Take-Two confirms backdating

Independent investigation blames ex-CEO for "significant" mishandling of stock-option grants from 1997 to 2003; says current executive suite is clean.

Last year, the Securities and Exchange Commission launched investigations of various high-profile game publishers, including THQ and Activision, for backdating stock options. As a result, many of those publishers hired external auditors to conduct independent investigations to head off any official sanctions from the federal government.

Now, just over a month after it first admitted financial "improprieties," one of the biggest publishers under investigation confirmed it backdated options in the late 1990s and early 2000s. Today, Take-Two Interactive conceded that it had "failed in many cases to comply with the terms of its stock option plans" by allowing its founder and former CEO Ryan Brant "to control and dominate the granting process."

In its latest filing with the SEC, Take-Two says an independent investigation conducted by the national civil legal firm of Kasowitz, Benson, Torres, & Friedman puts the blame for the backdating squarely on Brant's shoulders. The firm reviewed nearly 400,000 e-mails and interviewed more than a dozen executives to come to its conclusion.

"Between April 1997 and August 2003, Mr. Brant engaged in a pattern and practice of backdating options, and during such period, a significant number of option grants appear to have been backdated," read Take-Two's report. One of Take-Two's founders, Brant stepped down in March 2004, assuming the role of vice president of publishing. He left the company in October 2006, after being officially on disability since June. Take-Two's initial public offering was in 1997.

Take-Two also said the independent investigation found "no pattern" of any backdating from August 2003 to the current day. It also said there was "no evidence" the company's current CEO and CFO, Paul Eibler and Karl Winters, "engaged in any misconduct with respect to the company's option granting practices."

As a result of the backdating, the company believes it will incur additional expenses and "tax consequences." Take-Two said that will mean changes to its past and current financial reports--all of which will have to be reviewed by its auditing team.

But Take-Two taking some blame doesn't mean it is out of the woods yet. The official SEC backdating investigation is still ongoing, and the oversight body threatened the publisher with NASDAQ delisting for nondisclosure of finances just this morning. (Such threats, however, are not uncommon.)

After falling on the announcement of the SEC investigation and backdating admission, Take-Two share price had risen $0.05 (0.29 percent) to $17.54.

35 Comments

  • ares_infernus

    Posted Jan 24, 2007 4:46 am PT

    ahh the corporate game...and ste-rike 3!! out!!

  • reddlibra69

    Posted Jan 23, 2007 11:44 am PT

    Well Good The Person That Did it Is Gone!

  • cjcr_alexandru

    Posted Jan 23, 2007 9:37 am PT

    "current executive suite is clean."

    That's all that I wanted to know.

  • pompomboy

    Posted Jan 23, 2007 7:57 am PT

    huh wat this mean?

  • gatsbythepig

    Posted Jan 23, 2007 6:58 am PT

    how can they

  • wenbin09

    Posted Jan 23, 2007 5:59 am PT

    this is bad..

  • sieg6529

    Posted Jan 23, 2007 4:41 am PT

    A slap on the wrist, to be sure.

  • nevereathim

    Posted Jan 23, 2007 3:31 am PT

    I don't care, I mean it's just some stock here and some stock there

  • ketsuatama

    Posted Jan 23, 2007 12:41 am PT

    What disability did Brant have? Was it not being able to lie straight in bed due to his pants catching fire? A lying, conniving CEO, a rare breed indeed.

  • Blackstaff

    Posted Jan 22, 2007 6:45 pm PT

    lol... Backdating occurs... Stock rises, that's so weird

  • donscrillinger

    Posted Jan 22, 2007 5:03 pm PT

    where is the news about 2ks new football game for 360 thats what we want to know

  • messin18

    Posted Jan 22, 2007 4:31 pm PT

    redxwarriorxxx,

    The stock is UP .29% on this negative news. No reason to sell it. The stock was down to 9.00 only 5 months ago and it's at 17.54. It's doing great. Helps that one of the richest men in america has been buying the stock like crazy.. he has about 4% ownership now.

  • Re_ensurer

    Posted Jan 22, 2007 4:09 pm PT

    $17.54 a share.

