Take-Two served by DA, slammed by investors

[UPDATE] Hot Coffee continues to percolate as lead Manhattan prosecutor announces investigation over hidden sex-game controversy; analyst cools to Take-Two shares as stock drops to new 52-week low.

In the summer of 2005, game-industry news exploded over the so-called "Hot Coffee" controversy. The flap erupted over the fact that Grand Theft Auto: San Andreas--which has sold more than 7.2 million copies as of May 2005, according to industry-research group NPD Funworld--contained a hidden sex scene unlockable with a third-party mod or cheat device. The rerating came because the game was found to contain mingames that featured clothed representations of adults engaging in consensual activity.

As a result, the Entertainment Software Ratings Board rerated San Andreas from M for Mature to AO for Adults Only--giving it the retail equivalent of a hemlock smoothie. The game was pulled from retailers, which enforce a self-imposed ban on AO-rated titles, and wasn't available again at retail until fall 2005, when an edited version was released for the PlayStation 2, Xbox, and PC.

Not quite a year later, the New York county district attorney has deemed the now-budget-priced game worthy of further investigation. A week ago, Take-Two was served by a grand jury that has launched an investigation into the publisher and its subsidiary, Rockstar Games, dating back five years.

In a terse statement, the company asserted, "Take-Two Interactive Software, Inc. today announced that on June 19, 2006, the Company received grand jury subpoenas issued by the District Attorney of the County of New York requesting production of documents, covering various periods beginning on October 1, 2001, including those relating to: the knowledge of the Company's officers and directors regarding the creation, inclusion and programming of hidden scenes (commonly referred to as 'Hot Coffee') in Grand Theft Auto: San Andreas."

[UPDATE] One financial analyst, spooked by the potential of upcoming criminal indictments being served on company officials, said this morning he would "avoid the company's shares until the criminal investigation is concluded." Acknowledging that "the criminal nature of this investigation is likely to scare all but the most risk-tolerant investors," Michael Pachter of Wedbush Morgan said he was maintaining a Hold rating, but suspending any price target for the stock.

Commenting on a Securities and Exchange Commission investigation which began in 2002 and was resolved in 2005, as well as a the recently resolved Federal Trade Commission investigation into the "Hot Coffee" mod, Pachter said that due to the criminal nature of the current investigation, the future for Take Two is uncertain.

"The subpoenas leave us baffled, and raise the specter of quite serious consequences," Pachter said today in a memo to investors. "The potential outcomes range from indictments and convictions of key employees to no indictments issued at all. Should one or more key strategic, operating or creative employee be charged with criminal activity, we believe that at a minimum, the employee charged would be distracted from performing his or her duties for the company, and at a maximum, the employee charged would be convicted and would likely leave the company."

Pachter also added his two cents when it came to the potential far-reaching impact of the investigation. "We believe that other parties may have also received subpoenas, as it is customary for a criminal investigation to include all parties involved in the alleged criminal activity. Although we are in no position to know what the grand jury hopes to accomplish, we think it is likely that current and former Take-Two employees and directors will be asked to testify in the future."

At press time on Tuesday, Take-Two shares were off 15 percent, down $1.93 to $10.93. That price establishes a new 52-week low for TTWO shares. [END UPDATE]

136 Comments

  • Shawnzee_102

    Posted Jul 17, 2006 9:37 am PT

    VegetaMaelstrom:

    "Let's just hope that Take Two doesn't get hurt so bad that they have to sell Rockstar to some Jacka$$es like Microsoft."

    Its better than them selling to those evil bastards Sony

  • i_love_my_ds

    Posted Jun 30, 2006 6:17 pm PT

    can't wait till this is over

  • TheGrandMiG

    Posted Jun 28, 2006 11:02 am PT

    sheesh, when will this end?????

  • rarson

    Posted Jun 28, 2006 9:43 am PT

    This is retarded. Period. First of all, an M-rated game is for people 17 and older. I think these days that a majority of that age group is sexually active, and thus have experienced the real thing firsthand already. Whether or not you can deal with that fact is another issue and it's not my business what other people do in their own homes.

    If parents would do their jobs, then we wouldn't have to slam retailers for selling M-rated games to kids; we wouldn't have to blame a developer for including content, accessible or not, that is appropriate for adults only; and we certainly wouldn't have to go on stupid crusades to ban mature video games.

    It really irks me that I can go to Iraq and get shot but I can't play a cheap sex mini-game because someone else decided that it isn't appropriate for kids who aren't the target audience nor the allowed audience in the first place. Not that I'm dying to play the mini-game, I don't have the original San Andreas and I don't care about it, but to take the choice away from me is to take a basic right from me.

