Forbes and Shelton were charged with conspiracy and wire fraud for conspiring with subordinates to routinely use fraudulent accounting methods to inflate income, the U.S. attorney's office said.

Cendant, owner of such recognizable companies as Days Inn, Howard Johnson, Ramada Inn, Century 21 and Coldwell Banker, was created in 1997 when CUC, primarily a marketer of discount membership clubs, merged with HFS Inc., a hotel and real estate franchiser.

Cendant has said the alleged fraud inflated earnings before charges to the tune of some $500 million. In addition, the Securities and Exchange Commission filed a civil fraud lawsuit in Newark federal court.

Forbes and Shelton resigned from Cendant in 1998, shortly after Cendant discovered irregularities in CUC's accounting practices.

The indictment was preceded by a guilty plea from the duo's alleged co-conspirators, CUC's former chief financial officer, CUC's former director of accounting and former accountant. They pleaded guilty to conspiracy and acting under the instructions of their superiors last year.

Forbes and Shelton face a maximum of five years in prison and a $250,000 fine on each of the two counts. They also face possible fines in the SEC case.

Cendant has said it will seek "substantial monetary damages" from Forbes - who received a $47 million severance package when he resigned - if he is convicted or pleads guilty. The company is also currently seeking compensation from Shelton.

"It is a very significant case given the magnitude and complexity of the fraud," New Jersey U.S. Attorney Robert Cleary told The Post.

"It is very important for publicly held companies not to misrepresent themselves. Justice will take steps to stop this [type of fraud] in the future," he added.

Prosecutors told Bloomberg the case may be one of the biggest cases of securities fraud ever.

Both parties proclaimed their innocence.

"I am totally innocent of the charges brought against me and will fight them in court," Forbes said through a spokesperson.

Attorneys for Shelton, echoed that statement, but with vigor and finger-pointing. They said in a statement: "Shelton worked with an unflinching commitment to honesty and the truth during his 17 years at CUC/Cendant. His trust, and the trust of CUC/Cendant's employees and investors, was betrayed by those few CUC/Cendant financial executives who already have pleaded guilty to committing this fraud."