CUC International
CUC (Comp-U-Card) International Inc. | |
Founded | 1973 United States |
Headquarters | United States |
Number of locations | International Domestic |
Area served | Worldwide |
CUC (Comp-U-Card) International Inc. was a membership-based consumer services conglomerate with travel, shopping, auto, dining, home improvement and financial services offered to more than 60 million customers worldwide based in
History
Their main product, a shopping service, originally a membership telephone-based
CUC's main line of operations was its mail-order clubs such as Shopper’s Advantage, AutoVantage, Traveler’s Advantage and its Comp-U-Card program, and it had been trying to find a way to streamline its clubs and sell retail through a kind of interactive television. In an age before the internet and sites such as Amazon.com, this idea was innovative.
CUC went through various company presidents and lost a lot of money during the 1970s. By 1979, it was losing more than $2 million a year[
During the 1980s and early 1990s, CUC continued to grow and acquire other companies. It made strategic deals with other entertainment, communication, retail and investment companies such as America Online and AT&T.[citation needed] and grew to have over 30 million customers via its mail order clubs.[citation needed] CUC did not make any large acquisitions until 1995. Before that time, all acquisitions were relatively small and strategic.
In February 1996, seeking to expand its operations into the field of interactive entertainment, CUC approached the software companies Sierra On-Line Inc. and Davidson & Associates Inc. It bought Sierra for $1.06 billion and Davidson for $1.14 billion, both in stock.[4] These acquisitions allowed CUC, as a larger outlet, to streamline its distribution network. In addition, product placements and advertisements in these software companies' products allowed CUC to find new customers in demographics it had not previously reached.
In December 1997, CUC merged with
Cendant Software, composed of Sierra, Davidson & Associates (including
After the accounting scandal, the original Comp-U-Card division was bought out by some remaining executives and reorganized into a company called
On October 23, 2005, Cendant Corporation announced its decision to split into four separate companies:
Accounting scandal
On April 16, 1998, less than one year after the new brand was introduced, Cendant disclosed that for three years prior to the merger, CUC had fraudulently overstated its income by over US$500 million. This caused Cendant stock to plummet from $39 to $20 in a single day, eventually reaching $9,[7] and costing shareholders about US$14 billion. Cendant/CUC was eventually required to pay more than US$2.85 billion in class action settlements to shareholders.[8]
The Securities and Exchange Commission brought civil charges against CUC's president Kirk Shelton and CEO and chairman Walter Forbes, for the "long-running financial fraud" which, it alleged, started in 1995. The SEC stated that CUC inflated its books in order to inflate its stock price, which allowed it to use its stock to buy other companies, and in turn these mergers and acquisitions were executed in order to generate financial reserves and purchase reserves that were intended to be "big enough to bury the fraud".[9]
Shelton was convicted in January 2005 of 12 counts of fraud and related charges and sentenced to 10 years in prison. Shelton and Forbes were tried together. Although Shelton was convicted of all 12 charges brought, the jury was unable to reach a verdict for Forbes on any charge. A hung jury also deadlocked Forbes' second trial and a third trial was set for September 2006.[10] Retried and convicted, he was sentenced to 12 years on January 17, 2007.[11] The former CUC chief financial officer Cosmo Corigliano, former comptroller Anne Pember and former accountant Casper Sabatino all pleaded guilty in June 2000 to several fraud and related charges.[7][12]
In addition to their prison terms, Shelton and Forbes were each ordered to pay Cendant US$3.275 billion in restitution.[11] Cendant is unlikely to ever receive the full amount, as according to the payment schedule of US$2,000 per month ordered by the judge, it would take over 134,000 years to pay.
Investigators found that over US$500 million in non-existent company income had been reported during 1996 and 1997.[7] Membership sales revenue had been overreported and membership cancellations information held back, allowing for the company's earnings to be manipulated at will. With too much debt and too little real income, however, the real resources of the company were dwindling, despite the considerable flotation of the stock numbers. As the imaginary books and the real company finances diverged more and more, the requirements of appearances became greater. Even the cooked books were insufficient to cover all of the company's losses, at which time it turned to mergers with, and acquisition of, new companies. Purchased companies' assets could be similarly inflated, and the increase either boost operating income or write off losses.[7] The misreporting of assets by CUC from 1995 to 1997 is similar to that performed during the Enron scandal and other more recent frauds.[13]
Acquisition history