  • Bloodlustt

    Posted Jun 28, 2006 6:18 am PT

    This is so rediculous?????????? You mean to tell me the state of ny and our goverment has nothing better to do than waste our money prosecuting take two????? Why dont they take this energy and money and spend it on our soilders this is why liberals should never be in office people.

  • rynmls

    Posted Jun 28, 2006 12:58 am PT

    cmon man gamers are suffering, cmon let them just create game and learn from their mistakes, bully is no show at E3 maybe because of this suit...

  • metdevthegamer

    Posted Jun 27, 2006 11:29 pm PT

    This got old a long time ago, let it die already.

  • EThugg

    Posted Jun 27, 2006 6:11 pm PT

    Am I the only one amused by Gamespot's editorializing that the scenes in question were 'consensual'? I was unaware polygons had the ability to consent...

    I agree with whoever said that retailers are at fault. Their selfimposed restriction on AO games is half the problem. You'll sell porn, but not AO games? Yea, makes sense.

    Those of you whinging, however, are hurting your own cause (assuming you're adults and your opinion actually matters). Allowing strict rating enforcement by the government (and prosecutions like this for mis-labelling) ensures M and AO games are protected for adult gamers, rather than not being made at all. If I were effected, I'd rather be carded than not be able to buy my GTA (or whatever), which is going to be the ultimate result if the industry doesn't stick to and enforce its own ratings.

  • tobleronian

    Posted Jun 27, 2006 5:36 pm PT

    I never understood the mass uproar over hot coffee in the first place. Granted it should have probably been classified as Adult in the first place due to everything you can do in the game already (it was originally released as an 18 in the UK).

    The US cencor and classification ppl really need to get their priorities straight. How Mass murder, drug crime and grand theft can be over looked and deemed 'ok' and then a sex scene(which is tbh, laughable) - a natural human function to cause a complete uproar of disapproval.

    "MY GOD THAT CHILD CAN SEE A POOR REPRESENTAION OF REPRODUCTION, QUICK DISTRACT HIM WITH THIS UBER VIOLENT SERIAL KILLER GAME.... phew, close call"

    Insanity... thats what it is

  • VegetaMaelstrom

    Posted Jun 27, 2006 5:20 pm PT

    Let's just hope that Take Two doesn't get hurt so bad that they have to sell Rockstar to some Jacka$$es like Microsoft.

  • vaejas

    Posted Jun 27, 2006 4:59 pm PT

    Ah, it's the New McCarthyism.

  • zeroking420_666

    Posted Jun 27, 2006 4:31 pm PT

    This suck its not there fault the Rockstar Drop the ball and put in the hidden sex game. The company is going to fold they still have the Elders Scroll IV suit to go and thats going to kill them. So what game have sex in it and extreme blood. People Listin to me ITS JUST A VIDEO GAME. if u cant distinguish reality from fantasy than u have no right to live. Also take-two is getting sued by the actor from the warriors god this company is going under fast.

  • VixDiesel

    Posted Jun 27, 2006 1:05 pm PT

    I believe take two owns rockstar, that's why they are taking the heat. I'm not 100% positive though.

    Anyways, i'm an adult gamer and I think it;s time the government should just shut the **** up already.

  • gamer_10001

    Posted Jun 27, 2006 1:05 pm PT

    Stupid politicians trying to gain popularity from an old issue that was bolwn out of proportion in the first place.

  • jedismurf2

    Posted Jun 27, 2006 12:28 pm PT

    My question is why is Take Two under the gun for this. It seems like Rockstar should be the ones taking the fall for their actions. I highly doubt Take Two was aware that the code was in the game when they published it, yet they seem to be the only ones receiving the full force of the blame.

  • RuminaX

    Posted Jun 27, 2006 11:46 am PT

    They were clothed... I really don't see the issue here. Have these people actually seen what they're going off about? Even with the Hot Coffee it still should get an M rating, it wasn't any worse then other M rated games. It's just politicians wanting to take down GTA and make a name for themselves at the same time. What about DoA games? Or what about FFX-2? those games had sexual content and hell FFX-2 even got a teen rating.

  • divadave

    Posted Jun 27, 2006 11:18 am PT

    I'll be totally honest here, it's been a year already. They've place rules and regulations and in some states have already passed a bill on allowing certain types of videogames to be sold to just about anyone. They need to throw the coffee out, it's been in the pot now for a freak'in year. Time to brew a new cup for goodness sakes.

  • K1LLSWITCH

    Posted Jun 27, 2006 10:52 am PT

    suprsolider
    "K1LLSWITCH,

    SHUT UP.

    If you don't like GTA, then GET LOST. Simple

    Noone cares for your opinon.

    Also, I still don't see the reason why the rating was changed. For 1, the game was rated M, and on the box itself it says

    "STRONG SEXUAL CONTENT"

    How can it be more obvious than that.

