Gemstar Says It Has Settled With Ex-CFO

Gemstar-TV Guide International Inc. said Tuesday that it had settled long-standing litigation with former Chief Financial Officer Elsie Ma Leung. The settlement will free the company from having to pay her $8.4 million in severance in the wake of alleged accounting misdeeds.

Under the deal, Leung and Gemstar will drop their claims against each other.

The agreement ends a portion of one of Southern California’s largest corporate scandals. Leung, along with former Gemstar Chief Executive Henry C. Yuen, was fired from the company in 2003 after the Securities and Exchange Commission accused the two of inflating company revenue.

Since November 2002, the media and technology company has restated or reversed about $357 million in revenue.

In February, Leung settled her case with the SEC, agreeing to pay $1.36 million in penalties. She was permanently barred from serving as an officer or director of a public company. She could not be reached for comment.

“This settlement closes the book on Elsie. Her claims against us and our claims against her are completely settled,” said Elaine Murphy, a spokeswoman for Gemstar.

Hollywood-based Gemstar, controlled by media giant News Corp., publishes TV Guide and makes software to run cable television program guides.

An emigre from Hong Kong, Yuen studied mathematics at Caltech and founded Gemstar in 1989 with another doctoral student. The two patented a system for programming videocassette recorders, which brought a windfall of licensing fees -- by 1998 the company reported revenue of $126 million.

The company bought other companies that developed programming guides. In 1999, it acquired TV Guide in a deal that made News Corp. its largest shareholder. By 2000, Gemstar was valued at more than $20 billion.

But the SEC alleged that Leung directed and approved the company’s fraudulent accounting practices and knowingly misled Gemstar’s auditors. From June 1999 to September 2002, Gemstar overstated its revenue by at least $248 million to meet ambitious projections. Yuen and Leung stepped down in 2002 in exchange for big severance packages.

Although Gemstar hasn’t attracted the public outcry of better-known corporate scandals such as Enron Corp, the SEC and Justice Department nonetheless vigorously pursued cases against Leung and Yuen.