Featured Publications

Government Contracts: Alert - December 1, 2008

Beginning January 15, 2009, most federal contractors and subcontractors will be required to use E-Verify to verify the eligibility of their employees to work in the U.S. A recent final rule, which amends Federal Acquisition Regulations pursuant to a June 6, 2008 Executive Order, requires certain government contracts to contain a clause requiring contractors to enroll in and use E-Verify. Previously, participation in the program was optional. This alert provides a summary of the E-Verify program, its applicability to federal contractors and its requirements.

More

Nicholas Milano Appointed Executive Partner of Holland & Knight's Fort Lauderdale Office

FORT LAUDERDALE, Fla. – Holland & Knight Managing Partner Steven Sonberg has appointed Nicholas "Nick" Milano to serve as Executive Partner of the firm's Fort Lauderdale office. In this new role, Milano will be responsible for management of the office. He will focus his energy and talent on expansion of the office's core practice areas, which include real estate, hospitality, litigation, private wealth services, tax and corporate/M&A.

More

Search Our Library

Search

  • Printer friendly
  • Email this page to a friend
  • Generate a PDF version of this page
Securities & Financial News to Note
Alert - April 21, 2008
 
In this Issue...
SEC Successfully Applies Section 1103 of Sarbanes-Oxley to Prevent Severance Payment
 
 April 21, 2008
 

On April 9, 2008, the SEC announced the successful completion of its efforts to prevent a $29.5 million severance package from being paid to the former CEO of Gemstar-TV Guide International, Henry C. Yuen, who committed securities fraud prior to leaving Gemstar. The severance package, which was returned to the company, had been held in an escrow account pursuant to Section 1103 of the Sarbanes-Oxley Act.

The SEC was able to stop the large payment to Yuen through a provision in the Sarbanes-Oxley Act – Section 1103 – that allows the Commission to seek a temporary order from a federal district court requiring the company to hold “extraordinary payments” likely to be made to any officer, director, or affiliate of the company who is charged with a violation of the securities laws. Upon approval of the court, the escrow period provided by Section 1103 may be extended until the conclusion of any legal proceedings. The provision sought to ensure that “extraordinary” payments to potential wrongdoers would still be reachable by the time the SEC completed its inquiry and/or enforcement.

In the Gemstar case, Yuen and Gemstar agreed to a $29.5 million severance agreement nearly simultaneously with Gemstar’s public disclosure that it needed to restate its 2001 financial results, causing a material change to the company’s results. The Commission immediately commenced a formal investigation and thereafter sought and received an order from the U.S. District Court pursuant to Section 1103 that froze Yuen’s severance payment. As a result of its investigation, in 2003 the SEC charged Yuen with various violations of the federal securities laws. On May 8, 2006, Yuen was found guilty on all claims and forced to pay more than $22 million in financial penalties. On April 1, 2008, the Ninth Circuit Court of Appeals affirmed the district court ruling that Yuen committed securities fraud, and found that the financial penalties against Yuen were appropriate. The $29.5 million of escrowed funds will now be remitted to Gemstar.

The Gemstar case is one of the first instances of the SEC exercising its Section 1103 powers. Commenting on the case, Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement, said “[t]his important action keeps this substantial amount of money in the hands of the company and its shareholders where it belongs.”

http://www.sec.gov/news/press/2008/2008-58.htm