'Hot Coffee,' stock-option suit settled for $20.1 million

Take-Two Interactive will set up fund to pay plaintiffs in class action stemming from Grand Theft Auto: San Andreas sex minigames, 'historical stock option granting practices.'

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Over four years after the "Hot Coffee" scandal rocked the game industry, Take-Two Interactive has settled the matter once and for all. Today, the Rockstar Games parent announced that it has reached an out-of-court agreement with the members of a class action suit stemming from the hidden sex minigames in Grand Theft Auto: San Andreas.

"Oh, no. I'm not falling for that 'Wanna come up for some coffee?' line again."

The class action is different from another settled in late 2007, when purchasers of the sex-minigame-tainted version of San Andreas were offered a partial refund or a cleaned-up edition of the game. The suit settled today also addressed accusations of stock-option backdating, over which Take-Two paid the Securities and Exchange Commission $3 million in April without admitting any wrongdoing.

"We are pleased to have reached this settlement and put this historical matter behind us," Take-Two CEO Ben Feder told analysts during a post-earnings release conference call.

In exchange for the plaintiffs dropping the suit, the New York City-based publisher will put $20,115,000 into a fund to dole out payments. Of that, $15,200,000 will be paid by Take-Two's insurers and $4,915,000 by the company itself. The publisher said it had saved up its part of the settlement during "several quarters" before April 30, 2009. Ironically, it was during that month that Take-Two settled another class action suit filed by shareholders after the company refused to be bought by Electronic Arts at a hefty premium in 2008.

Today's settlement ends a chain of events that began over four years ago. In summer 2005, hackers unlocked hidden sex minigames in the PC and console editions of Grand Theft Auto: San Andreas. As a result, the game was rerated AO for Adults Only, forcing Rockstar Games parent company Take-Two Interactive to edit and rerelease the game at an estimated cost of over $50 million. By the end of that July, the Federal Trade Commission had launched a now-concluded investigation.

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