Gemstar Ex-Execs’ Severance Bid Denied
A federal judge on Monday rebuffed efforts by two former top executives of Gemstar-TV Guide International Inc. to obtain a $29.5-billion severance package that was frozen by the company in the midst of a federal investigation of alleged accounting irregularities.
Former Gemstar Chief Executive Henry Yuen and Elsie Leung, the firm’s ex-chief financial officer, sued the Securities and Exchange Commission this month alleging that the agency illegally coerced their Pasadena-based employer into putting the severance money into an escrow account because of the pending probe. The SEC is investigating the accounting practices used by Gemstar when Yuen and Leung were in charge.
For the record:
12:00 a.m. April 23, 2003 For The Record
Los Angeles Times Wednesday April 23, 2003 Home Edition Main News Part A Page 2 ..CF: Y 1 inches; 51 words Type of Material: Correction
Gemstar severance -- A Business section article Tuesday about two former top executives of Gemstar-TV Guide International misstated the value of their severance package at $29.5 billion. In fact, former Chief Executive Henry Yuen’s package is worth $29.5 million, and Elsie Leung, the former chief financial officer, will receive $8.16 million.
Judge Mariana R. Pfaelzer of the U.S. District Court in Los Angeles denied a request by Yuen and Leung for access to the severance package, ruling that the executives failed to prove that the SEC acted illegally or that the two were harmed by being denied access to the funds. “The reason the escrow is in place is that your clients consented,” Pfaelzer told the executives’ attorneys. “I don’t see irreparable harm. The money is there. The shareholders have had the hardship.”
Gemstar lost 90% of its value after disclosures by the company of aggressive accounting for certain revenue and after losing a patent case that is key to its business of licensing software for electronic TV guides.
Under an agreement with Gemstar, the two former executives agreed to step down from top management and to put their severance payments in an escrow account until May 6.
The SEC would not comment on Monday’s ruling. But a lawyer for Yuen and Leung said he expected the SEC to move to block the payments on that date under provisions of the newly adopted Sarbanes-Oxley Act, which is intended to protect shareholders from corporate misdeeds. The attorney, Stanley Arkin, said he would fight any attempt by the SEC to block the payments. He also is contesting the firing last Friday of his clients.
Gemstar said it terminated the two executives “for cause” but did not elaborate. Sources at the company said Yuen and Leung were fired because of their lack of cooperation with ongoing investigations. But Arkin said his clients have cooperated, with Leung testifying for eight days and Yuen for one.
The SEC filed contempt charges last week against Yuen, seeking to jail him after he failed to testify under a court order last Thursday. Arkin said Monday that Yuen did not testify because he learned early last week of his imminent ouster and skipped the other scheduled dates to prepare for a board meeting last Friday at which the termination was to be discussed.
