An attorney for Henry Yuen, the disgraced former Gemstar TV-Guide International Inc. chief executive, called a decision by the Securities and Exchange Commission to seek a $15.7 million fine against her client for accounting fraud "grossly disproportionate."
At a court hearing Friday in U.S. District Court in Los Angeles, Michelle Rice said the SEC's demand that the former executive pay a $15.7 million penalty and disgorge another $15.7 million in bonuses and ill-gotten gains amounted to far more than what another ousted Gemstar executive agreed to pay for a scheme to inflate the company's stock price, Bloomberg News reported.
Yuen and the company's former chief financial officer Elsie Leung were accused by the SEC of scheming to inflate the company's revenues by $248 million in order to boost its stock price. The case started in 2003 as a civil action and escalated to criminal charges. Gemstar publishes TV Guide magazine and licenses its programming guide technology to television companies.
Leung agreed earlier this year to pay a $1.4 million settlement to the SEC without admitting guilt or innocence. She also was barred from serving as an officer or director of a public company and was banned from practicing accounting at public companies.
Rice said the penalty against Yuen far exceeds the settlement the commission was willing to accept from Leung, while SEC attorney Mike Piazza acknowledged the penalty was the largest ever sought against an individual for accounting fraud but argued it was justified.
"This defendant has shown no remorse," said Piazza, according to Bloomberg News.
The SEC also is seeking to seize Yuen's frozen $29.5 million severance package. During the hearing, Rice sought to have Yuen's penalty taken from the severance package, which was approved just weeks after the company announced it had overstated revenue. But Piazza called the pay package "the fruits" of Yuen's fraud, according to Bloomberg.
Yuen pleaded guilty last October to destroying company documents and received six months of home detention, agreed to pay $1 million in charitable donations and a $250,000 fine. Gemstar executives protested the agreement, calling it too lenient, and have been seeking more severe penalties.
U.S. District Judge Mariana Pfaelzer gave Rice 10 days to submit a written response to the SEC's penalties. Yuen was not at the hearing.
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