The Associated Press reports that the SEC froze $37 million in termination payments to former Gemstar chief executive Henry Yuen and top finance executive Elsie Leung while its investigation of a $250 million accounting-fraud scandal at Gemstar was pending. The SEC was granted the ability to freeze payments to executives in the Sarbanes-Oxley Act of 2002.
Gemstar-TV Guide has already paid a $10 million civil penalty to settle SEC charges and other executives have also settled with the agency. According to the AP, a settlement reached between Yuen, Leung and the SEC fell apart and a civil trial is scheduled in a California federal court in December.
The litigation has provided a test case for freezing executive payments as an enforcement tool for the SEC. In a Supreme Court filing, US Solicitor General Paul Clement said the 9 th Circuit appeals court ruling allowing the payment freeze is consistent with the intent Congress had when it passed the accounting-fraud laws.