New suit for Take-Two suits

Investor sues executives for "breaches of fiduciary duties, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment," in addition to backdating stock options.

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Take-Two Interactive may have put one controversy behind it last week, but another one has sprung up to take its place.

According to court records, on July 12, Take-Two shareholder Richard Lasky filed a lawsuit against its officers and directors. The 110-page complaint alleges "breaches of fiduciary duties, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment" since January of 2000. It also contends that the executives improperly "backdated" stock options since 1997.

When executives are granted stock options, they're given the right to buy shares in company stock at a fixed price, with the right to exercise those options--buy the shares--over a predetermined period of time. The price is set based upon the stock's current market value at the time the options are issued. Recently, a number of corporations have come under investigation for having executives backdate their options, altering the records of when the options are issued to a low point for the company stock, thus maximizing their value.

Earlier this month, the Securities and Exchange Commission announced it was starting an informal investigation into Take-Two regarding its stock option grants since 1997. Also this month, an Activision shareholder filed suit against that publisher's current and former executives for backdating stock options.

On top of the backdating, Lasky accuses some of the executives of illegal insider selling, claiming they walked away with $31.77 million between them. Lasky points to the company's multiple restatements of its financial figures and a previous SEC investigation that ended with the company paying a $7.5 million penalty as evidence of a trend.

The oft-mentioned Grand Theft Auto: San Andreas "Hot Coffee" mod is also brought up, as the defendants are accused of conspiring to keep information about the sexually explicit mod from the Entertainment Software Ratings Board and consumers to keep Take-Two's stock price from falling.

And while he doesn't suggest the defendants illegally profited off the transaction, Lasky does bring up on multiple occasions a stock-buyback program initiated while the company's share value was in decline. That program cost the company $876.5 million, according to the suit.

"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 repricing of stock options, rather than issuing accurate and truthful financials."

Lasky originally demanded the company's board of directors take legal action against the defendants over the alleged abuses in March but that the board ignored his demand. In a letter to Take-Two chairman of the board Robert Flug dated March 28, 2006, Lasky's lawyers wrote:

"It is time for Take-Two to be made whole and liberate itself from the selfish, imprudent governing to which it has been subjected..."

The legal proceedings should seek recovery of illegal insider sales proceeds, as well as millions of dollars in salaries, bonuses, retirement benefits, and long-term compensation paid to directors and officers for a job not well done."

As of press time, Take-Two had not responded to GameSpot's request for comment.

Discussion

77 comments
AdMordem
AdMordem

If anyone really gives a rats arse about how offended their children are going to get by rockstars games molestering them they could take some kind - any kind - of action to stop these kids purchasing expensive products that they - their legal gaurdians - do not agree to. i just saw that maccas docco thing. A similar point can be seen there. STOP WINGING AND LOOK AFTER YOUR GOD DAMN CHILDREN. Both these 'huge problems' could be solved by a little something called: (drum roll) PERSONAL RESPONSIBILITY!!!! ie - dont let your poor sensitive over-sheltered MINOR spend like a hundred fricken bucks on something without FINDING OUT WHAT IT IS!

DarknessOfFate1
DarknessOfFate1

Geez an 110 page complaint. seems that they will be in the ****!

thepeter
thepeter

i'm looking forward to GTA4 making me laugh to the point of numbness about this subject.

brantothehizzam
brantothehizzam

i just dont get people i bet i could sue them for using my likeness as carl in gta:sa and i'd win and i look nothing like carl

Gleba2388
Gleba2388

Looks like people want to screw and shut down Take-Two for good... they'll keep sueing T2 until it's out of money... tomorrow's accusation: Pogo The Monkey was copied without license from a guy that died 100 years ago, and they found a scrip containing a game's scheme. They'll sue T2 for "stealing" the original plan and recproducing it in San Andreas. Glad T2 has plenty of money left to give to these guys...

Cube_of_MooN
Cube_of_MooN

Oh boy what isn't wrong with this company?