    IT WAS ALREADY LABELED for Sexual Content, which happens to be what HC is.
    But it is nothing more than dry humping, compare it to games like Leiusre Suit Larry Magna Cum Laude where it showed scenes of Sex (although partially censored). And what Hot Coffee delivered is nothing.

    This was proably the work of our good buddy Jack Thompson. He is still mad at Rockstar not getting fined for it."

    I'm putting blame where blame is due. If it wasn't for Take Two Interactive and Rockstar's stupidity, and yours for not seeing this, nothing would of come of this. Now politicians have even more leverage against the gaming industry. You guys think that developers such as these, can't do no wrong. Well guess what they can, and now the industry is being threatened because of this. Thank you very much. It doesn't matter if I like or dislike the GTA series. It's a matter of our hobbie, and part of our culture, being threated for what reason? Hot coffee mod that's why.

  • ClayMeow

    Posted Jun 27, 2006 10:36 am PT

    First off you guys are clueless. They're not being indicted because of "pornography" or "adult content." They're being indicted for covering it up. Now I think the lawsuit is frivolous and nothing will come of it, but a lot of you need to make the distinction and realize what this is really about.

    Nevertheless, we should go back to the day when games weren't rated at all, and anyone and everyone could buy and play whatever the hell they wanted. Games don't teach sex, you learn that when you're ten, and games don't invoke drugs and violence, bad parenting does.

  • magnolio369

    Posted Jun 27, 2006 10:01 am PT

    i played the "HOT COFFEE" mini game! it was cool but why go after them for that when we have games like 7 sins,that suit larry game and stuff!

    i think there just hiting an already dead hooker!!!

  • Flan_Man

    Posted Jun 27, 2006 9:54 am PT

    They found a scapegoat and they are going to make sure that Take-Two gets executed for helping entertain kids the same way TV does... with sex and violence. Hey, movies and books do that too. Looks like the thought police are going to have to go out and slaughter imagination in order to quell any representation of what goes on in life... Yeah, Hillary is set for presidency now.

  • locdog517

    Posted Jun 27, 2006 9:51 am PT

    I Am Weasel:THIS IS AN OUTRAGE!!!!!

  • rokkuman09

    Posted Jun 27, 2006 9:40 am PT

    That is so stupid these people need to go get lives

  • PikMinSniP3r

    Posted Jun 27, 2006 9:34 am PT

    While they were busy with hot coffee little Billy was watching Real Sex on HBO.

  • jimbo102671

    Posted Jun 27, 2006 8:32 am PT

    [This message was deleted at the request of the original poster]

  • mjc0961

    Posted Jun 27, 2006 8:29 am PT

    "If a judge can rule that Girls Gone Wild isn't pornographoc, then why do all these politicians keep acting like these "sex" minigames in San Andreas are pornographic? I bet they've never actually seen what they're trying to punish Take Two for."

    What? How the hell is Girls Gone Wild not pornographic?! My GOD the US government is full of idiots!

  • jonnyjd

    Posted Jun 27, 2006 8:18 am PT

    Wow. Does anyone really care about this anymore?

  • mikeroussos

    Posted Jun 27, 2006 8:18 am PT

    i wish thy could just leave our game alone and do something better with their time...if anything dont allow kids to buy it

  • Gigglefitz

    Posted Jun 27, 2006 8:07 am PT

    *Sort of SPOILER*
    In GTA: LCS, the main character is invited in for some coffee, which he promptly refuses...

  • jimbo102671

    Posted Jun 27, 2006 7:55 am PT

    Have these DA jerks ever heard of the phrase "beating a dead horse"? That's exactly what this case sounds like to me.

    [edit]: bcfish, on page 1, beat me to the punch (by about 10 hours) on "beating a dead horse". Still, I feel I need to reinforce this idea because this issue is nearly a year old. They need to get over it and move on.

  • TimberWolf_CLT

    Posted Jun 27, 2006 7:52 am PT

    Welcome to election period politics. Hillary probably whined at the prosecutor until action was taken.

  • Dominicous

    Posted Jun 27, 2006 7:34 am PT

    Come on give it a rest already.
    R* already took care of it and they still keep catching crap for it.
    And it's just going to get worse.

  • daviwinn

    Posted Jun 27, 2006 7:12 am PT

    Instead of complaining the gaming community should be showing our support of R*. I have bought a few t-shirts from their website and buy every game they release. Any little bit of revenue I can give to them I will do so gladly to ensure they have the funds to fight this ridiculous court battles and continue to create great games.

  • nullvision

    Posted Jun 27, 2006 7:09 am PT

    All the comments in favor of rockstar would sound a LOT less biased if they weren't coming from teenaged kids directly affected by any new laws/fines against buying mature games.

  • undat_basic

    Posted Jun 27, 2006 7:08 am PT

    Monster's Ball had a hidden portion of Halle Berry's sex scene in it....maybe we should bring her and Billy Bob up on charges of lewd conduct in public.

