Gemstar Fires Yuen, Ex-CFO
One day after federal authorities sought to jail the former chairman of Gemstar-TV Guide International Inc., the company fired him and the former chief financial officer.
Gemstar said Friday that the two were terminated for cause. Sources said Henry Yuen, the former chief executive, and Elsie Ma Leung, the former finance chief, were fired for failing to cooperate with a Securities and Exchange Commission investigation into accounting practices when the pair were in charge.
They both stepped down from top management in November after a power struggle with the company’s largest shareholder, News Corp. But they remained on the payroll of the Pasadena-based company, which owns TV Guide and produces electronic programming guides. The firm said that Yuen would step down from the company’s board and that Leung would retire from the board when her term ends May 20.
The announcement of the firings came one day after the SEC asked a federal court in Los Angeles to hold Yuen in contempt, saying he violated a court order to testify in the agency’s investigation. The SEC, which launched the Gemstar probe in October, asked the court to jail Yuen and fine him $50,000 a day and to double the penalty daily until the Gemstar founder testifies.
Yuen’s lawyer, Stanley Arkin, said his client had asked to testify on another day because he first needed to address unspecified “pressing issues” with Gemstar.
Sources said this week’s developments could make it more difficult for Yuen and Leung to collect a $37.6-million severance package that Gemstar placed in an escrow account as part of a settlement tied to their ouster as top executives. On Monday, a federal judge in Los Angeles is expected to consider their request to gain early access to the funds.
November’s settlement agreement provided for them to receive the money May 6. The deal also set up new employment contracts requiring them to cooperate with an internal audit investigation as well as with the SEC. In addition, the agreement called for all patents and inventions developed by Yuen to be transferred to the company.
Sources close to the company said Friday that the two executives breached their new employment agreements by failing to cooperate with the SEC and the internal audit. The audit was finished this month, when the company posted a loss of more than $6 billion for 2002 because of goodwill write-downs, and it restated past results dating to 2000.
The sources said their severance package was in jeopardy because Gemstar or the SEC was likely to take action to stop any payment. The SEC could seize the payments if it finds that the executives improperly inflated Gemstar revenue.
Gemstar lost 90% of its stock value last year after disclosing aggressive accounting of certain revenue. News Corp., which controlled half the company’s board seats at the time, installed new management.
In a move that many found surprising under the circumstances, Yuen and Leung sued the SEC in March, accusing the agency of playing an illegal role in putting the severance money in escrow by threatening to sanction Gemstar. Arkin did not return a phone call late Friday seeking comment.
