CUC International
CUC (Comp-U-Card) International Inc.
United States
HeadquartersUnited States
Number of locations
Area served

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.[1]


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.[2] It was perhaps the first company conducting electronic commerce,[3] 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, 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[citation needed]. 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.[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 HFS Incorporated. A competition was held internally at CUC, primarily among its senior marketing staff but open to all employees, to come up with a new corporate name. The winner was to receive dinner "anywhere in the world". No employee submission was selected to win, as the name of the company had already been decided. The new company was named Cendant. After the merger, Cendant retained its core business as a direct marketer and thereafter also specialized in hotel franchises, car rentals, travel agencies and its consumer software operations, Cendant Software. The merger of these two companies, which between them owned "a virtual monopoly in the worldwide market for full-service timeshare exchange services" according to the Federal Trade Commission, caused the FTC to require "the parties to divest one of their timeshare exchange companies to re-establish a viable competitor in the market".[5]

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."[6]

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 dating [32]
November 19, 1997 NetGrocer (25% stake) online grocery and household goods service $5MIL [33]

See also


  1. ^ SEC press release on bringing civil suits against Forbes and Shelton
  2. ^ "On-Line Middleman Opens for Business", The New York Times
  3. ^ "Deal Brings Marketing To the Fore", The New York Times
  4. ^ a b c "CUC TO PAY $2,200M IN SHARES FOR SIERRA ON-LINE, DAVIDSON". Tech Monitor. February 21, 1996.
  5. ^ "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
  6. ^ Cendant Press Release Archived 2006-01-03 at the Wayback Machine
  7. ^ a b c d Howard Mark Schilit (2002). Financial shenanigans. McGraw-Hill. pp. 3–9. ISBN 0-07-138626-2.
  8. ^ "Cendant Case Scorecard: Government 3; Book-Cookers 0", Fortune archive
  9. ^ 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
  10. ^ "Cendant Judge Targets September for Third Walter Forbes Trial", Bloomberg News, May 5, 2006
  11. ^ a b Joshua Lipton (January 17, 2007). "No Leniency For Walter Forbes". Forbes.
  12. ^ 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
  13. ^ After Enron Archived 2011-10-08 at the Wayback Machine: SEC compliance and enforcement challenges in the new era
  14. ^ a b "TENDER OFFER STATEMENT". U.S. Securities and Exchange Commission. February 10, 1998.
  15. ^ "GENERAL FORM FOR REGISTRATION OF SECURITIES". U.S. Securities and Exchange Commission. March 10, 2016.
  16. ^ a b "Wrapping paper company sold for $31 million". GoUpstate. December 28, 1992.
  17. ^ "Is Interval International owned by Marriott?". SidMartinBio. May 11, 2020.
  19. ^ a b c "FORM S-4 REGISTRATION STATEMENT". Avis Budget Group. June 21, 1996.
  22. ^ "CUC INTERNATIONAL TO BUY ADVANCE ROSS". New York Times. October 19, 1995.
  23. ^ "Press Release issued by CUC International Inc". Avis Budget Group. February 20, 1996.
  24. ^ "CUC to Buy Ideon in $375 Million Deal". New York Times. April 23, 1996.
  25. ^ "ONLINE BOOKSTORE'S MUSIC SITE SPINOFF GOING AFTER CD MARKET". Crain's Cleveland Business. February 17, 1997.
  26. ^ "CUC Will Buy Knowledge Adventure". Los Angeles Times. November 6, 1996.
  27. ^ "MERGER PRODUCES SPARK SERVICES". Chicago Tribune. August 15, 1997.
  28. ^ "PROSPECTUS". Avis Budget Group. February 3, 1997.
  29. ^ "CUC TO ACQUIRE HEBDO MAG FOR $440 MILLION". Crain's Cleveland Business. July 24, 1997.
  30. ^ "Berkeley Systems Acquired by CUC". Wired. April 7, 1997.
  32. ^ "Short Take: CUC buys". CNET. September 25, 1997.
  33. ^ "Short Take: CUC invests in online grocer". CNET. November 19, 1997.