New York (June 27, 2002) -- Big Five firm Ernst & Young is trying to prevent Robert Herdman, its former chairman and now chief accountant at the Securities and Exchange Commission, from testifying in a civil lawsuit in which former E&Y client, Cendant Corp., has accused the firm of aiding in accounting fraud.Cendant charges that four months after the 1997 merger between CUC and HFS Inc. that created Cendant, the company discovered that CUC had been booking false revenue for several years. When Cendant revealed its findings, its market cap plunged $14 billion in the course of one day.
Cendant, a franchisor of multiple lodging and real estate brands, claims that E&Y, its auditor at the time, must share responsibility for the massive accounting fraud case four years ago.
In 1999, E&Y agreed to pay a record $335 million in a civil suit to investors, while Cendant settled a $3.2 billion class-action suit.
Herdman departed E&Y in October to take the post at the SEC. A ruling is expected July.
--Electronic Accountant Newswire staff
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