U.S. securities regulators said on Thursday that they have suspended two Ernst & Young partners .
The Securities and Exchange Commission filed a civil complaint against Kenneth Wilchfort and Marc Rabinowitz for their alleged roles when CUC and Cendant inflated operating income by more than $500 million from 1995 to 1997.
Without admitting or denying any wrongdoing, Wilchfort and Rabinowitz agreed to settle the lawsuit, which was filed in a federal court in Washington.
As part of the settlement, they were suspended from auditing public companies for at least four years, after which they may reapply with the SEC.
CUC merged with HFS Inc. in 1997 to form Cendant, which owns Avis car rentals and franchises Days Inn and Ramada hotels.
Wilchfort's attorney, Kevin Marino, declined to comment. Rabinowitz's attorney, Gerald Krovatin, was not reachable for comment.
Ernst & Young said in a statement that it “can appreciate the decision of the two partners to put this matter behind them” and repeated a previous claim that it was a “victim of the collusive fraud by Cendant Corporation's senior management.”
The SEC said that “Wilchfort and Rabinowitz had a duty to withhold their firm's audit report containing an unqualified opinion and take appropriate steps to prevent these financial statements from being filed with the Commission and circulated to investors.”
The settlements marked the end of an investigation into the financial books of CUC and Cendant, which was accused of fraudulently inflating income figures to meet earnings expectations of Wall Street analysts.
Wilchfort and Rabinowitz, who are currently employed by Ernst & Young, were both audit engagement partners. Wilchfort was a CUC audit partner from 1990 through the third quarter of 1996, and Rabinowitz was an audit partner from the third quarter of 1996 until April 1998.