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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.

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.

77 Comments

  • AdMordem

    Posted Oct 11, 2006 9:22 am GMT

    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

    Posted Jul 31, 2006 1:40 pm GMT

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

  • thepeter

    Posted Jul 29, 2006 9:16 pm GMT

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

  • brantothehizzam

    Posted Jul 27, 2006 11:02 am GMT

    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

    Posted Jul 26, 2006 2:08 pm GMT

    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

    Posted Jul 26, 2006 1:50 pm GMT

    Oh boy what isn't wrong with this company?

  • PrangeWay

    Posted Jul 26, 2006 11:06 am GMT

    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

    Posted Jul 26, 2006 10:32 am GMT

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

  • sun_wyvrn

    Posted Jul 26, 2006 9:41 am GMT

    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

    Posted Jul 26, 2006 8:34 am GMT

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

  • IgnatiusX

    Posted Jul 26, 2006 8:08 am GMT

    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

    Posted Jul 26, 2006 7:59 am GMT

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

  • nappan

    Posted Jul 26, 2006 7:53 am GMT

    "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.

  • Destroyeron13

    Posted Jul 26, 2006 7:26 am GMT

    Lawyers are the scum of the Earth.

  • FilthyYamBag

    Posted Jul 26, 2006 7:13 am GMT

    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

    Posted Jul 26, 2006 7:12 am GMT

    "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

    Posted Jul 26, 2006 7:06 am GMT

    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

    Posted Jul 26, 2006 7:02 am GMT

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

  • alpha_company

    Posted Jul 26, 2006 6:09 am GMT

    Woohoo!

  • Autolycus

    Posted Jul 26, 2006 5:57 am GMT

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

  • Fallout_red

    Posted Jul 26, 2006 2:55 am GMT

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

  • Talduras

    Posted Jul 26, 2006 2:39 am GMT

    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

    Posted Jul 26, 2006 12:31 am GMT

    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

    Posted Jul 25, 2006 11:51 pm GMT

    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

    Posted Jul 25, 2006 11:10 pm GMT

    What's this? A seemingly legitimate suit being brought against a video game publisher?

    Has the world gone sane?. . .

  • nintendorocks

    Posted Jul 25, 2006 11:08 pm GMT

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

  • Briantb_2008

    Posted Jul 25, 2006 10:45 pm GMT

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

  • rynmls

    Posted Jul 25, 2006 10:32 pm GMT

    to bad for take-two...

  • faridmon

    Posted Jul 25, 2006 10:13 pm GMT

    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

    Posted Jul 25, 2006 10:10 pm GMT

    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

    Posted Jul 25, 2006 9:49 pm GMT

    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

    Posted Jul 25, 2006 9:20 pm GMT

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

  • higk

    Posted Jul 25, 2006 9:15 pm GMT

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

  • mrhankeydinks

    Posted Jul 25, 2006 9:01 pm GMT

    sucks for them

  • chickenoverlord

    Posted Jul 25, 2006 8:55 pm GMT

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

  • Karjah

    Posted Jul 25, 2006 8:53 pm GMT

    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

    Posted Jul 25, 2006 8:50 pm GMT

    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

    Posted Jul 25, 2006 8:47 pm GMT

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

  • Bone_Craker

    Posted Jul 25, 2006 8:05 pm GMT

    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

    Posted Jul 25, 2006 7:44 pm GMT

    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.

  • i_love_my_ds

    Posted Jul 25, 2006 7:42 pm GMT

    those guys need to rest

  • comthitnuong

    Posted Jul 25, 2006 7:38 pm GMT

    these guys are taking a beating

  • Knight_Rider_3K

    Posted Jul 25, 2006 7:30 pm GMT

    Looks like another Enron.

  • X-Jen

    Posted Jul 25, 2006 7:30 pm GMT

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

  • jochai

    Posted Jul 25, 2006 7:30 pm GMT

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

  • metdevthegamer

    Posted Jul 25, 2006 7:27 pm GMT

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

  • mullerer

    Posted Jul 25, 2006 7:26 pm GMT

    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

    Posted Jul 25, 2006 7:13 pm GMT

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

  • DrKill09

    Posted Jul 25, 2006 6:55 pm GMT

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

  • evilmonkey998

    Posted Jul 25, 2006 6:53 pm GMT

    it seems like they get a lawsuit a week.

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