The Securities and Exchange Commission on Wednesday announced a court ruling in its favor that stops a $29.5 million severance package to the former CEO of Gemstar-TV Guide International, Henry Yuen, who committed securities fraud before leaving the company.

The funds were previously set aside in an escrow account that will be dissolved after a ruling by a federal district court and an affirmation by the Ninth Circuit Court of Appeals.

In the SEC’s and Gemstar’s favor was Section 1103 of the Sarbanes-Oxley Act, which allows companies to temporarily hold “extraordinary payments” likely to be made to any officer, director, or affiliate of a company who is charged with a violation of the securities laws.

The SEC charged Yuen with various violations in 2003, and he was later found guilty on all claims and forced to pay more than $22 million in financial penalties. This forfeiture of his severance payment will bring the total financial cost to more than $51 million for Yuen.

“This important action keeps this substantial amount of money in the hands of the company and its shareholders where it belongs,” said Linda Chatman Thomsen, director of the SEC’s Division of Enforcement.

Added Rosalind Tyson, acting regional director of the SEC’s Los Angeles regional office, “This escrow perfectly achieved what Section 1103 was designed to do: prevent departing officers from reaping additional benefit from their fraudulent conduct.”

Yuen’s attorney, Brian Maas of the New York law firm Beldock Levine & Hoffman, could not be reached by press time.

In a rare securities-law trial the U.S. District Court for the Central District of California in December of 2005 ruled in favor of the SEC against Yuen on all claims. Yuen was convicted of committing securities fraud by making misrepresentations and omissions of material fact about Gemstar revenues, aiding and abetting Gemstar’s violations of reporting and record-keeping control requirements, and lying to the company’s auditors.

In May 2006, the court ordered Yuen to disgorge $10.5 million, pay prejudgment interest of $1.1 million, and pay a civil penalty of $10.5 million.

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