Former Chairman and CEO of Gemstar-TV Guide International, Inc. Ordered to Pay Over $22 Million For Role in Accounting Fraud
FOR IMMEDIATE RELEASE
Washington, D.C., May 10, 2006 - The Securities and Exchange Commission today announced that Henry C. Yuen, the former chairman and chief executive officer of Gemstar-TV Guide International, Inc., has been ordered to pay over $22 million for his role in a scheme to defraud investors by inflating Gemstar's licensing and advertising revenues. In addition, Yuen will be permanently barred from serving as an officer or director of a public company.
After a three week trial in December 2005 in the Central District of California, United States District Judge Mariana R. Pfaelzer found in favor of the Commission and against Yuen on all of the SEC's charges. In a written decision filed on March 20, 2006, the court found that Yuen had committed securities fraud by making misrepresentations and omissions of material fact about certain Gemstar revenues, that Yuen aided and abetted Gemstar's primary violations of the periodic reporting and record keeping control requirements, and that Yuen lied to Gemstar's auditors.
On May 8, 2006, the court ordered Yuen to pay a total of $22,327,231 in disgorgement, penalties, and interest, and entered a permanent injunction against future securities law violations and a permanent bar from serving as an officer or director of a public company. The court found that Yuen received $10,577,692 in ill-gotten gains from his fraudulent conduct, consisting of (1) $3,022,452 in gross bonus compensation received by Yuen during the period of the fraud, and (2) $7,555,240 in excess trading profit he received by selling Gemstar stock during the period of the fraud. The court ordered Yuen to pay a civil money penalty equal to the amount of disgorgement.
"We are pleased that the district court so soundly rejected Henry Yuen's attempts to evade responsibility for the fraud he orchestrated at Gemstar-TV Guide," said Randall R. Lee, the SEC's Pacific regional director. "The financial judgment and the permanent bar against future service as an officer or director reflect the seriousness of Yuen's misconduct and the vital importance of punishing and deterring securities law violations which harm the investing public."
Gemstar is a Los Angeles-based media and technology company that publishes TV Guide magazine and 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. When Gemstar announced for the first time that certain of its IPG licensing and advertising revenue may have been improperly recorded, its stock price declined by approximately 37%, causing a market loss in excess of $3 billion.
In addition to its charges against Yuen, the SEC also previously filed actions against Gemstar and its former CFO, co-president, general counsel, and a divisional CFO, as well as against Gemstar's auditors, KPMG, and four members of the KPMG audit engagement team.
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For further information contact:
Randall R. Lee
Michael A. Piazza
Regional Trial Counsel
Additional materials: Litigation Release No. 19694