Administration December 10, 2005

Supreme Court Backs SEC's Payment Freeze for Gemstar Execs

October 12, 2005 (PLANSPONSOR.com) - The US Supreme Court affirmed a ruling against two former Gemstar-TV Guide International Inc. executives whose termination payments have been frozen by the Securities and Exchange Commission (SEC).
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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.

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