U.S. Securities and Exchange Commission
Litigation Release No. 18826 /August 10, 2004
Accounting and Auditing Enforcement Release No. 2081 / August 10, 2004
SEC v. Peter C. Boylan, Civil Action No. CV 04-6569 FMC (MANx) (C.D. Cal.)
FORMER CO-PRESIDENT OF GEMSTAR-TV GUIDE INTERNATIONAL, INC. AGREES TO SETTLE SEC ACTION
The Securities and Exchange Commission today announced that Peter C. Boylan, a former senior executive of Gemstar-TV Guide International, Inc. and its wholly owned subsidiary, TV Guide, Inc., has agreed to settle the federal court action filed by the Commission. As part of the settlement, Boylan will consent to a fraud injunction, without admitting or denying the allegations in the Commission's complaint, and will pay a total of $600,000 in disgorgement and civil penalties. The settlement is subject to approval by the court.
Gemstar is a Los Angeles-based media and technology company that, among other things, publishes TV Guide magazine and develops, licenses, and markets an interactive program guide (IPG) for televisions that enables consumers to navigate through and select television programs. During the relevant period, Gemstar generated revenues from the IPG by licensing the technology to third parties and selling advertising on the IPG. In statements to securities analysts and the investing public, Gemstar repeatedly touted the IPG technology and IPG advertising revenues as the company's future and as the "value driver" of the company's stock, and downplayed expected declines in revenue from TV Guide magazine.
Boylan, of Tulsa, Oklahoma, is the former co-president, co-chief operating officer and a member of the board of directors of Gemstar and the former co-chairman, chief executive officer, and co-president of Gemstar's wholly owned subsidiary, TV Guide. The Commission's complaint alleges that from June 1999 through September 2002, Gemstar overstated its total revenues by at least $248 million to meet its ambitious projections for revenue growth from IPG licensing and advertising. The complaint further alleges that Boylan participated in Gemstar's fraudulent reporting of transactions relating to IPG advertising. According to the complaint, Boylan structured two transactions so that a portion of the amount to be paid to Gemstar was nominally and artificially allocated to the sale of IPG advertising. The complaint also alleges that in press releases, conference calls with securities analysts, and annual reports filed with the Commission, Boylan omitted to disclose material information regarding the transactions. The complaint charges Boylan with securities fraud, falsifying Gemstar's books and records, and aiding and abetting Gemstar's reporting and record-keeping violations, in violation of Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-1, and 13b2-1 thereunder.
If approved by the court, Boylan will be enjoined from future violations, or aiding and abetting violations, of the above provisions of the federal securities laws. Boylan is also agreeing to pay disgorgement of $300,000 and a civil penalty of $300,000. The Commission will seek to have this money included in a fund established for harmed shareholders of Gemstar pursuant to Section 308 of the Sarbanes-Oxley Act of 2002.
The Commission's action is pending against four other former executives of Gemstar: Henry C. Yuen, former chief executive officer; Elsie M. Leung, former chief financial officer; Jonathan B. Orlick, former general counsel; and Craig Waggy, former CFO of TV Guide. The court has scheduled the trial of this matter to begin on January 18, 2005. On June 30, 2004, the court entered a final judgment of permanent injunction against Gemstar as part of a settlement in which the company agreed to pay a $10 million civil penalty to be distributed to harmed shareholders pursuant to Section 308 of the Sarbanes-Oxley Act.