Gemstar Ex-CEO’s Plea Deal Rejected

A Los Angeles federal judge Monday rejected a plea agreement that would have allowed former Gemstar-TV Guide International Inc. Chief Executive Henry Yuen to escape prison time in exchange for pleading guilty to destroying evidence in a Securities and Exchange Commission probe.

U.S. District Judge John Walter said the agreed-upon sentence of six months of home detention, a $250,000 fine and a $1-million charitable donation “failed to reflect the seriousness of the offense.”

Walter said last month that he was inclined to reject the plea deal between Yuen and the Justice Department because it was too lenient and “sends the wrong message to corporate America.”

Yuen withdrew his guilty plea Monday. That allows him to enter new negotiations with prosecutors.

The SEC filed fraud charges against Yuen and former financial chief Elsie Leung two years ago, claiming that they overstated company revenue by $248 million from March 2000 to September 2002 to boost the company’s stock.

Prosecutors say Yuen, subpoenaed to testify before the SEC in March 2003, installed a program called Eraser 2003 on his Gemstar computer that made it difficult to recover or trace deleted files. Soon after, he had the hard drive of his computer removed from his office.

Gemstar, which Yuen founded, had urged the judge to reject the plea bargain and impose a harsher penalty. Yuen and Leung were forced out in October 2002 by News Corp., which has a 42% stake in Hollywood-based Gemstar, after questions over accounting irregularities caused the stock to plunge.

Yuen’s attorney said he was disappointed that the judge gave such weight to the company’s position.

“Because of a bitter fight between Henry Yuen and News Corp. and Gemstar, their viciousness and access to the press have really led this whole process to be out of kilter,” Stanley S. Arkin said.

The company issued a statement praising the judge’s decision.