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News and Press Releases |
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HEADLINE:
SEC Accused Of Overstepping Authority
By: Tamara Loomis - New York Law Journal
Law.com. April 11, 2003
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EXCERPT: In the first legal challenge to the Sarbanes-Oxley Act, a sweeping securities law passed by Congress last summer, two executives have sued the Securities and Exchange Commission, the federal agency charged with administering the new statute. Henry Yuen, former chief executive of Gemstar-TV Guide International Inc., and Elsie Leung, the company's former chief financial officer, are accusing the SEC of illegally withholding more than $37 million in severance payments they claim they are owed by the company. There may be more lawsuits to come, experts said. The SEC has been playing things fast and loose, they say, buoyed by the powerful new enforcement tools of Sarbanes-Oxley and a political climate impatient with corporate wrongdoing. In the complaint filed last week in U.S. District Court for the Central District of California, the two executives claim that the agency, which is investigating Gemstar for accounting irregularities, "injected itself" into severance negotiations they were conducting with their employer, a leading supplier of on-screen TV programming guides. They allege that the SEC then impounded the money and put it into escrow in violation of their constitutional due process rights. They seek dissolution of the escrow account. The plaintiffs' lawyer, Stanley Arkin of New York's Arkin Kaplan, said the complaint addresses the "unlawful, arrogant and high-handed conduct" of the SEC toward Yuen and Leung. SEC spokesman John Nester declined to comment on the lawsuit. The SEC's authority to freeze the assets of executives such as Yuen and Leung derives from § 1103 of Sarbanes-Oxley, which gives the agency the right to escrow assets of companies and executives it is investigating for possible securities law violations.
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