Harvard transcripts sought in fraud trial
By Phil Milford and Jane Mills
Bloomberg News Service
Former Cendant Corp. Chairman Walter Forbes and ex-Vice Chairman E. Kirk Shelton asked the judge in their accounting-fraud trial not to let jurors see how well they did at the Harvard Business School, court papers show.
Forbes, 61, and Shelton, 49, are on trial in federal court in Hartford, Conn., for allegedly inflating income while they were top executives at CUC International Inc., which merged with another company to become Cendant, the largest U.S. travel and real estate services company. The two have said they didn't know CUC accountants were cooking the books before the merger.
Both defendants hold Master in Business Administration degrees from Harvard. The men's grade transcripts from the 1960s and 1970s are irrelevant, Forbes' lawyer Brendan Sullivan Jr. and Shelton's lawyer Thomas Puccio said in the court papers.
The records show Forbes was knowledgeable in "a host of concepts pertaining to corporate finance" and that Shelton was "an honors student of accounting," Assistant U.S. Attorney John Carney said in the papers, which were filed last week.
Prosecutors will try to use the transcripts "as one more link in the chain to establish knowledge" of the fraud, said Sandra Jordan, a former U.S. prosecutor who lectures on white-collar crime at the University of Pittsburgh School of Law.
The defendants want to keep their academic records from jurors because there would be less damage to their defense that they were unaware of the fraud, said Sheryl Willert, a litigator at Williams, Kastner & Gibbs in Seattle and immediate past president of the civil-trial defense lawyers' association, DRI, formerly the Defense Research Institute. "It casts less aspersions" on their credibility, she said.
Forbes finished a master's program at Harvard in 1968, according to court records. He received "high pass" grades in finance and investment management and "low pass" grades during three terms of managerial economics.
Forbes attended Northwestern University where he received a Bachelor of Science degree in 1965 and a master's in 1966, both in journalism.
"Mr. Forbes did not take any courses in accounting" at Harvard, Sullivan's motion says.
At Harvard, Shelton "earned the highest possible grade" in 10 of 21 courses and received honors in both years, court papers say. He received a master's degree with "with distinction" in 1978.
At Yale University, where Shelton received a Bachelor of Science degree with distinction in 1976 in administrative science, his transcript shows top grades of A in financial accounting, labor economics and data analysis.
The government wants to introduce "evidence that Mr. Shelton is very smart as a substitute for evidence that Mr. Shelton understood the wrongfulness" of the bogus accounting, Puccio's motion says.
Marketer CUC and franchiser HFS Inc. merged in late 1997 to form Cendant, whose brands now include Avis, Days Inn and Coldwell Banker. At CUC, Forbes was chief executive officer and Shelton was president. The men face up to 40 years in prison each if convicted of charges of wire, mail and securities fraud.
Forbes is also charged with insider trading for the sale of $11.3 million in Cendant stock just before the company revealed accounting irregularities in April 1998 that caused its shares to fall $14 billion in a single day. Cendant later restated $500 million in CUC income.
