Payouts held in escrow while SEC investigates
NEW YORK — Cleaning house over at Gemstar TV Guide is proving expensive.
Gemstar-TV Guide International will have to fork over some $37 million for the privilege of firing former chief executive Henry Yuen and CFO Elsie Yeung, according to documents filed with the SEC Monday.
The two execs were formally fired last week from “consulting” roles they had held since a News Corp.-mandated management reshuffle last fall (Daily Variety, April 21).
Things got even uglier after the SEC late last week sought to have Yuen held, and possibly imprisoned, for contempt of court. In addition to jail time, the SEC has asked a federal court in Los Angeles to fine Yuen $50,000 a day and double it daily until he testifies.
The pair were terminated Friday for failing to cooperate with the SEC investigation.
Due to get millions
Yuen is entitled to receive $29.5 million in unpaid salary, bonus and vacation, related to the termination of his employment agreement Friday. CFO Leung’s contract provides for a payout of $8.2 million.
Not that the two ousted execs — considered largely responsible for recent financial and legal travails of the electronic program guide company — will be able to access their golden parachutes.
Funds in escrow
The funds are being held in escrow while the SEC investigates Gemstar’s accounting irregularities over the past four years.
Yuen and Leung had refused to provide full testimony in the Justice Dept.’s ongoing investigation into the company’s financial disclosures.
The ever-litigious Yuen made lawsuits virtually a cornerstone of his electronic program guide patent business.
And in an unusual, but highly characteristic move, Yuen and Leung last month sued the SEC on the grounds that they had no right to place severance funds in an escrow account.
Claim hurled out
On Monday, a Los Angeles federal court judge denied the pair’s request for a preliminary injunction against the SEC. They claim they were coerced into signing an agreement with the company that would put their severance in escrow pending cooperation with investigation.
Still unclear is the fate of Yuen’s new five-year, $10 million contract signed with Gemstar last year after he stepped down from an operational roll. As the company says it terminated Yuen for cause, he could be forced to relinquish any claims on that contract.
Gemstar has restated earnings several times in the past six months and earlier this month disclosed a 2002 loss of $6.4 billion due to huge write-downs in goodwill value and the reduction in true earnings from past results.
The legal unpleasantness comes as News Corp. is hoping to use Gemstar’s Interactive program guide system on DirecTV once its deal to acquire the satcaster is complete.