Gemstar’s former CEO Henry Yuen and chief financial officer Elsie Leung have filed an unusual lawsuit against the Securities and Exchange Commission, blaming the agency for stopping payment of millions of dollars in severance that Gemstar placed in escrow as the SEC and the Dept. of Justice examine the company’s books.
The suit, filed this week, charges the SEC with intimidation and undue pressure on the company aimed at keeping the pair parted from their cash. The SEC itself has no authority to block the funds since it hasn’t filed any charges.
Yuen and Leung stepped down from management roles last fall under the pressure of the various investigations, shareholder lawsuits and the threat of Gemstar’s being delisted from the stock exchange. Both Yuen and Leung remain on the board. Yuen is non-executive chairman and is entitled to about a $30 million payout for his CEO contract.
Firm freezes funds
The funds were frozen by the company pending results of the civil and criminal investigations. Last month, the SEC had to issue a subpoena to force the pair to testify after they failed to show on first request. It’s not clear if they’ve done so yet.
Yuen was replaced by former Fox exec Jeff Shell. Fox parent News Corp. owns 42% of Gemstar and has taken billions of dollars of writedowns as Gemstar stock plunged over the past year.
Gemstar, News Corp, and the SEC all declined to comment on the suit.
A person familiar with the suit said Yuen and Leung claim there was an oral agreement that the payments would not be entirely frozen but that some funds would be available to them.
Earlier this week, Gemstar posted a loss of $6 billion for 2002 and restated its financial results for the past three years.