The parties have reached a $10 million settlement in an SEC enforcement action filed against Gemstar-TV Guide International, Inc., (Nasdaq:GMST) on behalf of stockholders who purchased the company's common stock between 1999 and 2002. The action claims that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. Persons eligible to take part in the settlement should contact the attorneys who prosecuted the action for more information.

The action charged Gemstar with improperly reporting its highly touted interactive program guide licensing and advertising revenues in its financial statements from 1999 through 2002. The Commission's complaint also alleges that Gemstar materially overstated its revenues by nearly $250 million through the following means:

• It recorded revenue under expired, disputed, or non-existent agreements, and improperly reported this as IPG licensing and advertising revenue.

• It recorded and reported revenue from a long-term agreement on an accelerated basis in contravention of GAAP and Gemstar's own stated and disclosed revenue recognition policy, which required the recording and reporting of such revenue ratably over the terms of the agreement.

• It inflated its IPG advertising revenue by improperly recording and reporting revenue amounts from multiple-element transactions. Gemstar's recording and reporting of this revenue was improper under GAAP because Gemstar could not determine the IPG advertising's fair value. Additionally, some of those improperly reported transactions included so-called "round-trip" transactions whereby Gemstar paid money to a third party that then used those funds to buy advertising from Gemstar. Gemstar also failed to disclose that it had structured certain settlements for the purpose of creating "cookie jars" of IPG advertising revenue.

• It improperly recorded and reported IPG advertising revenue from non-monetary and barter transactions. Gemstar's recording and reporting of this revenue was not in accordance with GAAP because it did not meet the revenue recognition requirements for such transactions and because Gemstar could not properly establish the IPG advertising's fair value.

• It improperly reported certain revenues as IPG advertising revenues when in fact those revenues were derived from the sale of print advertising. Gemstar shifted revenues by invoicing advertisers for both IPG and print advertising, but recording the revenue only as IPG revenue.

These misstatements of revenue were reported in Forms 10-K, 10-Q, and 8-K filed with the SEC. The complaint further alleges that when Gemstar disclosed in its 2001 Form 10-K filed on April 1, 2002, that revenue from two transactions had been recorded under an already-expired licensing agreement and in a non-monetary transaction.

"The magnitude of the improper conduct at Gemstar, together with its initial lack of effective cooperation or remedial efforts, warrant the imposition of a significant monetary penalty," said Randall R. Lee, Director of the Commission's Pacific Regional Office. "At the same time, we have credited the company for its extensive cooperation once new management took control," Lee added. "We are continuing to pursue our case against former Gemstar senior management."