    Working as a teacher, do you really think i overheard teenagers gushing over the plot, or the fact that you can see them actually having sex at one point?

  • jaefrmbk2k

    Posted Jun 27, 2006 7:05 am PT

    they'll kno better next time

  • sootybuttercup2

    Posted Jun 27, 2006 7:04 am PT

    I blame the retailers for all of this contraversy. If they would just sell games rated AO then companies wouldn't need to create a contavercial M rated title to have any chance at sucess. Although I will agree the American politicians are taking this too far. Come on it wasn't even real game content. I played and beat San Andreas before this whole thing began and had no knowledge of its existance. Its funny how they pick and choose which games to attack. Look at God of War for example. That game is rated M and has nudity and yet i don't think anything has been said about it. Anyway this just needs to be dropped.

  • SNKrock

    Posted Jun 27, 2006 6:58 am PT

    Britesparc

    I think R* lied, they lied about it existing in the first place, they lied about programming it, they just had a bad start.

  • SavoyPrime

    Posted Jun 27, 2006 6:48 am PT

    This is getting reeeaaalll old. Just give it a break already!

  • DrKill09

    Posted Jun 27, 2006 5:47 am PT

    It sounds to me like the politicians were arroused by the Hot Coffee scene... just shows how pethetic and lonely they are!

    When will they get it in their freakin head that the game IS NOT MEANT FOR KIDS!!! RATED M FOR MATURE means that anyone under 17 has no business playing it, and that whatever the kid see's is his parents' fault for not watching him! Durs!

  • Owt_Ytrof

    Posted Jun 27, 2006 5:40 am PT

    Won't somebody think of the children? If this investigation goes through, that will even further reduce their chances to see Hot Coffee in action!

    Day late, meet dollar short.

  • IgnatiusX

    Posted Jun 27, 2006 5:14 am PT

    Gaara79
    Oh Geez.. Kids can get a hell of a lot more traumatized by walking into their parents bedroom at the wrong time then playing the hot coffee part of SA..

    Get over it..

    ---

    Rofl, that's instant death, not massive trauma. XD

  • squarephreak

    Posted Jun 27, 2006 5:13 am PT

    Give it a rest already!

  • wokisan

    Posted Jun 27, 2006 5:06 am PT

    Must have been time to waste more taxpayers money.....wait, the gov't does that every day.....

  • fuzzybunny566

    Posted Jun 27, 2006 4:44 am PT

    meanwhile, in iraq...
    meanwhile, in korea...

    UGH

  • Zeraquor

    Posted Jun 27, 2006 4:27 am PT

    Leave Rockstar alone...

  • amogley

    Posted Jun 27, 2006 3:24 am PT

    Hasn't the New York County DA got better and more important cases to be getting on with??

    Obviously slow season in NY DA ( or silly season)

  • Britesparc

    Posted Jun 27, 2006 3:06 am PT

    As I understand it, the "hot coffee" element of the game was going to be put in, they changed their minds, but left the materials in there; hackers then unlocked those materials, and, later, re-skinned the models to feature nekkid ladies. So, in my opinion, none of that is Rockstar's fault. The "hot coffee" feature itself is pretty tasteless, but I guess it's inkeeping with the humour of the game, and so - apart from it arguably being sexist, a criticism that could be applied to all GTA games - there's not really anything wrong with it (unless Take Two or Rockstar lied at some point, of course, but I don't think they did).

    The most depressing thing in my opinion is the refusal of stores to stock AO titles at all. THAT should be the subject of an investigation! Why is it that an "adult" game is unsuitable for, er, adults?

  • alexgangur

    Posted Jun 27, 2006 2:41 am PT

    Global Nexus: "maybe that "military" thing that's sucking this country into what could easily be the biggest debt in human history..."

    Not quite. I think something more along the lines of Germany's reparations payments for WWI would take that award.
    6,000 million british pounds, or 10,929,564,827.60 USD -.-
    and thats in modern value. Just imagine how much more that would have been 100 years ago, and when britian had an even more powerful economy.
    Just a little off-topic...

  • alexgangur

    Posted Jun 27, 2006 2:30 am PT

    I find it rediculous how insignificant many of you find the 'hot coffee' incident to be - the law was broken because rockstar/take two were too stupid to announce that the game still contained these features. Think of it in terms of a customs office - if a traveler entering the country does not declare that they are in possession of something, and then that something is found, they are dealt with, and often quite severely. Even if they do not declare something as seemingly insignificant as $20, they can suffer for breaking the law, which clearly states that all goods must be declared. Rockstar/take two broke the law, and, being honest, really only recieved a slap on the wrist for it. That said, however, I do agree with mosespippy in that now is a bit late to call for a formal investigation.

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