Court says Sarbox needs further defining
A US federal appeals court has said that the Sarbanes-Oxley Act seems to be lacking a definition of "extraordinary payments".
In ruling whether two former Gemstar-TV Guide international executives (CEO Henry Yuen and CFO Elsie Leung) can claim $37.6 million in severance payments blocked by the SEC, the court said that neither Congress nor the SEC had defined "extraordinary payments".
Yuen and Leung were originally to have collected severance payments, provided they cooperated with an internal audit investigation and with the SEC over the company's restated financials. But last year the SEC got a federal judge to block the payments as the former executives were accused of overstating Gemstar's revenues - as according to Section 1103 of Sarbanes-Oxley, they could lose those payments if they were found to have violated securities laws.
However the federal appeals court has now said that the scheduled payments do not qualify as "extraordinary payments" subject to Sarbanes-Oxley - and the government must prove "by admissable objective evidence" that the payments were out of line.
But the dissenting judge on the appeals court, Circuit Judge Stephen Trott, says: "One would not expect benefits like these to be flowing from corporate assets to executives resigning under fire.