PrangeWay
PrangeWay

What!? CEO and Board Members of a company using their position to make easy millions on the backs of the common investor?! I'm shocked! Apalled! Suprised utterly! Not.. There is no doubt T2 is a poorly managed company, with suits more worried about padding their stocks than anythingelse, but every company is like that, as long as they put out good games I'll be happy with them roasting in hell when they die :) PW

TalesOfGazayan
TalesOfGazayan

Anyone else tired of that Superhero picture used with every court story?

sun_wyvrn
sun_wyvrn

First they screw with "Hot Coffee", and now there is talk of executive swindling? I didn't like the company as it was, but to hear this. I won't bash until there is judgement of whether they are innocent or guilty. But this seems very convincing that the execs are screwed.

Ponsardin
Ponsardin

Again and again and again... I wouldn't had the patience of reading those 110 pages.

IgnatiusX
IgnatiusX

Great way to make a company's stock go up, make it so that investors pull their money out from supposed CEOs screwing with the company, and SUE THEM. Rofl... if you want your stock to go up, encourage a company, not destroy it. XD

BigV25
BigV25

110 pages s*** I can barely write a paragraph of things to say.

nappan
nappan

"Lawyers are the scum of the Earth." ...Right up until you need them, and suddnely they're saints. I think it would be more accurate to say that people who use lawyers irresponsibly are the scum of the earth. Now, politicians ARE the scum of the earth.

FilthyYamBag
FilthyYamBag

hot coffee mod = i have no problem with, we need more of em stock swindling = BIG PROBLEM, you can't screw over your investors, they are the ones who are usually supporters when you're in trouble. its why Ken Lay (sp?) was gonna go to jail

nappan
nappan

"Pray for our government, guys. Just pray for our government that the innocent are spared and the guilty are delt with severely." Ooooh yeah. We need more prayer. That's the kind of keen wit that powers our government to "fight the evildoers". **** prayer. Try voting for people who aren't blatently corrupt, pandering sociopathic right wing nutballs. Then you can save your prayers for the good old fashioned things like "world peace" and "I hope Kobe scores over 20 tonight". You know... the big things.

bcfish
bcfish

Bad management can kill any company, no matter how great it is. And no I'm not talking about Enron! I'm thinking of Interplay, with along with Black Isle made killer RPGs in the Baldur's Gate series but since they acted like idiots they imploded. I don't doubt there is some validity to the claims in this case, and Take Two is simply reaping what they sowed. If it cleans up their act, it's for the better.

MedevilDragon
MedevilDragon

Can't believe this, Take-Two make great game, go and sue corrupted EA instead!

Autolycus
Autolycus

[This message was deleted at the request of a moderator or administrator]

Fallout_red
Fallout_red

When will these leechers leave Take Two?? They just want money and kare for nothing.

Talduras
Talduras

Hmm... in a way, this string of bad luck doesn't surprise me. Hot Coffee may have nothing to do with Take Two (I'm not sure how much a publisher would know about a game's code from a developer), but all of the rest of the suits seem like a backwards chain reaction that's seeking for the root. This sort of thing dug up the Enron problems, so who's to say Take Two isn't doing this sort of thing? Call it a gut feeling, but I think Take Two is up to something shady, though whether it's minor or as bad as those lawyers say is something I won't guess. There is still the possibility that all of this is just multiple targeting created after Hot Coffee... which makes me wonder why Rockstar isn't getting targetted like this, which is why I'm not quick to blame Hot coffee for this suit.

WeeWeeJumbo
WeeWeeJumbo

It's stupid to complain about Lasky; if his allegations are true, then the board members at Take2 (not the developers; the real fat cats who pimp developers) really are total scumbags who really do deserve prison time, because they've manipulated the system to produce a gain for themselves at everybody's expense. Now listen carefully. Whatever you think of GTA, it's not really the point here. This is not "what happens" when a company makes a game that you don't like; and if your sense of taste is so weakly developed that you actually think Psychonauts is better than GTA, I'm terribly sorry for you and everybody who knows you.

CyphenX
CyphenX

Ye Gods, when will it end? Even if this lawsuit turns out to be completely rational and legitimate, couldn't you at least give Take Two a break for a few months?

