Take-Two confirms formal SEC investigation

New management inherits continuing stock option scandal as old CEO leaves with more than $2.4 million in severance pay.

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Take-Two Interactive shareholders cleaned house last week by voting out the publisher's entire board of directors and replacing it with a new crew headed up by former BMG Entertainment CEO Strauss Zelnick. While the people who helmed the company through the tumultuous years of the Hot Coffee and stock option scandals may be gone, their legacy continues to impact the company.

Last July, Take-Two Interactive revealed that it was cooperating with an "informal non-public investigation" by the Securities and Exchange Commission (SEC) in regards to stock option grants the company made dating back to the beginning of 1997. Yesterday the company revealed in an SEC filing that it had received a Formal Order of Private Investigation from the commission. As a result, the SEC can now subpoena witnesses related to the case.

Earlier this year, the publisher confirmed that there was "significant" mishandling of its stock options for years and pointed the finger at former CEO and founder Ryan Brant. Brant was later fined $6.3 million by the SEC and paid another $1 million to New York state and local authorities as part of a deal that included pleading guilty to first-degree felony charges of falsifying business records.

The SEC filing also includes details about the severance plan of former Take-Two CEO Paul Eibeler, whose employment with the company was officially terminated yesterday. While Eibeler will receive nearly $2.48 million in severance pay, he will also serve in an advisory role for the next six months. For his input, Eibeler will be given a total of $300,000, health care benefits, and a monthly car allowance of $799.

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