CUC International: От потребительских услуг к скандалу и реорганизации.

Former consumer services company

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 Stamford, Connecticut, US, and founded in 1973 by Kirk Shelton and Walter Forbes. In 1998, it became involved in a Securities and Exchange Commission investigation into what, at the time, was the biggest accounting scandal in corporate history.

Their main product, a shopping service, originally a membership telephone based drop ship service called Comp U Card begun in 1973, was made available online to users of The Source in the mid 1980s, and later CompuServe after its purchase of The Source. It later offered its Shoppers Advantage service on America Online, Prodigy, GEnie and Delphi as well. It was perhaps the first company conducting electronic commerce, although its web based service first went online in 1995. 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. By 1983, Forbes and his company had found investors such as Reader's Digest and Eckerd Drugs but had lost nearly $14 million. After licensing their "interactive shopping" idea in Europe, the Morgan Stanley group took CUC public in the United States in 1983 and raised $20 million. 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. and grew to have over 30 million customers via its mail order clubs. 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. Cendant Software, composed of Sierra, Davidson & Associates (including Blizzard Entertainment), Knowledge Adventure and Gryphon Software, was sold in 1998 to the French publisher Havas, which then merged with Vivendi, which then merged with Activision. After the accounting scandal, the original Comp U Card division was bought out by some remaining executives and reorganized into a company called Trilegiant. It was later renamed Affinion Group and is still located in Stamford, Connecticut. On October 23, 2005, Cendant Corporation announced its decision to split into four separate companies: Realogy, Travelport, Wyndham Worldwide and Avis Budget Group."

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, 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. 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". 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. Retried and convicted, he was sentenced to 12 years on January 17, 2007. 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. In addition to their prison terms, Shelton and Forbes were each ordered to pay Cendant US$3.275 billion in restitution.

Date Company Business Value (USD) References 1985 Benefit Consultants, Inc.(BCI) accidental death insurance $50MIL 1985 Financial Institution Services, Inc. and Madison Financial Corporation (renamed FISI*Madison) insurance and package enhancement products $30MIL 1992 Entertainment Publications books of entertainment and dining coupons — 1992 Interval International timeshare — 1992 Sally Foster gift wrap $31MIL 1995 Essex Corporation third party marketer of financial products for banks — 1995 Welcome Wagon marketing to new homeowners $20MIL 1995 Credit Card Sentinel credit card enhancement services $22.5MIL 1995 CUC Europe European licensee — 1996 GETKO (Getting to Know You) home buyer welcoming program — 1996 Davidson & Associates software $1,140MIL 1996 Sierra Entertainment software $1,060MIL 1996 Book Stacks Unlimited books $4.85MIL 1996 Knowledge Adventure software $50 100MIL 1997 Plextel Telecommunications Inc. and Tango Communications, Inc. (later merged and renamed to Spark Services) dating — 1997 NUMA publisher of Halbert's genealogy — 1997 Hebdo Mag classified advertisement magazine company $440MIL 1997 Berkeley Systems software — 1997 Gryphon Software (later folded into Davidson) software — 1997 Match. com dating — 1997 NetGrocer (25% stake) online grocery and household goods service $5MIL