Date | Company | Business | Value ( USD )
|
References |
---|---|---|---|---|
1985 | Benefit Consultants, Inc.(BCI) | accidental death insurance | $50MIL | [14] |
1985 | Financial Institution Services, Inc. and Madison Financial Corporation (renamed FISI*Madison) | insurance and package enhancement products | $30MIL | [14] |
1988 | National Card Control Inc (NCCI) | loyalty solutions and package enhancement program | — | [15] |
January 1992 | Entertainment Publications | books of entertainment and dining coupons | — | [16] |
1992 | Interval International | timeshare | — | [17] |
December 1992 | Sally Foster | gift wrap | $31MIL | [16] |
November 21, 1994 | NetMarket | Online marketplace | $1MIL | [18] |
January 1995 | Essex Corporation | third-party marketer of financial products for banks | — | [19] |
February 2, 1995 | Welcome Wagon | marketing to new homeowners | $20MIL | [20] |
March 1995 | Credit Card Sentinel | credit card enhancement services | $22.5MIL | [21] |
March 1995 | CUC Europe | European licensee | — | [19] |
September 1995 | NAOG (North American Outdoor Group) | hunting, fishing and handyman membership organization | — | [21] |
October 18, 1995 | Advance Ross | value-added tax refunds for travelers to Europe | $225MIL | [22] |
1996 | GETKO (Getting to Know You) | home-buyer welcoming program | — | [19] |
February 6, 1996 | Rent Net | nationwide apartment rental information on the Internet | $3MIL | [23] |
February 20, 1996 | Davidson & Associates | software | $1,140MIL | [4] |
February 20, 1996 | Sierra Entertainment | software | $1,060MIL | [4] |
February 20, 1996 | Ideon (SafeCard, Wright Express & National Leisure Group (NLG)) | credit card protection, fleet fuel cards, provider of vacation travel packages and cruises | $375MIL | [24] |
September 17, 1996 | Book Stacks Unlimited | books | $4.85MIL | [25] |
November 5, 1996 | Knowledge Adventure | software | $50−100MIL | [26] |
January 1997 | Plextel Telecommunications Inc. and Tango Communications, Inc. (later merged and renamed to Spark Services) | dating | — | [27] |
January 8, 1997 | NUMA | publisher of Halbert's genealogy | — | [28] |
August 15, 1997 | Hebdo Mag | classified-advertisement magazine company | $440MIL | [29] |
April 1, 1997 | Berkeley Systems | software | — | [30] |
July 1997 | Gryphon Software (later folded into Davidson) | software | — | [31] |
September 25, 1997 | Match.com | dating | — | [32] |
November 19, 1997 | NetGrocer (25% stake) | online grocery and household goods service | $5MIL | [33] |
See also
- Trilegiant
- Worldcom scandal
References
- ^ SEC press release on bringing civil suits against Forbes and Shelton
- ^ "On-Line Middleman Opens for Business", The New York Times
- ^ "Deal Brings Marketing To the Fore", The New York Times
- ^ a b c "CUC TO PAY $2,200M IN SHARES FOR SIERRA ON-LINE, DAVIDSON". Tech Monitor. February 21, 1996.
- ^ "FTC Negotiates Settlement To Preserve Competition In Worldwide Market For Timeshare Exchange Services". Federal Trade Commission. December 17, 1997. Archived from the original on May 14, 2009.
- Federal Trade Commission - ^ Cendant Press Release Archived 2006-01-03 at the Wayback Machine
- ^ ISBN 0-07-138626-2.
- ^ "Cendant Case Scorecard: Government 3; Book-Cookers 0", Fortune archive
- ^ Dept. of Justice press release on Forbe's conviction Archived 2009-05-31 at the Wayback Machine
- Dept. of Justice press release on Shelton's conviction Archived 2009-05-14 at the Wayback Machine - ^ "Cendant Judge Targets September for Third Walter Forbes Trial", Bloomberg News, May 5, 2006
- ^ a b Joshua Lipton (January 17, 2007). "No Leniency For Walter Forbes". Forbes.
- ^ Dept. of Justice Archived 2009-05-31 at the Wayback Machine: Chief Cooperating Witness in Cendant Accounting Fraud Sentenced to Three Years Probation, Six Months' House Arrest
- ^ After Enron Archived 2011-10-08 at the Wayback Machine: SEC compliance and enforcement challenges in the new era
- ^ a b "TENDER OFFER STATEMENT". U.S. Securities and Exchange Commission. February 10, 1998.
- ^ "GENERAL FORM FOR REGISTRATION OF SECURITIES". U.S. Securities and Exchange Commission. March 10, 2016.
- ^ a b "Wrapping paper company sold for $31 million". GoUpstate. December 28, 1992.
- ^ "Is Interval International owned by Marriott?". SidMartinBio. May 11, 2020.
- AdAge. November 21, 1994.
- ^ a b c "FORM S-4 REGISTRATION STATEMENT". Avis Budget Group. June 21, 1996.
- New York Times. February 3, 1995.
- ^ a b "CUC INTERNATIONAL INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS". Avis Budget Group. September 1, 1995.
- New York Times. October 19, 1995.
- ^ "Press Release issued by CUC International Inc". Avis Budget Group. February 20, 1996.
- New York Times. April 23, 1996.
- Crain's Cleveland Business. February 17, 1997.
- ^ "CUC Will Buy Knowledge Adventure". Los Angeles Times. November 6, 1996.
- ^ "MERGER PRODUCES SPARK SERVICES". Chicago Tribune. August 15, 1997.
- ^ "PROSPECTUS". Avis Budget Group. February 3, 1997.
- Crain's Cleveland Business. July 24, 1997.
- ^ "Berkeley Systems Acquired by CUC". Wired. April 7, 1997.
- ^ "THIS DAY IN SIERRA HISTORY". THIS DAY IN SIERRA HISTORY. July 24, 2008.
- ^ "Short Take: CUC buys Match.com". CNET. September 25, 1997.
- ^ "Short Take: CUC invests in online grocer". CNET. November 19, 1997.