GT Interactive Suit Update

A class-action lawsuit filed in New York by the law firm of Kaufman Malchman Kirby & Squire against GT Interactive alleges that GT "and certain of its officers and directors engaged in a scheme to inflate artificially the market price of GT common stock... and enable GT insiders to sell their own shares at artificially high prices."

The law firm filed the lawsuit in the US District Court for the Southern District of New York on Jan. 7 and on Jan. 9 began informing shareholders who purchased stock in GT between August 1, 1996 and December 12, 1997 that they could join in the suit.

Kaufman Malchman Kirby & Squire allege that, during that time period, GT did not comply with generally accepted accounting principles (GAAP), and that the company "artificially inflated GT's earnings by failing to properly expense research and development costs or royalty payments for software projects that had been terminated or failed to achieve technical feasibility." The complaint further alleges that GT "issued public statements during the class period, which fraudulently created and/or left the false impression that GT's accounting practices were proper."

GT's response to the lawsuit? "We believe the suit is completely without merit and intend to defend ourselves vigorously. All our financial and accounting reports have been in accordance with GAAP."