  • YukoAsho

    Posted Jan 22, 2007 3:51 pm PT

    HyperMetaDragon
    LOL. Grand Theft NASDAQ.

    That's their next game, probably.

  • Jaeme

    Posted Jan 22, 2007 3:48 pm PT

    Theft by handgun= robbery and serious jailtime
    Theft by handshake= illegal if you get caught and little if any time inside da big house.
    The pen isn`t just mightier than the sword, its a more acceptable robbery method.

  • zintarr

    Posted Jan 22, 2007 3:23 pm PT

    CEOs are all scum!

  • HyperMetaDragon

    Posted Jan 22, 2007 3:23 pm PT

    LOL. Grand Theft NASDAQ.

  • nullvision

    Posted Jan 22, 2007 3:17 pm PT

    Eh, Enron wasn't backdating anything. They were eh... Nevermind. Google is your friend.

    Backdating is when ...
    Ok, some employees get stock options as part of their benefits. Now, if the company puts the date of the granting of those options to the employee at a time when the stock was cheap, they become more valuable when sold, in a way.

    It's actually not illegal in some circumstances. The illegal part is when they don't record it in their earnings. In other words, if they backdate the stock to a time when it was worth $10, but the earnings show the grant at a value of $20, it looks like they have more money than they really do. But what happens is that other $10 is put in the pocket of the employee who sells the stock. The money comes up missing, and shareholders at large take the hit. Of course, they are actually trying to have it never come up missing by overstating other things to make up the difference. But they sometimes get caught. That's stealing.

  • vaejas

    Posted Jan 22, 2007 2:56 pm PT

    Grand Theft NASDAQ... just doesn't have the same ring...

  • Generic_Dude

    Posted Jan 22, 2007 2:46 pm PT

    @datniccah187: Agreed... although I can't help but just kinda feel a little sickened by the sort of philandering that people try to get away with. The video game industry is like any other industry and is filled with dirty crooks, but all the same, if I had any similar improprieties being looked at, my azz would already be in jail. Great handle btw, datniccah, lol.

  • RaiKageRyu

    Posted Jan 22, 2007 2:46 pm PT

    Lots of stock problems lately, eh?

  • redxwarriorxxx

    Posted Jan 22, 2007 2:31 pm PT

    Sell it if you got it,,, quickly.

  • lzorro

    Posted Jan 22, 2007 2:29 pm PT

    Enron, HP, Take-Two this isn't anything new even Apple was under investigation if I recall correctly?

  • comthitnuong

    Posted Jan 22, 2007 2:06 pm PT

    wait so whats backdating?

  • Purvis11

    Posted Jan 22, 2007 1:54 pm PT

    A corrupt CEO really?...pphh what CEO isn't.

  • paranoiasurviva

    Posted Jan 22, 2007 1:39 pm PT

    LOL @ Take-Two

  • blueflamedino

    Posted Jan 22, 2007 1:08 pm PT

    CEOs are crooked, and been crooked, this isn't news, just stating the obvious and passing the blame

  • Phylyn5151

    Posted Jan 22, 2007 12:48 pm PT

    They should make a game about corporate greed.....

  • ultimate_zero

    Posted Jan 22, 2007 12:45 pm PT

    Just release GTA already!

  • diablos101

    Posted Jan 22, 2007 12:40 pm PT

    crazy world...

  • OfficialBed

    Posted Jan 22, 2007 12:35 pm PT

    neato

  • ignominiousf

    Posted Jan 22, 2007 12:35 pm PT

    Owned.

  • datniccah187

    Posted Jan 22, 2007 12:32 pm PT

    Take-Two is a pretty solid videogame devloper. Especially when it links up wit THQ and Activision. I hope whatever legal troubles or whatever they're having isn't really a big deal and it gets cleared up quick so they can refocus on making some bomb games.

  • J-Man24

    Posted Jan 22, 2007 12:30 pm PT

    oh well, not me

  • 1SleepyGit

    Posted Jan 22, 2007 12:15 pm PT

    Typical corporate backstabbing and lies. Glad this investigation is going ahead, make sure those responsible do not get away with their deception like so many others do.

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