Securities and Exchange Commission v. Henry Yuen
In one of the largest civil penalties ever obtained by the SEC against an individual in an accounting fraud case, a federal judge ordered Gemstar ex-CEO Henry Yuen to pay a $22.3 million penalty for overstating Gemstar's revenue by more than $225 million between 2000 and 2002. Mr. Yuen was alleged to have inflated Gemstar's revenue using tactics such as recording phantom revenue and booking "round-trip" transactions with no economic substance. The ruling, widely covered in major media outlets, followed a four-year SEC investigation of Gemstar, an entertainment company that publishes TV Guide and holds patents on technology for interactive TV programming guides.
Led by Managing Principal Bruce Strombom and Principal Mark Gustafson, an Analysis Group team supported academic affiliate Gerard Tellis, University of Southern California marketing professor, whose report was filed in rebuttal to that of a defense expert. The team's work included analyzing hundreds of invoices for advertising on Gemstar's interactive programming guide (IPG) and demonstrating that the limited number of invoices executed as arm's length transactions were fundamentally different from the remaining invoices, for which there was no market justification. At the direction of Professor Tellis, Analysis Group also analyzed the market for IPG advertising and, in contrast to the defense expert, determined that the market was in its infancy and unable to support the volume of transactions claimed by Mr. Yuen.