After finding that its earnings had been overstated by some $40 million, Gemstar announced plans to restructure
Question:
After finding that its earnings had been overstated by some $40 million, Gemstar announced plans to restructure its management and corporate governance. As part of the restructuring plans, Gemstar provided termination agreements to its chief executive officer (CEO), Dr. Henry Yuen. Dr. Yuen’s termination agreement provided for a “ termination fee” of $22,452,640; an additional $7,030,778 in unpaid salary, bonuses, and unused vacation time; and 5,274,519 shares of restricted stock.
The SEC ultimately charged Yeun with fraudulently inflating Gemstar’s revenue reports by $223 million. The SEC informed Gemstar that Yuen’s restructuring payments were to be placed in escrow during the course of its action against them. Yuen contends that the SEC cannot enforce this requirement because the payments were not “extraordinary payments” for the purposes of Sarbanes-Oxley. Were the restructuring payments “extraordinary payments”? Explain.
Step by Step Answer:
Law for Business
ISBN: 978-1259722325
13th edition
Authors: A. James Barnes, Terry M. Dworkin, Eric L. Richards