The Securities and Exchange Commission has completed its investigation of Gemstar-TV Guide International Inc., filing a raft
of securities fraud charges last week against the company's ousted management team.
Ex-CEO Henry Yuen and former chief financial officer Elsie Leung were charged with cooking the books to
meet inflated revenue projections related to the company's interactive program
guides, then reaping millions of dollars in personal financial gains from compensation tied
to company performance.
"In total," the SEC said, "the defendants caused Gemstar to overstate its
total revenues by at least $223 million from March 2000 through September 2002."
They did so, the commission said, by, among other things, reporting
nonexisting agreements as IPG licensing and ad revenue and by moving revenue
from media and licensing sectors to the IPG advertising column "to show dramatic
growth and acceptance of IPG advertising when such growth and acceptance did not
The SEC pegged the financial gain in the period between 2000 and 2002 at:
Yuen -- $18.8 million in salary and bonuses; $14.6 million in exercised stock
options; $63.6 million from sale of Gemstar stock, plus the $29 million Yeun was
to get as a buyout package. Leung -- $5.3 million in salary and bonuses; $4.9
million in stock options; $8.1 million buyout package.
The specific charges are "securities fraud, lying to the auditors, falsifying
Gemstar's books and records, aiding and abetting Gemstar's reporting,
record-keeping and internal-controls violations of the federal securities
The suit, filed in Los Angeles District Court, seeks injunctions; civil monetary
penalties; "disgorgement of ill-gotten gains," including salary, bonuses and
stock sales; and the permanent disbarment of the pair from serving as officers
or directors of a public company.
The same court in May told Gemstar to withhold any "extraordinary payments"
made to any of its directors and officers, including the buyout payments.
The SEC said it is still investigating whether others at the company were
involved in the alleged fraud.
For its part, Gemstar said it continues to cooperate fully with the SEC, it has
resolved its past accounting issues and it continues to withhold the former
executives' settlement money per SEC instructions.
"In March, Dr. Yuen and Ms. Lueng were terminated by Gemstar-TV Guide for
cause," the company said in a prepared statement. "Dr. Yuen and Ms. Lueng do not
currently serve in any capacity related to Gemstar-TV Guide."