The Supreme Court voted to let stand a ruling against two former executives of Gemstar-TV Guide International, supporting the ability of the Securities and Exchange Commission to freeze payments to executives under federal accounting fraud law.

Under the Sarbanes-Oxley Act of 2002, the SEC was granted the power to block payments to executives. Following an investigation of a $250 million accounting scandal at Gemstar, the SEC froze $37 million in termination payments to former executives Henry Yuen and Elsie Leung, who promptly challenged the law. A trial judge in the U.S. Court of Appeals for the Ninth Circuit in San Francisco ruled that the freeze was allowed, and later was overruled by a Ninth Circuit panel. The appeals court then reheard the case and overturned its original ruling.

Gemstar's businesses include the TV Guide magazine and electronics licensing. Both former chief executive Yuen and former chief financial officer Leung were forced out in late 2002 after the company was discovered to have inflated advertising sales since 1999. Yuen would have received nearly $30 million in severance. Both said that their termination fees and unpaid salaries did not meet the "extraordinary payments" requirement the law set for holding up money to corporate officers.The SEC is moving forward to prosecute Yuen and Leung on civil fraud charges in December. Yuen has reached a plea agreement with the Justice Department, but it is under review by a federal judge. Gemstar filed objections to that agreement last week.

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