the former HFS Inc. and CUC international, said the requested changes "have no connection" with accounting irregularities in the former CUC business units, disclosed last April.
"The topics discussed by the SEC do not affect the cash results of this business," Michael Monaco, Cendant's vice chairman and chief financial officer, said. "The discussions have no connection to correction of the accounting irregularities previously disclosed."
The SEC request came as Cendant's reconstituted 14-member board was expected to meet for the first time Thursday to hear the findings of an audit committee into the accounting problems.
The auditors' report is said to run 200 pages and, according to one published account, detail massive accounting fraud at CUC under the management of former Cendant chairman Walter Forbes and vice chairman E. Kirk Shelton. Forbes, who was CUC's chairman and chief executive, and Shelton resigned last month, along with eight other directors from the former CUC.
Elliot Bloom, a Cendant spokesman, said Thursday the company plans to issue a statement following the meeting, sometime around midday, and post the auditors' findings on the Internet. Bloom declined to speculate on or discuss the investigation's findings prior to the meeting.
The auditor's' report apparently comes down hard on Forbes and Shelton for fostering a climate at the firm in which slipshod accounting practices were allowed to flourish, USA Today reported Thursday, citing executives who had seen the findings.
In a statement Thursday the company asserted that the audit investigation "is complete and is not the subject of this dialogue with the SEC."
Cendant said its discussions with the SEC related to revenue recognition policies for individual memberships. Cendant is a marketer and franchiser of real estate and discount hotel memberships, with brand names such as Ramada hotels, Avis rental cars and Century 21 real estate.
The scope of the fraud at the former CUC remains unknown. Forbes has vehemently protested his innocence and insisted that the audit committee findings would vindicate him.
Despite the turmoil roiling Cendant, the company beat Wall Street expectation in its second quarter, posting strong earnings of 24 cents a share, or $210.9 million.
At the same time, the firm announced that the accounting debacle would force it to restate 1997 earnings downward by 28 cents a share, or $240 million.
Cendant also said Thursday it will delay, until late September, its 10K annual filing with the SEC, which will include restated financial results for its 1995, 1996 and 1997 fiscal years.
Cendant (CD) stock has lost about half its value since its accounting woes were disclosed in April. Its shares were down 1-3/4 at 12-13/16 Thursday, a sharp slide from its 52-week high of 41-11/16.