Take-Two Sued By Shareholder Over Stock Options

Legally challenged publisher Take-Two Interactive has become involved in yet another new prospective court battle, in a story broken by consumer website GameSpot, and this time involving allegations of stock options backdating and other financial irregularities. The new lawsuit by shareholder Richard Lasky is reminiscent of the recent suit filed against Activision by an unnamed shareholder, claiming that the publisher had backdated stock option grants to a point where the shares were being sold at a lower price, thus increasing their value. Take-Two, along with other companies inside and outside the video games industry, were previously being investigated by the American Securities and Exchange Commission (SEC) due to concerns over possible backdating of stock options. The new lawsuit from Lasky complains of “breaches of fiduciary duties, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment". It also accuses executives of insider trading to the value of $31.77 million and alleges that the company has been involved in backdating stock options as far back as 1997. The list of complaints also addresses the recently ended “Hot Coffee” investigation, suggesting that executives conspired to keep information from the Entertainment Software Ratings Board (ESRB) in order to avoid legal punishment and adverse effects on the company’s share price. Finally, Lasky is critical of the company’s repeated stock buyback programs, which the lawsuit suggests cost the company (and by association shareholders) $876.5 million, as well as the numerous restatements of the company’s financial figures which resulted in a $7.5 million penalty from the SEC. Lasky is scathing of the Take-Two management, stating: "This continuing decline in the quality and accuracy of Take-Two's financials is further indicative of the defendant's conscious disregard for the company's welfare. Indeed, defendants appear to be more interested in looting the company via the illegal re-pricing of stock options, rather than issuing accurate and truthful financials."