Problems Worsen For Cendant Corp.

Cendant Corp.’s problems deepened Tuesday with the announcement that one of the companies that merged to create the franchising business falsified records for three years, creating “fictitious revenues” and prompting a criminal investigation.

The company that owns the brand names of Avis car rentals and Century 21 real estate brokerages said the latest problems would decrease its 1997 earnings by $200 million to $250 million. They will also force Cendant to revise earnings for 1995 and 1996, as well as estimates for this year.

The former Stamford, Conn.-based CUC International Inc., which merged with HFS Inc. of Parsippany in December to form Cendant, was responsible for “accounting errors made with an intent to deceive” and “fictitious revenues,” the company said in a news release.

Cendant said CUC artificially inflated its revenue by classifying restructuring charges as revenues, recording long-term revenue as short-term revenue and delaying recognition of membership cancellations.

The company also invented “fictitious revenues” for the first three quarters of 1997, Cendant said. The practice also occurred in 1995 and 1996.