Cendant Corporation Chief Executive Officer and 1964 Law School alumnus Henry Silverman -- whose stock lost 80 percent of its value suddenly this spring -- spoke Wednesday on "crisis management" before a standing-room-only crowd in the Law School. Cendant -- a marketing company which franchises many well-known names such as Avis Rent-A-Car, Coldwell Banker real estate and Days Inn -- has been crippled since April, when stockholders were stunned by the company's admission of accounting fraud. Silverman --Ewho gave the largest single donation in Penn Law School history last February -- called his company's crisis a "challenge in the integrity of the institution" that can only be alleviated with "truth, communication and restored confidence." He began by tracing how he has dealt with his company's decline. Silverman's residential and commercial brokerage business, Hospitality Franchise Systems, was successful in the early-to-mid 1990s. The company's strategy, acquisitions and stock sales generated rapid earnings growth, and Silverman flourished with HFS's success, reaching a $600 million net worth in 1996. When HFS merged with direct-marketing company CUC International Inc. last year to form Cendant, the value of Silverman's stock began to decline. The 58-year-old University Trustee discovered in April that CUC had engaged in a three-year, $500 million pattern of fraud and investor deception, constructing fictitious bottom lines each quarter. As the company's stock plummeted from more than $40 a share to its close yesterday of $7.50, Silverman became the self-described "Monica Lewinsky of Wall Street" as the business soap opera of Cendant's sordid story unfolded on the pages of newspapers across the country. After being victimized by one of the biggest fraud schemes ever -- a scheme that spurred shareholder lawsuits against the company -- Silverman drew on his experience to discuss the role of truthfulness and integrity in the capitalistic economy. In his talk, sponsored by the Institute of Law and Economics, Silverman emphasized how every institution needs a "strong ethical compass." Silverman warned the crowd that "in every action, you are putting integrity in the bank or running up a debt that could crush you." He said his affinity for truthfulness is evident in the recovering company's operations. Silverman explained that he has candidly exposed Cendant's precarious situation to investors. His damaged company has since reversed its strategy, buying back stock and selling holdings, moves which Silverman hopes will stop the stock value's decline. Silverman credited the Penn Law School with giving him the analytical skills used in his demanding CEO slot. Silverman made headlines in February with his $15 million donation to the Law School, at the time a record gift for a U.S. law school. Although Cendant lost millions as a result of the fraud crisis, Silverman retained a spot in the Forbes 400, released in the October 12 issue, as number 390, worth $500 million.
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