HENRY SILVERMAN WAS the toast of Wall Street in late 1997 as he prepared to merge his company HFS, successful franchiser of Avis, Ramada Inns, and real estate brokerage Century 21, with high flying CUC International, a company that sold memberships in discount buying clubs through direct-marketing to form Cendant.

Like many popular Wall Street companies, Silverman's HFS had delivered a 20-percent-plus growth rate through a program of continuous acquisitions. Wall Street rewarded the new deal with a rising stock price for Cendant, with the sexy concept of synergies from feeding HFS customer names into CUC's direct marketing channels. It was not until April 1998 that the new Cendant management discovered that former CUC executives had massively overstated earnings by $500 million over three years.

Subsequently, Cendant's ...

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