The founder and the former chief financial officer of Gemstar-TV Guide International Inc. have reneged on commitments to honor subpoenas issued by the Securities and Exchange Commission, prompting the agency to seek a court order Wednesday to compel them to testify.
The SEC, which is investigating Gemstar's financial reporting practices, said in court filings that former CFO Elsie Leung "failed to obey" a subpoena to appear on March 10 in U.S. District Court for the Central District of California despite her agreement to do so. The filing also said Gemstar founder and former Chief Executive Henry Yuen informed the agency Friday that he would not testify March 24 as he had agreed to do.
The two executives resigned their top management positions at Gemstar last year after a major shareholder, News Corp., raised questions about the company's finances. Shortly after, Gemstar disclosed it had overstated financial results, prompting the SEC investigation.
This week, Gemstar, which is now run by News Corp. executive Jeff Shell, said it would reduce reported revenue for the last 3 1/2 years. Gemstar said it had improperly accounted for sales of its on-screen TV program guides.
News Corp. was furious with the pair, who are still on the Gemstar payroll. News Corp. said in a terse statement Wednesday that it "has and continues to cooperate fully with the SEC's investigation and has directed its employees to do the same. The company is very disappointed by the necessity of a subpoena enforcement action."
Stanley Arkin, the attorney representing Yuen and Leung, said his clients needed more time to review documents in the case. "I've gotten in the last two weeks 160 boxes of additional documents and hundreds of thousands of e-mails," he said.
Leung and Yuen have said they will be ready to testify in about three weeks, and they and the SEC have agreed on new dates.
But the SEC suggested in its filings Wednesday that even so, it didn't completely trust Leung and Yuen. The agency said the two lacked credibility because they failed to honor earlier promises to appear -- which officials called highly unusual.
The agency suggested in its filing that the two may get incentives for trying to continue to delay because they are to collect severance packages, a total of $62 million, on May 6.
In some financial fraud cases, the SEC has demanded that executives involved in wrongdoing give up some financial gains.
Pasadena-based Gemstar stock has plunged 85% in the last year.