Corporations and securities brief ~ Ninth Circuit upholds key Sarbanes-Oxley provision

[JURIST]Leading Wednesday's corporations and securities law news, a US Court of Appeals for the Ninth Circuit [official website] upheld a district court's ruling which froze $37.6 million in termination pay and bonuses to two Gemstar TV Guide International [corporate website] officials. The SEC had settled with the two executives, former CEO Henry Yuen and former CFO Elsie Leung over their roles in the company overstating revenue by $223 million in January. The ruling is important in that strengthened the SEC's power in curbing payments to executives who are being investigated for fraud. This is a major provision of Sarbanes-Oxley Act [text, PDF] which is meant to keep the money in escrow to keep the money available for fines or repayment if the fraud is proved. Read the opinion [PDF]. The San Francisco Chronicle has more.

In other news...

  • TXU Corp. [corporate website], the largest Texas power producer, said in a regulatory filing that the SEC has subpoenaed the company related to an investigation into possible violations of federal securities laws arising from the collapse of the company's European unit in 2002. The subpoena asks for information related to the losses at TXU's European unit which led to its bankruptcy in 2002. The bankruptcy led to various shareholder lawsuits. TXU said it would cooperate with the probe. Bloomberg has more.

  • As previously reported on JURIST's Paper Chase, federal prosecutors in Chicago confirmed they are conducting a criminal investigation of newspaper tycoon Conrad Black [Wikipedia profile], his former top deputy David Radler and Hollinger, Inc [corporate website]. Prosecutors filed court papers where it asked to intervene in the SEC lawsuit against Black, Radler, and Hollinger, Inc. The SEC, in its complaint [PDF], allege Black and Radler engaged in fraud by taking cash and other assets from Hollinger and concealing it from investors. AP has more. In related news, SEC has sent former Pentagon adviser Richard Perle [Wikipedia profile] a Wells Notice, a formal warning that the agency has determined that evidence of wrongdoing is sufficient to bring a civil lawsuit. The notice says the agency may sue Perle for his role in the alleged looting of Hollinger International Inc. Perle said he did not recall any specific allegation made by the SEC. Bloomberg has more.

  • The SEC [official website] announced Citigroup [corporate website] will pay $20 million to settle charges it did not give customers adequate information about mutual fund shares. The settlement involves two disclosure failures at the company. Citigroup will not admit or deny any wrongdoing. Read the SEC press release and administrative proceeding [PDF]. Also today, the NASD [official website] announced it has fined units of American Express Inc., Citigroup Inc. and JP Morgan Chase & Co. [corporate website] a total of $21.25 million for selling customers "Class B" or "Class C" fund shares, or shares of both classes, without disclosing that "Class A" shares would have provided higher overall returns. Read the NASD press release. Reuters has more.

  • The SEC also announced Putnam Investment Management [corporate website] will pay $40 million to settle charges related to Putnam's failure to disclose to its Board of Trustees and shareholders the conflicts of interest that arose from "shelf space" arrangements with broker/dealers. Putnam will neither admit or deny the charges. Read the SEC press release and administrative proceeding [PDF].
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