According to a press release dated September 13, 2005, KPMG settled a class-action lawsuit brought by shareholders of Gemstar-TV Guide International Inc. for $25 million. A federal judge in Los Angeles approved the KPMG settlement, said a lawyer for the plaintiffs with Bernstein Litowitz Berger & Grossman in San Diego. The $25-million settlement includes $10 million KPMG agreed to pay last year to settle with the Securities and Exchange Commission.
In a Press Release dated February 12, 2004, Gemstar-TV Guide International Inc. said it has agreed to settle a group of pending class-action suits by
shareholders who sued in the wake of an accounting scandal that led to civil
charges against a series of former top executives. Gemstar said it would pay $42.5 million in cash to class members and issue 4.1 million shares of stock, worth $25 million at the time the agreement was reached. The number of shares to be issued will increase if the stock price falls below $6.09 at the time of the distribution.
Further, according to the press release, Gemstar also said it would assign to the class some of its claims against its former auditor, KPMG. Class members and the company will retain their claims against former Gemstar Chief Executive and Gemstar Chief Financial Officer. The CEO and CFO were forced out in late 2002, and the U.S. Securities and Exchange Commission sued them last summer as part of an investigation into the way the company accounted for revenue. The SEC sued three other former top executives earlier this year. Authorities
have also been pursuing criminal charges against four unnamed former Gemstar
executives. The settlement of the class-action suits, which are pending in federal court in California, does not cover other shareholder derivative suits and certain other
securities fraud cases.
The complaint charges Gemstar and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that during the Class Period, defendants caused Gemstar's shares to trade at artificially inflated levels through the issuance of false and misleading financial statements. On April 1, 2002, the Company filed its 10-K, which stated in part: "During 1997 through 1999, Scientific-Atlanta was under a license agreement with the Company for the incorporation of interactive program guides into Scientific-Atlanta set-top boxes. The license expired on July 23, 1999, however, Scientific-Atlanta continued to ship set-top boxes incorporating IPGs which are the same or similar to the products shipped during the term of the agreement. The Company instituted legal proceedings in federal district court to recover damages which are probable, based upon the factors described above, to include revenues commensurate with the licensing fees under the expired agreement. The Company has accrued an aggregate of $107.6 million ($58.9 million,$36.5 million and $12.2 million for the year ended December 31, 2001, the nine months ended December 31, 2000 and for the period from July 23, 1999 through March 31, 2000, respectively) in license fees from Scientific-Atlanta."
The 10-K also provides in relevant part: "In April 2001, the Company entered into a nonmonetary transaction with an unrelated company in which $20.8 million of intellectual property was acquired in exchange for $750,000 in cash and advertising having a fair value of $20 million. In addition, the Company received an option to acquire the company in the event that certain performance criteria were met in each of the following two years. The Company determined the fair value of the advertising consideration, all of which was recognized during 2001 as the advertising was aired, based on cash transactions for similar advertising sold to other parties." The stock dropped below $9 per share on this news.