KPMG Settles Gemstar Audit Case

From Times Wire Services

KPMG agreed Wednesday to pay $10 million to settle Securities and Exchange Commission charges of improper conduct while auditing Gemstar-TV Guide International Inc.

The SEC said the settlement was the largest ever obtained from an accounting firm.

The commission also said it sanctioned two former KPMG partners, a current partner and a current senior manager for improper conduct related to revenue overstatements from 1999 to 2002 by Gemstar, publisher of TV Guide magazine.

Proceeds from the settlement will go to Gemstar shareholders whose investments suffered as a result of KPMG's audits, the commission said.

KPMG, which was also censured by the SEC, settled without admitting or denying the charges.

"KPMG resolved this matter ... on an amicable basis and to avoid any further distractions in achieving our goal to restore public confidence in the capital markets," the accounting firm said in a statement.

Los Angeles-based Gemstar settled with the SEC over the same case in June and agreed to pay $10 million as well.

Gemstar, which also sells advertising on a program guide on TV, was accused of overstating revenue by almost $250 million. The overstatements included improperly reporting interactive program guide licensing and advertising revenue, the SEC said.

The SEC said KPMG and the auditors should have known that Gemstar improperly recognized and reported revenue.

"Our action today holds KPMG as a firm accountable for the audit failures of its partners," said Stephen Cutler, the SEC's director of enforcement.

Bryan E. Palbaum, a former KPMG partner, was barred from working for publicly traded companies for three years, the SEC said. John M. Wong, another former partner, and Kenneth B. Janeski, a partner in KPMG's Los Angeles office, were barred from working for publicly traded companies for one year. David A. Hori, a manager in KPMG's Phoenix office, was barred from working for publicly traded companies for 18 months.

Samuel Winer, Wong's attorney and a partner in the Washington office of the law firm Foley & Lardner, said: "John is pleased to have this matter resolved and looks forward to moving on with the rest of his life."

Attorneys for the other three men could not be reached.

The SEC is still pursuing a lawsuit in federal court in Los Angeles against four former Gemstar executives, including former Chief Executive Henry Yuen and former Chief Financial Officer Elsie Leung.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World
59°