FORMER GEMSTAR LEADERS CHARGED.

Byline: Jamie McClintock Staff Writer

The Securities and Exchange Commission on Thursday filed securities fraud charges against two former top-ranking executives of Los Angeles-based Gemstar-TV Guide International Inc. for inflating the firm's total revenues by $223 million.

Henry Yuen, Gemstar's former founder and chief executive, and Elsie Leung, the company's former chief financial officer, were named in the SEC suit for allegedly ``cooking the books'' from March 2000 through September 2002.

The executives were fired April 20 by Gemstar's board for cause.

``The allegations leveled ... by the SEC against Henry Yuen and Elsie Leung are as unfair as they are fragile and arbitrary,'' said Stanley S. Arkin, Yuen's attorney.

The SEC suit alleges that Yuen and Leung participated in a fraudulent scheme to overstate Gemstar's revenues and to report the inflated revenues to the investing public in an attempt to boost the firm's stock.

Because of the alleged manipulation, Yuen received $18.8 million in salary and bonuses from 2000 to 2002, and exercised stock options for a taxable profit of $14.6 million and over $63.6 million from selling shares of Gemstar stock, according to the SEC filing.

Yuen is also seeking payment of $29 million as a termination fee and payment of salary, bonuses and vacation pay that he claims to be owed by Gemstar.

Leung received $5.3 million in salary and bonuses, and exercised stock options for a profit of $4.9 million, according to the SEC complaint.

She is also seeking payment of $8.1 million as a termination fee and payment of salary, bonuses and vacation pay that she claims to be owed by the company.

The alleged scheme was to enable Gemstar to meet its projections for revenue growth from an interactive television program guide licensing and advertising, according to the SEC filing.

The lawsuit, filed Thursday in a Los Angeles federal court, seeks anti- fraud injunctions and civil money penalties including salaries, bonuses and proceeds from the sale of stock during the fraud.

``We filed a lengthy, detailed complaint which outlines the evidence that we think supports the charges,'' said John Bulgozdy, senior trial counsel for the SEC in Los Angeles. The lawsuit also seeks to permanently bar Yuen and Leung from serving as officers or directors of public companies.

It also seeks a continuation of the May 9 order requiring Gemstar to place extraordinary payments to any of its directors, officers or other affiliates including almost $38 million in cash payment the company previously agreed to pay the defendants, in escrow, in essence freezing the money.

Those funds are being held under court order pursuant to Section 1103 of the Sarbanes-Oxley Act. ``I think most people in the industry detach (Yuen and Leung) and what they did from current Gemstar management ...,'' said Phillip Swann, president and publisher of TVPredictions.com in Santa Monica.

Gemstar issued a statement indicating that current management will continue to fully cooperate with the SEC's investigation.

Jamie McClintock, [phone]

jamie.mcclintock(at)sgvn.com