UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 43034 / July 13, 2000

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1284 / July 13, 2000

ADMINISTRATIVE PROCEEDING
File No. 3-10251

In the Matter of KEVIN T. KEARNEY, CPA, Respondent.

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ORDER INSTITUTING PROCEEDINGS PURSUANT TO RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS

I.

The Securities and Exchange Commission ("Commission") deems it appropriate to institute public administrative proceedings pursuant to Rule 102(e) of the Commission's Rules of Practice¹ against Kevin T. Kearney ("Respondent" or "Kearney"), a certified public accountant.

II.

In anticipation of the institution of these administrative proceedings, Kearney has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings, and any other proceedings brought by or on behalf of the Commission, or in which the Commission is a party, without admitting or denying the findings set forth below, except as to jurisdiction of the Commission over him and over the subject matter of these proceedings, which Respondent admits, Respondent consents to the entry of this Order Instituting Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions ("Order") set forth below.

Accordingly, it is ordered that proceedings pursuant to Rule 102(e) of the Commission's Rules of Practice be, and hereby are, instituted.

III.

FACTS

The Commission makes the following findings:²

A. Kevin T. Kearney, CPA, age 33, was a Manager of Financial Reporting at CUC International Inc. ("CUC") from 1993 until mid-1995, and then Director of Financial Reporting until March 1997, at which time he became Controller of Spark, a division of CUC. Kearney is a certified public accountant licensed in the state of Connecticut.

B. CUC, a Delaware corporation that had its headquarters in Stamford, Connecticut, was principally engaged in membership-based consumer services, such as auto, dining, shopping, and travel "clubs." CUC's largest division, Comp-U-Card, marketed individual memberships in these clubs. CUC's securities were registered pursuant to Section�12(b) of the Securities Exchange Act of 1934 ("Exchange Act") and traded on the New York Stock Exchange ("NYSE"). On December 17, 1997, CUC merged with HFS Incorporated to form Cendant Corporation. Cendant's common stock and certain other securities issued by Cendant are registered pursuant to Section�12(b) of the Exchange Act and trade on the NYSE. Certain additional securities issued by Cendant are registered pursuant to Section 12(g) of the Exchange Act.

C. On June 14, 2000, the Commission filed a complaint against Kearney in SEC v. Cosmo Corigliano, Anne M. Pember, Casper Sabatino, and Kevin T. Kearney, 00 Civ. 2873 (D.N.J.). On June 6, 2000, Kearney consented to the entry of the Final Judgment of Permanent Injunction and Other Relief as to Defendant Kevin T. Kearney ("Final Judgment"), without admitting or denying the allegations of the complaint, except as to subject matter jurisdiction, which he admitted. On June 29, 2000, the United States District Court for the District of New Jersey entered the Final Judgment, which (1) permanently enjoins Kearney from (i) violating Section 13(b)(5) of the Exchange Act, and Exchange Act Rule 13b2-1; and (ii) aiding and abetting violations of Sections 10(b), 13(a), 13(b)(2)(A), and 14(a) of the Exchange Act, and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-2, and 14a-9; (2)�orders him to disgorge ill-gotten gains of $32,443, plus prejudgment interest of $8,234; and (3)�orders him to pay a civil money penalty of $35,000 pursuant to Section 21(d)(3) of the Exchange Act.

D. The Commission's complaint alleges that, while Kearney was in the Financial Reporting group at CUC, he participated in a financial fraud at CUC to inflate its quarterly and annual earnings during the period from at least 1995 through early 1998. Specifically, the complaint alleges the following: He was regularly present when CUC's Chief Financial Officer calculated the fraudulent quarterly adjustments at the end of each of the first three fiscal quarters each year necessary to meet CUC's earnings targets. Kearney supervised financial reporting personnel who entered the unsupported quarterly adjustments. Kearney also had the job of canvassing the various CUC subsidiaries throughout the year to find out if the subsidiaries had "excess" reserves that CUC corporate could use to inflate operating income at CUC. Kearney occasionally instructed controllers at CUC subsidiaries to make certain unsupported year-end entries directed by the CFO. Kearney also aided and abetted certain officers or directors of CUC in making materially false or misleading statements to CUC's auditors in order to conceal the fraud, including the preparation of false schedules, statements, and other support for various entries and methodologies associated with the fraud.

V.

Based on the foregoing, the Commission finds that Kearney (a) willfully violated Section�13(b)(5) of the Exchange Act and Rule 13b2-1 promulgated thereunder; and (b) willfully aided and abetted violations of Sections�10(b), 13(a), 13(b)(2)(A), and 14(a) of the Exchange Act, and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-2, and 14a-9 promulgated thereunder.

VI.

In view of the foregoing, the Commission deems it appropriate to accept Kearney's Offer and to impose the sanctions agreed to therein.

Accordingly, IT IS HEREBY ORDERED that pursuant to Rule 102(e) of the Commission's Rules of Practice

1. Kearney be denied the privilege of appearing or practicing before the Commission as an accountant.

2. After five years from the date of the Order, Kearney may request that the Commission consider his reinstatement by submitting an application (attention: Office of the Chief Accountant) to resume appearing or practicing before the Commission as:

a. a preparer or reviewer, or a person responsible for the preparation or review, of any public company's financial statements that are filed with the Commission. Such an application must satisfy the Commission that Kearney's work in his practice before the Commission will be reviewed either by the independent audit committee of the public company for which he works or in some other acceptable manner, as long as he practices before the Commission in this capacity; and/or

b. an independent accountant. Such an application must satisfy the Commission that: (a) Kearney, or the firm with which he is associated, is a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms ("SEC Practice Section"); (b)�Kearney, or the firm, has received an unqualified report relating to his, or the firm's, most recent peer review conducted in accordance with the guidelines adopted by the SEC Practice Section; and (c) as long as Kearney appears or practices before the Commission as an independent accountant he will remain either a member of the SEC Practice Section or associated with a member firm of the SEC Practice Section, and will comply with all applicable SEC Practice Section requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education.

3. The Commission's review of an application by Kearney to resume appearing or practicing before the Commission may include consideration of, in addition to the matters referenced above, any other matters relating to Kearney's character, integrity, professional conduct, or qualifications to appear or practice before the Commission.

By the Commission.

Jonathan G. Katz
Secretary

¹ Paragraph 1 of Rule 102(e)(1) provides, in relevant part, that:

The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before it in any way to any person who is found by the Commission after notice and opportunity for hearing in the matter: .�.�. (iii) [t]o have willfully violated, or willfully aided and abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder.

² The Commission's findings herein are made pursuant to Respondent's Offer and are not binding upon any other person or entity in these or any other proceedings.