A federal judge ordered home confinement Wednesday for former Cendant Corp. executive E. Kirk Shelton while he appeals his convictions in a $3 billion accounting scandal at the travel and real estate company.
Shelton, the former vice chairman of Cendant, was sentenced last year to 10 years in prison on conspiracy and fraud charges. He was also ordered to pay $3.27 billion restitution to Cendant, including a balloon payment of $15 million and monthly installments of $2,000 after he is released from prison.
Shelton had been free on bond with some travel restrictions pending appeals of his convictions, which were upheld last month by the 2nd U.S. Circuit Court of Appeals in New York.
His lawyers intend to ask the court to reconsider its decision.
U.S.
District Judge Alvin W. Thompson imposed house arrest on Shelton with some exceptions, including visits to see his lawyers and psychiatrist in Connecticut and New York. Shelton will be subject to voice verification calls to make sure he is at his home in Darien, and must report to probation officials once a week.
Shelton declined to comment.
Prosecutors said Shelton inflated revenue by $500 million at Cendant's predecessor, Stamford-based CUC International, to drive up the stock price. The fraud was reported in 1998, causing Cendant's market value to drop by $14 billion in one day.
Former Cendant Chairman Walter Forbes was convicted in October of fraud conspiracy and other crimes in connection with the accounting scandal and awaits sentencing.
New York-based Cendant changed its name to Avis Budget Group in September to reflect its Avis and Budget vehicle rental brands.
Shelton, a Yale graduate, was president of CUC when it merged with HFS Inc.
to form Cendant in December 1997. Cendant's brands included Ramada, Howard Johnson, Avis, Coldwell Banker and Century 21.
Cendant's real estate and hotel businesses were spun off as standalone companies and the company sold its travel distribution operations.
Thompson had ordered Shelton to report to prison in September 2005, but the 2nd Circuit Court of Appeals put that ruling on hold while it considered Shelton's appeal. The appeals court is now considering a request by prosecutors to lift the hold and have Thompson issue a new order for Shelton to go to prison.
In another hearing after Thompson imposed the house arrest, he heard arguments by Cendant lawyers in their lawsuit accusing Shelton of fraudulently transferring millions of dollars to shield his assets.
Shelton's lawyers have denied the allegations in court documents.
Cendant lawyers are trying to secure Shelton's assets, including his home in Darien and condominium in Vail, Colo., so that the company can get at least some of the restitution it is owed if it wins the lawsuit.
I'm trying to get my hands on a whole bunch of assets that were fraudulently transferred, said Robert Kaelin, a lawyer for Cendant.
Thompson did not issue a ruling Wednesday, but was expected to announce his decision in a few days.
A dozen lawyers were in the courtroom representing Shelton, his wife, a trust Shelton's family controls and Cendant.
Thompson said the lawyers have filed many crappy briefs in the case and were overreaching in many of their arguments. He suggested all sides try to settle the case out of court.
We're running up a lot of legal costs here and I think it's a waste, Thompson said.
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