MasterAsh42
MasterAsh42

What's this? A seemingly legitimate suit being brought against a video game publisher? Has the world gone sane?. . .

nintendorocks
nintendorocks

I don't believe this...Another shareholder lawsuit and just when Take-Two has finally out of the water....*sigh*

Briantb_2008
Briantb_2008

To many law suits in the video game industy of late. I think it will only get worst before it gets better.

rynmls
rynmls

to bad for take-two...

faridmon
faridmon

yep, that what u get when u realease an overhyped and overrated game and sell million while the "Classics" don't even sells 100k like Psychonuauts.

SteveTwo
SteveTwo

While the other allegations against TakeTwo I mostly think are sue-happy people who smell blood and want some cash, this one is actually a pretty bad thing. I would have imagined that people who are on the firing line as often as TakeTwo would be a bit more careful/honest considering the attention focused thier way. Basically, if it's true, there are some dumb-ass people at TakeTwo.

VegetaMaelstrom
VegetaMaelstrom

If these allegations of backdating stock options by executives turn out to be true then I would like to see some jail time handed down instead of the usual fine and probation slap on the wrist. These guys can steal millions and ruin lives (Enron comes to mind) but the courts seem to think that stealing $100 from a 7 Eleven is much more serious. Go figure.

gamer_10001
gamer_10001

AH!!!!!! DANG!!!!!!! I just spilled coffee on myself. Now I got like a first degree burn. Time to sue Folgers.

higk
higk

*sigh*...yet another law suit against the creators of GTASA. when will this madness ever end?!

chickenoverlord
chickenoverlord

what's next they'll get sued by a pingpong ball manufacturer!?!

Karjah
Karjah

I'm sorry but take two has caused NOTHING but trouble for the industry putting out gta3 clone after gta3 clone and totally disregarding the esrb with everything they publish. They DESERVE to be shut down for putting the game industry in such bad eyes. They alone are responsable for the vast majority of the anti game laws right now in the senate. Death to take two.

Generic_Dude
Generic_Dude

clayremix305 As a law student... Take Two getting hit with SEC penalties = blood in the water. Anyone with stock in the company can initiate legal action against them predicated on the SEC's findings... It sucks that so many video game companies are being sued now, but frankly if the company was involved in the alleged misconduct, they are only getting what they deserve. VERY true. I'm as big a GTA fan as the next guy, but that sort of behavior is way out of line. Capitalism is a wonderful system, but when it is abused, it's more dangerous than many of the alternatives. What some people would do for a few more pennies turns my stomach.

Generic_Dude
Generic_Dude

Dang, TakeTwo is taking it on the chin lately, eh?

Bone_Craker
Bone_Craker

This like all lawsuits will be dragged out over at least a year before anything is really done about it. Also one of this proportion is likly to be dragged out longer then that, jus enough to release GTA IV and that should help them float accross this time. If you all want to see Rockstar in the future, jus buy their games for added support, or if you want to think pesimisticlly, for memorabilia. Either way i think Rockstar will still be capable of relesing GTA IV before anything major comes of this lawsuit.

ryanstoy91
ryanstoy91

It's just a continuing pattern. One week it feels like the lawsuits are finally going to stop, the next week, another lawsuit comes, and Take-Two takes another hit. If this keeps up, Take-Two would cease to exist as we know it.

X-Jen
X-Jen

[This message was deleted at the request of a moderator or administrator]

jochai
jochai

what the heck is wrong wit the freaking moron. shut up, get your money when they reelase the next gta. people these days...

metdevthegamer
metdevthegamer

Just when they're in the clear, they get slapped with another lawsuit.

mullerer
mullerer

I can't believe this. Some selfish bastard out there to make money for himself decides he needs to be a complete **** to do it. What a shame that this guy has to try his best to hinder the GTA series so he can make his own greedy fortune. To hell with the sueing investor.

FourSwordsx4
FourSwordsx4

Damn, now everyone is just suing them because they're an easy target now.

DrKill09
DrKill09

People keep saying how Saint's Row won't be the GTA killer, but at this rate, there might not be a GTA IV. :(