LOS ANGELES (Reuters) -
Former Gemstar Chief Executive Henry Yuen could receive nearly $30 million in cash severance despite being fired last week from an advisory role after regulators sought to jail him for not cooperating with a probe of the company's finances, Gemstar said Monday.
Yuen is still entitled to the money under a November agreement, the media and technology company said. But the funds remain in a separate bank account and will not be released to him until next month unless authorities move to seize the money first, Gemstar-TV Guide International Inc. has said.
Yuen's lawyer, Stanley Arkin, told Reuters on Monday he expected the Securities and Exchange Commission will attempt to seize the funds under provisions of the Sarbanes-Oxley Act.
Separately, Arkin said Yuen intended to contest his dismissal from Los Angeles-based Gemstar, which provides interactive programming guides, saying the company was trying to get out of a previously negotiated deal with its founder.
The SEC has filed contempt of court charges against Yuen and asked a federal judge in Los Angeles to jail and fine him after he failed to testify into an ongoing probe of the company's accounting.
In a report filed with the SEC, Gemstar-TV Guide International Inc. (GMST: Research, Estimates) said Yuen was still eligible to collect termination fees and unpaid bonuses and vacation time worth more than $29.5 million despite his dismissal.
Yuen was forced aside as chief executive by Gemstar's largest shareholder, News Corp. Ltd. (NWS: Research, Estimates) after a series of legal setbacks and accounting concerns hit the company and its stock, according to sources familiar with the situation.
Gemstar on Friday fired Yuen from his role heading an international business development unit for Gemstar, and removed him from the company's board of directors.
The SEC subpoenaed Yuen to testify in its investigation of Gemstar. The commission in March sought a court order to force Yuen to honor the subpoena, and filed the contempt motion on Thursday after he missed agreed testimony dates.
Yuen also has a lawsuit pending against the SEC, but a federal judge in Los Angeles on Monday denied his request for a preliminary injunction against securities regulators.
Gemstar said the only part of Yuen's severance package he was no longer eligible to collect was an award of 5.27 million shares of restricted stock or stock units.
Under the terms of the employment agreement Yuen reached with Gemstar after stepping aside as CEO, Yuen also has the right to appeal his termination, the company said.
If an arbitrator rules in his favor, he would be entitled to receive options for 6.9 million shares of stock and 2.1 million shares of restricted stock or stock units, vesting immediately. He could also get up to $10 million in salary.
Gemstar also said that under Yuen's agreement, the company was obligated to pay him his salary and certain expenses until any dispute was resolved.
Gemstar said Yuen's termination triggered a patent deal between the two sides. The deal, which lasts until November 2009, gives Gemstar the right to acquire certain of Yuen's inventions and mandates that he not compete with the company.
Under the terms of that agreement, Yuen was entitled to a base payment of $250,000 a year, fees of $1.25 million to $2.75 million per year related to the revenue generated from certain products, and options on 200,000 shares of stock a year.
Also fired last Friday was Elsie Leung, Gemstar's former chief financial officer. If Leung successfully appeals her termination, she would get 666,667 shares of common stock, 209,308 shares of restricted stock or stock units and salary of up to $1.5 million.
Leung's agreement after stepping aside last year also included significant cash payments for severance and unpaid vacation and bonuses, totaling around $8.2 million, the company said in Monday's SEC filing. Those payments were also made to a restricted account to be released on May 6.
"There is no good faith or substance basis for terminating Elsie Leung or Henry Yuen. It's simply a case of welching on a deal made with them," Arkin said, adding that they intended to contest the dismissals soon.