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Gemstar Ex-CEO May Face Contempt Citation

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Times Staff Writer

The Securities and Exchange Commission asked a federal court Thursday to hold the former chief executive of Gemstar-TV Guide International Inc. in contempt, saying he violated a court order to testify in the agency’s investigation of the company’s accounting practices.

The SEC said Henry C. Yuen refused to testify Wednesday and failed to show up to give testimony Thursday, though he had promised to do so. The agency asked the court to put Yuen in jail and fine him $50,000 a day -- and to double the fine every day until the Gemstar founder testifies.

“He agreed to a court order that he appear, and then he violated that order,” John B. Bulgozdy, an SEC attorney, said.

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Stanley Arkin, an attorney for Yuen, said the SEC’s action came as a shock because he had informed the agency that he needed to reschedule Yuen’s testimony.

Arkin accused the SEC of seeking revenge for a lawsuit his client filed against it last month.

Yuen and a colleague accuse the SEC of illegally freezing their $37.6 million in severance payments. The SEC used “intimidation and implied threat of sanction” to compel Gemstar to put the money into escrow, according to their suit. A hearing is scheduled for Monday in that case.

“This is retaliatory,” Arkin said.

The courtroom dueling comes as the SEC is investigating whether securities laws were violated at Gemstar from 1999 through 2002, when Yuen ran the company.

Pasadena-based Gemstar owns TV Guide magazine and sells electronic programming guides that allow television viewers to navigate through hundreds of TV channels.

After disclosures of aggressive accounting practices, the SEC investigation and a 90% drop in the company’s stock value, Gemstar’s largest shareholder, News Corp., pushed Yuen out of top management a year ago, along with its chief financial officer, Elsie Leung.

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News Corp. wrested control of the board, installed a new management team and fired the company’s accountant.

Gemstar has restated earnings four times since November as part of an accounting review.

Arkin berated both News Corp. and the SEC on Thursday. He accused News Corp. of unfairly “beating up” on Yuen and the SEC of going along with it.

“The SEC is being used as a cat’s paw by News Corp.,” said Arkin, who also represents Leung.

He said News Corp. had been looking for an opportunity to push out Yuen to take control of the company and had hired accountants that disagreed with those employed by Yuen about how to calculate advertising on the company’s electronic programming guides.

“There is a terrible failure here to focus on the underlying issue in this case, which is whether advertising on this new platform has value,” Arkin said. “We think it has considerable value. Ernst & Young, the auditors for News Corp., have a differing perspective.”

The SEC said Yuen provided testimony April 1 and was scheduled to return this week for two more days of testimony. Those dates were in a March court order sought by the SEC because Yuen had failed to show up for previous testimony dates.

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Arkin said that his client was not objecting to testifying, but that he first needed time to address certain issues with Gemstar. He added that he wasn’t given a chance to reschedule his client’s testimony.

A judge will set a hearing at which Yuen will have the chance to explain why he should not be held in contempt.

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