Gemstar playing tough with Yuen.

When a former chief executive is charged with a corporate crime, companies usually go out of their way to stay in the background.

Not so with Henry Yuen and Gemstar-TV Guide International Inc.

Not only has Los Angeles-based Gemstar gone so far as to impugn Yuen's character--calling him "pathologically" deceitful, among other zingers--it has pressed a judge to stiffen Yuen's sentence on obstruction of justice charges, calling it a "travesty of justice."

Then again, Gemstar has a strong motivation. Forcing a prison sentence may mean that the company won't have to fork over $29.5 million in severance payments Yuen is seeking.

"It's very unusual for a corporation to seek to get more criminal penalties heaped upon a former officer, and in this case the former CEO," said Brian Hennigan, a partner at Irell & Manella LLP, who represented a former executive of Homestore Inc. who was charged criminally.

"If they can get a case wrapped up with a lighter sentence and one with a smaller penalty, that's (usually) interpreted as a good thing from a corporate view," he said.

Earlier this month, Gemstar, which publishes TV Guide, argued that Yuen deserved a harsher sentence than the six months of home detention outlined in an October plea agreement with federal prosecutors. As part of that plea deal, Yuen admitted that he destroyed documents during a separate investigation by the Securities and Exchange Commission, which has charged that Gemstar inflated its revenue by $248 million from 2000 to 2002.

The company also took the unusual step of asking another U.S. attorney's office, in the Middle District of Florida, to launch a separate investigation of the allegations against Yuen.

Yuen's attorney, Stanley Arkin, a partner at Arkin Kaplan LLP in New York, told Bloomberg News that Gemstar's actions are part of "an insincere, malicious litigation ploy" used to avoid paying his client a severance package, which includes $29.5 million frozen by the SEC. Yuen and Elsie Leung, the former chief financial officer whose $8.1 million in severance payments also has been frozen, appealed to various courts to lift the freeze but were ultimately denied by the U.S. Supreme Court.

The SEC case is scheduled to go to trial next month against Yuen and Leung, and the outcome of the obstruction of justice case will be an issue.

"What's going on here is this company, Gemstar, wants to see if they can get out of various economic responsibilities they have," said Arkin. "Henry Yuen never, ever, ever did anything intentionally or knowingly to harm Gemstar."

Gemstar's spokesman, Whit Clay, refused to comment beyond a statement saying that "the company has and will continue to cooperate with all government investigations into the conduct of the company's former executives."

Outside attorneys familiar with the case say it would behoove Gemstar to seek a tougher sentence for Yuen than six months home detention. A prison sentence could give it a stronger hand in seeking to avoid the severance payment.

"There is an open issue as to whether or not it is appropriate under the circumstances for these payments to be made," said Jan Handzlik, a partner at Howrey LLP. "Mr. Yuen was not convicted of an accounting fraud. He was not convicted of securities fraud. He's entered a plea of obstruction of justice. Thus, the company cannot point to his conviction and say, 'He defrauded the company and its shareholders and therefore has no right to severance.'"

Gemstar's appeal to another U.S. attorney's office is particularly rare, one that defense lawyers in white-collar crime say is unlikely to lead to a new investigation. But it might force Yuen to the negotiating table. "It would be unusual for another U.S. attorney's office to take up an investigation that had been concluded," Handzlik said.

The company's actions may have another motivation: getting even.

The SEC has maintained that Yuen sold 7 million shares of Gemstar stock in April 2002, just a few days after the first disclosure of revenue restatements. At that time, the shares were valued at $60 million. In its recent court filings, Gemstar said Yuen and Leung have received an additional $30 million from exercising company stock since they were fired in April 2003.

"If other board members felt he misrepresented the facts to them, there might be personal animosity," Hennigan said. "Here he is making millions of dollars each year and other members feel he's been playing fast and loose with them. They feel this is like any purported victim to say, 'This sentence is not serious enough.'"

In court filings, the company says Yuen had a "history of lying," assuring others he was innocent while at the same time destroying documents critical to the SEC investigation. Gemstar said Yuen even lied to his family when he allegedly coerced his son into tricking his ex-wife into signing a modification of their divorce settlement under which she effectively signed away her tight to millions of dollars in support, court papers say.

Such personal attacks might simply indicate that the company's board members want a "sense of justice," Hennigan said.

Financial reasons

Despite their unorthodox nature, Gemstar's moves make sense given the company's financial situation, lawyers say. The company has been struggling as its historic TV Guide property has lost circulation, forcing it to recently re-launch the publication as a larger, celebrity-driven magazine. And in court filings, the company says it suffered $100 million in "hard costs" related to Yuen's case.

That included a $10 million fine to the SEC, $40 million in attorney's fees and more than $70 million to settle shareholder lawsuits. Additionally, Yuen has been collecting $2 million per year in salary since Gemstar fired him.

The company also reported $5 million in outside legal expenses during the third quarter. While those numbers are an improvement over last year, legal fees "are likely to increase" for the rest of the year, according to SEC filings.

Gemstar also sued its former insurance carriers, alleging that they paid less than $1 million in defense costs despite liability insurance policies with limits of $50 million.

"Sometimes, it's difficult for companies to swallow that type of outlay of cash payments to attorneys for individuals who no longer work there," said Thomas Brown, a partner at Brown & White LLP. "If they can't renege on an agreement ... the next thing to do is gain a tactical advantage with the criminal authorities to bring the executive to the table and renegotiate the deal."