SACRAMENTO, CA – The California Public Employees' Retirement System (CalPERS) and two New York-based pension funds have recovered more than $2.8 billion for shareowners in a securities class action lawsuit against Cendant Corporation. The settlement – the largest securities class action recovery in history – stems from financial statement irregularities at CUC International (one of Cendant's predecessors) and the CMS division of Cendant. In addition to the monetary recovery, Cendant agreed to a number of corporate governance reforms. The settlement was presented today in New Jersey Federal District Court.

"This is a landmark victory for CalPERS and all Cendant shareowners," said Charles P. Valdes, Chairman of CalPERS Investment Committee. "This settlement demonstrates the important role that pension funds play as lead plaintiffs in securities actions. Not only have we recovered a substantial portion of the losses incurred by all class members, but the company is emerging stronger and worthy of greater confidence by the financial markets."

"This is a victory for the more than one million New York State retirees and other Cendant shareholders who were defrauded by the company's misleading financial reports and senior executives' inappropriate actions, " McCall said. "This is the largest securities class action recovery in history. The New York State Common Retirement Fund will recoup a substantial portion of the losses incurred. And, equally important, Cendant has agreed to make changes in its operations that should, in the long term, strengthen the company's stock value."

"This is one of the first cases in which public pension funds took the lead in representing shareholders. Not only did we win the largest recovery ever, but we also forced the company to institute governance reforms that will help prevent this kind of behavior from recurring," Hevesi said. "The results should stand as a warning to any manager who is thinking about covering problems by falsifying the books. We will always fight to protect shareholders, New York City and our retirees when they suffer losses because of management fraud or other grossly inappropriate behavior."

As part of the settlement, Cendant's Board of Directors agreed to significant changes to the Company's corporate governance structure. These include:

• The Board's Audit Committee, Nominating Committee and Compensation Committee will be comprised entirely of independent directors;
• The majority of the Board will be independent within two years following the final approval of the settlement and, if appropriate, settlement of the currently pending derivative action brought on behalf of Cendant;
• The definition of "independence" will generally conform to the standards established by active shareowners including CalPERS and the Council of Institutional Investors;
• A proposal to provide for the annual election of directors will be presented for shareholder approval; and
• Employee stock option plans will not be "re-priced" without shareholder approval.

"These corporate governance reforms are a fitting endpoint to the case against Cendant," said James E. Burton, former CalPERS Chief Executive Officer. "As a long-term investor, our best protection is greater corporate governance in all corporations that operate in today's markets."

In June 1998, CalPERS, together with the New York State Common Retirement Fund and the New York City pension funds, filed a motion to be co-lead plaintiffs in a series of shareholder lawsuits against Cendant Corporation. The lawsuits, filed in the U.S. District Courts of New Jersey, Connecticut and Pennsylvania, alleged that Cendant issued false and misleading financial statements to the investing public about the company's income and earnings. The lawsuits further alleged that certain former officers and directors of the company sold or filed intentions to sell over 4 million shares of Cendant common stock preceding the announcement.

It was the first time any of the three public pension systems had filed to be lead plaintiff in a class action lawsuit since the Private Securities Litigation Reform Act of 1995. At the time of the filing, the pension funds estimated that they had lost approximately $89 million as a result of Cendant's alleged misstatements.

CalPERS and the New York funds continue to pursue claims in the action against Ernst & Young, L.L.P, who was the former outside auditor of CUC International and Cendant's CMS division.

CalPERS owns approximately 4.5 million shares of Cendant stock. Collectively, the three funds owned more than 11.7 million shares of Cendant common stock at the time of the lawsuit.

In the lawsuit, CalPERS was represented by the New York law firm of Bernstein Litowitz Berger & Grossmann, L.L.P. and the Philadelphia law firm of Barrack, Rodos & Bacine.

CalPERS is the nation's largest public pension fund with assets totaling more than $155 billion. The System provides retirement and health benefits to more than 1 million state and local public employees and their families. For further information about CalPERS, please visit the System's Web site at www.calpers.ca.gov.

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