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SEC sues 3 more ex-Gemstar executives

The U.S. Securities and Exchange Commission on Monday sued three additional, former top executives from programming guide provider Gemstar-TV Guide International Inc., charging them with participating in a "widespread and complex scheme" to inflate revenue.
/ Source: Reuters

The U.S. Securities and Exchange Commission on Monday sued three additional, former top executives from programming guide provider Gemstar-TV Guide International Inc., charging them with participating in a "widespread and complex scheme" to inflate revenue.

The civil lawsuit, filed in federal court in Los Angeles, named former Gemstar Co-President Peter Boylan, Jonathan Orlick, Gemstar's former general counsel, and Craig Waggy, ex-chief financial officer of TV Guide, a wholly-owned Gemstar subsidiary.

Gemstar's top two former executives were sued in June as part of the same probe into an accounting scandal that regulators have charged included efforts to overstate revenues by hundreds of millions of dollars. Authorities are pursuing criminal charges against four unnamed former executives.

Gemstar, which reshuffled management in late 2002 and which counts News Corp. Ltd. as its largest shareholder, said it believes it has resolved its accounting issues.

"Since the management restructuring, the Company's current management has worked closely in cooperation with the SEC in connection with this investigation," it said. "The company believes that it has resolved its past accounting issues and has taken significant steps towards the resolution of associated regulatory issues."

Boylan's attorney said she had not yet received a copy of the SEC complaint but had seen some documents as part of the investigation and did not believe there was a basis for charges.

"Based on what we have been told the complaint says ... there is absolutely no merit to their claims and we believe Mr. Boylan will be totally vindicated," Patricia Glaser told Reuters. "We are extremely frustrated with the SEC."

Orlick's attorney said he intended to fight the complaint.

"Mr. Orlick at all times complied with his ethical and legal obligations to Gemstar," attorney Susan Resley told Reuters. "He did not misrepresent anything to anyone."

Waggy's attorneys said he had made efforts within the company to push for greater financial disclosure.

"The allegations against Mr. Waggy lack merit, and Mr. Waggy is prepared to set the record straight at trial," they said. "Mr. Waggy was neither the CFO nor the Principal Accounting Officer of Gemstar, and had no responsibility for the financial statements and disclosure decisions being challenged by the SEC."

New charges
The SEC filed similar charges last June against former Gemstar Chief Executive Henry Yuen and ex-Chief Financial Officer Elsie Leung. The commission charged Yuen and Leung with scheming to overstate revenue at Gemstar by at least $223 million from March 2000 to September 2002.

Through their attorney, the two have denied those charges and said their actions during the period were reviewed and approved by auditors and attorneys.

In the amended complaint filed on Monday, the SEC said Gemstar overstated its total revenues by at least $248 million.

SEC Pacific Regional Director Randall Lee said in a statement that the new charges reveal the fraud was carried out not just by Yuen and Leung.

"It's even more disturbing that two of the defendants were also members of Gemstar's board, and that one of them was the general counsel of the company," Lee said.

The SEC's complaint seeks unspecified civil penalties and asks that any ill-gotten gains be returned to investors. The financial regulator is also asking they be barred from service as an officer or director of a public company. (Additional reporting by Niala Boodhoo in Washington)