Plumbers put EA in legal vise

During the past several months, the Securities and Exchange Commission has opened inquires into over 100 companies, ranging from Apple to GameSpot's parent company, CNET. The subject of the investigations is whether or not these firms retroactively gave out stock options to employees at an artificially low strike price. If a company's share price is rising, the practice almost guarantees these employees make money off the options.

Many of the companies being eyed by SEC have been in the high-tech sector, and several of them have been game publishers. THQ and Activision have acknowledged the regulatory body has asked them for information regarding their stock-options grants, while Take-Two Interactive is the subject of an "informal inquiry" by the regulatory body.

One publisher who hasn't said whether or not it has been contacted by the SEC is the biggest one of all: Electronic Arts. Today, though, the company filed an 8-K Form with the SEC, saying that it is being sued by a pension fund over its stock-options grants--a pension fund for plumbers, no less.

"On August 9, 2006, a shareholder derivative complaint was filed in San Mateo Superior Court, purportedly on behalf of Electronic Arts Inc...against certain current and former officers and directors," read the brief filing. "The complaint, styled Plumbers & Pipefitters Local No. 572 Pension Fund v. Probst, et al., alleges, among other things, purported improprieties in the Company's issuance of stock options."

The "Probst" in question is Larry Probst, who has been EA's CEO for 15 years and has received $81.76 million in compensation during the last five, according to Forbes. According to a copy of the suit obtained by TheStreet, the union alleges that the backdating process has been going on since the 1990s. However, EA vice president Jeff Brown told the site that no such thing had occurred. "Backdating has never been an accepted practice at EA," Brown said. "We've always had strong processes in place to prevent this."