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Senators Press Probe of Gemstar Ex-CEO

September 22, 2006|From Bloomberg News

Gemstar-TV Guide International Inc. has enlisted two U.S. senators to press the Justice Department to speed up its investigation into what role the company's former chief executive, Henry Yuen, played in a $248-million accounting fraud.

Democratic Sens. Charles E. Schumer of New York and Dianne Feinstein of California wrote Atty. Gen. Alberto Gonzales to inquire about the government's case against Yuen, who withdrew eight months ago from a plea agreement with federal prosecutors in Los Angeles after a federal judge said the deal was too lenient. The senators also forwarded a letter from Gemstar's general counsel warning that a legal deadline to charge Yuen was approaching.

The Yuen case "may raise some questions about the adequacy of tools available to prosecutors to fight corporate wrongdoing," Schumer wrote in his Sept. 13 letter to Gonzales.

Gemstar's stock price has fallen about 76% since the fraud was revealed in April 2002. The Hollywood-based company, controlled by Rupert Murdoch's News Corp., publishes TV Guide magazine and is the largest provider of software for cable television program guides.

While saying he didn't want to interfere, Schumer added, "It is important that Congress be kept well-informed about this and other similar cases so we can monitor the enforcement of the laws designed to protect average Americans from the type of conduct of which Mr. Yuen has been accused."

Feinstein, who wrote Gonzales on Aug. 23, said, "I do not believe it is appropriate for me to intervene in prosecutorial decisions," but the Gemstar general counsel's letter "does raise some serious allegations."

The letters ratchet up a campaign by Gemstar to have Yuen sent to prison for his role in the fraud. The company, which has paid more than $100 million in civil settlements and attorneys' fees in connection with the accounting missteps, has taken the unusual stance that it is a victim of Yuen's alleged crimes.

Yuen has already been sanctioned for securities fraud in a civil case brought by the Securities and Exchange Commission. In May, a federal judge ordered him to pay $22.3 million -- one of the largest penalties against an individual in an accounting case -- for misleading investors and Gemstar's auditors while inflating the company's revenue from 1999 to 2002. Yuen is appealing.

Gemstar General Counsel Stephen Kay, in his letter to the senators, asked them "to do whatever you can to ensure that this case receives the attention it deserves so that the decision about whether or not to prosecute Mr. Yuen will be well-reasoned rather than the product of inexplicable neglect."

He said that most, if not all, potential charges against Yuen would be barred by March 2007 because of the statute of limitations on such offenses.

Thom Mrozek, a spokesman for U.S. Atty. Debra Yang in Los Angeles, who has been supervising the Yuen case, would not make further comments, saying, "The matter is still under investigation." Yuen's attorney Brian Maas declined to comment on the Justice Department probe. He said Yuen was still fighting Gemstar to collect his severance, about $30 million.

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