Henry C. Yuen, former chairman of Gemstar-TV Guide International Inc., will plead guilty to obstructing a Securities and Exchange Commission investigation into alleged accounting irregularities at the company from 1999 to 2002, the U.S. attorney’s office said Tuesday.
Under terms of a plea agreement with prosecutors, the 57-year-old Yuen will serve six months of home detention during a two-year period of probation.
He also will be required to contribute $1 million to charities representing low-income victims of fraud and to pay a $250,000 fine, the prosecutor’s office said.
Yuen and the Los Angeles-based company’s chief financial officer, Elsie Leung, were forced out in late 2002 after Gemstar was discovered to have inflated revenue by nearly $250 million.
Billions of dollars in shareholder value were subsequently wiped out as the company’s stock price plummeted.
According to prosecutors, Yuen received a subpoena from the SEC in October 2002 to turn over e-mails, memos and other documents stored on his Gemstar office computer. Instead, they said, he deleted them.
He was subsequently subpoenaed to testify before an SEC hearing in March 2003. On the day before he was supposed to appear, Yuen allegedly installed a computer program called “Eraser 2003" on his computer.
By running the program, prosecutors said, Yuen, a computer expert, made it nearly impossible to recover the documents he had previously deleted.
Yuen’s lawyer, Stanley Arkin of New York, released a statement Tuesday saying that what his client did was “the product of bad judgment that in no way affected Gemstar or its shareholders.”
No date has been set for Yuen to enter his plea to the felony charge.
In the meantime, the SEC is proceeding with plans to try Yuen and Leung on civil fraud charges Dec. 6 in Los Angeles federal court.
The SEC won a court fight this year to freeze $29.5 million in severance pay that Yuen was to receive after he left Gemstar. The U.S. 9th Circuit Court of Appeals ruled that the agency could freeze the payment under the Sarbanes-Oxley Act. The law was enacted after disclosures of accounting fraud at Enron Corp. and WorldCom Inc., now MCI Inc.
Gemstar publishes TV Guide and licenses technology for on-screen TV program guides. Rupert Murdoch’s News Corp. owns a controlling stake in the company with about 41% of its shares.