Activision sued by shareholder

Suit alleges publisher's executives improperly backdated stock options with the help of the company's audit committee.

30 Comments

Last week, Take-Two Interactive notified shareholders that the Securities and Exchange Commission was conducting an informal investigation into the company regarding some stock option grants it made in the past decade. Today, word emerged that an Activision shareholder has filed suit against the publisher in Los Angeles Superior Court over its own stock option grants.

The Activision suit, brought on behalf of the company by shareholder Ryan Vazquez, charges 16 current and former Activision senior executives with improperly adjusting their stock option grants to their own benefit and to the company's detriment.

The way most of the company's stock option grants work is that on the day grant is made, the employee receiving it gets the right to buy a limited amount of stock within a limited time frame at the low-bid price from that day. The suit alleges that Activision executives were issued these grants and then fudged the books to make the issuing dates occur when the stock was at a low point. As a result, the price the employees pay to turn those options into actual stock is much lower, and the company gets less money for those shares.

Vazquez alleges that an array of Activision executives, including CEO Robert Kotick, breached their obligations to their shareholders by regularly backdating stock options between 1995 and 2004. As evidence, Vazquez points to more than 80 stock option grants made to the defendants over that period of time and what kind of growth the stock price saw in the 10 days following the purported grant of options. In some of the instances the stock price went up a few percentage points over what the defendants could pay for it, but some grants were made just before the company experienced growth spurts. In one case, the stock jumped up to 147 percent of what the executive's stock option said he could purchase it for within 10 days of the grant being made.

The lawsuit claims that the "extraordinary pattern" of stock surges immediately after the option grants were made is due to the grants being backdated. Vazquez's complaint says the alleged backdating "improperly increased the value of the options to the officer defendants and improperly reduced the amounts they had to pay the company upon exercise of the options." As a result, Vazquez contends the defendants violated the terms of the stockholder-approved stock option plans, failed to recognize the extra compensation expenses, and lied to shareholders and the Securities and Exchange Commission to hide their actions.

Vazquez said the executives' actions cost the company millions of dollars in damages. On behalf of the company, Vazquez is demanding that the defendants pay for damages and legal costs, give up stocks and money gained from the contested options, and provide "equitable relief" for violating their duties to shareholders.

As of press time, Activision representatives had not returned requests for comment.

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Avatar image for Sandman100
Sandman100

It's only cheating if you get caught. That right.

Avatar image for Paganstar
Paganstar

Actually if you look Activision is not getting sued. The company is sueing the 16 executives. The Activision suit, brought on behalf of the company by shareholder Ryan Vazquez, charges 16 current and former Activision senior executives with improperly adjusting their stock option grants to their own benefit, and to the company's detriment. Vazquez is acting as an agent of the company basically. As a stock holder he is acting in the company's interest, trying to recoup lost earnings due to the executives alledged dishonest actions. (and at the same time hopefully increase his own stock shares value).

Avatar image for Briantb_2008
Briantb_2008

There is only one preson sueing its a good chance that this preson is wrong

Avatar image for thefjk
thefjk

I couldn't understand this shareholder news thing... I'm kinda confused! But still am sure they aint gonna get any probz!

Avatar image for SNKrock
SNKrock

it's only cheating if you get caught.

Avatar image for soulknight63133
soulknight63133

All Actiivision needs to do is come out with another Pitfall and they recoop all the money the owe, and problem solved..lol.

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TTA_TENACIOUS

Anything to make some more money that they dont need

Avatar image for irmeleeman5995
irmeleeman5995

What is the industry no what is the WORLD coming to?

Avatar image for KFrog
KFrog

Once again it would appear that this is a case of the rich getting richer on the backs of the average guy. *Sigh*

Avatar image for chic-warmer
chic-warmer

RICH? please....

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Beltbite

lol too funny

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Gothichell

These days companies will buy anyone even republican and democrats.

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lordxymor

I hope they sell the rights to Marvel vs Capcon to pay this and the buyer actually makes a MxC sequel... *crosses fingers*

Avatar image for Destroyeron13
Destroyeron13

Give me money.

Avatar image for Kfoss
Kfoss

woo stock options!

Avatar image for comthitnuong
comthitnuong

the guy is probably gonna get a bunch of money....

Avatar image for KnightsofRound
KnightsofRound

Serves them right, those asses are responsible for Call of Duty 3 not being on the PC. I hope Activision goes bankrupt.

Avatar image for alexgangur
alexgangur

The title is a bit misleading, the guy is suing execs, not Activision. Regardless, it's pretty pathetic really.

Avatar image for fenriz275
fenriz275

Man, I wish I could get ahold of some of that scam stock.

Avatar image for metdevthegamer
metdevthegamer

More lawsuits -_-

Avatar image for Vulpis
Vulpis

What amuses me is the whole railing about violating their duties to shareholders...overlooking the fact that since they bought the stock, they *are* shareholders...

Avatar image for ScudBuster
ScudBuster

Ok, apparently just another incident of the kind. Why are so many reading casting judgement now? The executives are only being "accused of" backdating their option trading. This is nothing compare to the major white-collar bust of the past 5 years.

Avatar image for Myugenjin
Myugenjin

Westly Snipes! I recall at least 2-3 months ago that Senators both Dem & Rep were getting "special options" grants even changing state laws to profit comps, and made a 24% increase on investments last year compared to Corporate Americas 12% and the average American investors 7%. Lord knows you'd all do it too if given the chance:)

Avatar image for moldovan76
moldovan76

Not surprising. It's estimated about a third of all North American companies have backdated options at some point. Just because it's Activision that's getting sued now doesn't make it news - just a symptom of a bigger scam.

Avatar image for smbius
smbius

Wow. That is some serious backdoor to "bump up" the stock value. Enron was much worse of a problem than Activision because they are trading energy. They were also not as sneaky as Activision. Energy companies pretty much rule the world.

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mattes2542

I wonder if they have the same fate Enron did for cooking the books.

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SyluxElite

indeed

Avatar image for zash
zash

Shame indeed.

Avatar image for jonkirst
jonkirst

Trying to get rich quick and dirty...shame.