The US Securities and Exchange Commission (SEC) on Wednesday announced a court ruling that successfully concludes its efforts to stop a USD29.5mn severance package from being paid to the former CEO of Gemstar-TV Guide International, Henry C. Yuen, who committed securities fraud before leaving his position at the California-based company.
The funds were previously set aside in an escrow account that will now be dissolved so that the money remains with the company and its shareholders.
The SEC was able to stop the large payment to Yuen through a provision in the Sarbanes-Oxley Act - Section 1103 - that allows the Commission to seek a temporary order from a federal district court requiring the company to hold "extraordinary payments" likely to be made to any officer, director, or affiliate of the company who is charged with a violation of the securities laws.
The Commission charged Yuen with various violations of the federal securities laws in 2003, and he was later found guilty on all claims and forced to pay more than USD22mn in financial penalties.
This forfeiture of his severance payment will bring the total financial cost to more than USD51mn for Yuen in the wake of his securities fraud violations.
"The SEC is committed to utilizing every provision in our securities laws to bring wrongdoers to justice. This important action keeps this substantial amount of money in the hands of the company and its shareholders where it belongs," explained Linda Chatman Thomsen, Director of the SEC's Division of Enforcement.
"This escrow perfectly achieved what Section 1103 was designed to do: prevent departing officers from reaping additional benefit from their fraudulent conduct," added Rosalind Tyson, Acting Regional Director of the SEC's Los Angeles Regional Office.
She continued: "Yuen was stopped from taking USD29.5m on his way out the door under the cloud of an SEC investigation. This is a victory for the company's shareholders, who ultimately benefit from the return of these funds."
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