SEC chooses not to recommend action against THQ [Gameindustry.biz]

Take-Two said it received a "Wells" call last Thursday from the staff of the SEC's enforcement division. The staff plans to ask the Commission to file charges related to its investigation into the company's stock options practices and seek a civil monetary penalty.

Take-Two said it is cooperating with the SEC and expects to resolve the investigation through a settlement rather than litigation.

We'll see what the SEC has to say about that.

Take-Two Gets 'Wells' Notice From SEC [Forbes]

Brant faces up to four years in prison for falsifying business records.

"I am deeply sorry for my role in the inappropriate manner Take-Two granted incentive stock options," Brant said in a statement. "I accept responsibility for my actions, and apologize to the company's shareholders," said Brant, who in 1993 founded the company best known for the blockbuster "Grand Theft Auto" urban-action game from its Rockstar Games studio.

Brant agreed to pay $6.3 million to settle the civil charges and $1 million in penalties related to the criminal case.

He did not admit or deny wrongdoing in the civil case, and as part of the settlement he agreed to a permanent bar on holding top offices at publicly held companies.

The SEC and the Manhattan District Attorney's office said the investigation into the company were continuing.

Sentencing for Brant is set for Aug. 1 Brian Crecente

NEW YORK, Feb 14 (Reuters) - Ryan Brant, the former chief executive of video game publisher Take-Two Interactive Software Inc.(TTWO.O: Quote, Profile , Research), pleaded guilty on Wednesday to criminal charges related to backdating of stock options.

Brant pleaded guilty in New York State Supreme Court to falsifying business records, a charge that carries a punishment of up to four years in prison. Separately, he also settled a civil action brought by the U.S. Securities and Exchange Commission.

"I am deeply sorry for my role in the inappropriate manner Take-Two granted incentive stock options," Brant said in a statement. "I accept responsibility for my actions, and apologize to the company's shareholders," said Brant, who in 1993 founded the company best known for the blockbuster "Grand Theft Auto" urban-action game from its Rockstar Games studio.

Brant agreed to pay $6.3 million to settle the civil charges and $1 million in penalties related to the criminal case.

He did not admit or deny wrongdoing in the civil case, and as part of the settlement he agreed to a permanent bar on holding top offices at publicly held companies.

The SEC said in a statement that Brant had agreed to settle charges that he "enriched himself and others" by granting undisclosed options to himself and other company employees. It did not provide details about the other individuals.

Both the SEC and the Manhattan District Attorney's office said their investigations were continuing.

More than 170 companies have been investigated by U.S. authorities or have conducted internal inquiries into possible manipulation of stock option grant dates. Some companies are accused of backdating grant dates to days when the share price was lower, giving the recipient the opportunity to reap extra profit.

Backdating is not in itself illegal, as long as the practice has been properly disclosed to shareholders and fully accounted for.

The Justice Department has filed criminal charges relating to alleged backdating against former executives at Comverse Technology Inc. (CMVT.PK: Quote, Profile , Research) and Brocade Communications Systems Inc.

Brant resigned his nonexecutive post at Take-Two in October. He was CEO until February 2001 and chairman until March 2004.

"If people are to have confidence in our financial markets, it is critical that public companies report their financial condition accurately," Manhattan District Attorney Robert Morgenthau said in a statement following the guilty plea.

Sentencing was set for Aug. 1.

Take-Two said on Jan. 22 that a review of its past option grants had found that Brant had engaged in a pattern and practice of backdating options between April 1997 and August 2003.

The company said in an SEC filing that the review showed Take-Two failed in many cases to comply with the terms of its option plans and did not have adequate compliance procedures.

In June 2005, Brant and three other former Take-Two executives paid $14 million to settle a SEC lawsuit, closing a nearly four-year investigation into alleged fraudulent accounting practices at the company.

Ex-Take-Two CEO pleads guilty to options charges [Reuters]

NASDAQ is threatening to delist Take-Two interactive from their stock market for failing to file a quarterly report, as required by their rules, according to an SEC filing.

The company says that filing of their report was delayed by the internal investigation they are conducting into their own stock option grants.

Take-Two plans to request a hearing with the Listing Qualification Panel to review the ruling, until then the company will remain listed.

Wow, I'm no business school grad, but this sure doesn't sound good for Take-Two. I know they say they were expecting this ruling to come, but you can't help wait for the other shoe to drop. Often, this sort of thing is the first step down a long and ugly trail that ends in bankruptcy and people snatching up your IPs from the bowels of a warehouse during a bankruptcy auction.

Today Thompson decided to drop Edward C. Johnson, III, chairman of Fidelity Investments, a friendly note to try and convince the guy to drop the company's Take-Two shares. For those of you who don't follow who owns what out there (and that typically includes me), Fidelity owns more than 20 percent of the game developer.

In his letter, Thompson continues to insist that he "prepared Senator Clinton" for her Grand Theft Auto bashing press conference and goes on to say he knows a lot of secret, company-killing stuff about Take-Two and the SEC investigation.

He never really gets around to spilling the beans in the letter, but does hint that he was partially responsible for the informal SEC investigation and that he's helping out the lawyers involved in what could become a class-action lawsuit against the company.

Thompson claims the key to the SEC investigation can be found in the company's 10-k filing last month. He also tries to rope the company's outside general counsel, Blank Rome, into the whole mess as well as Barbara Kaczynski, Take-Two's former audit chair.

Here's the kicker:

In short, without herein divulging all I know, I'll say this: Somebody at Fidelity needs to talk to me immediately if not sooner. You all owe that to your investors.

I guess Thompson figures if he can't convince politicians or the media that Take-Two is the antichrist, he can at least try to dry up their funds. I tried figuring out the 10-K filed by Take-Two, but I'm an embicile. If you feel like you will fare better, check it out for yourself, just make sure to report back your findings. Hit the jump for Jack's full letter.
Brian Crecente

July 13, 2006

Edward C. Johnson, III
Chairman
Fidelity Investments (FMR)

Re: Take-Two Interactive Software, Inc. (TTWO on NASDAQ)

Dear Mr. Johnson:

As you know, Fidelity reportedly owns more than 20% of the above company's stock. In one year that stock has fallen in value from $28 to $9, primarily because of the "Hot Coffee" scandal which broke because of Senator Hillary Clinton's July 2005 press conference. I prepared Senator Clinton for that news conference, and here is a graphic depiction of the subsequent stock price tumble:

I was on CBS's 60 Minutes twice last year regarding Take-Two, and the August 2005 issue of Reader's Digest reported my efforts against this company. They didn't report a tenth of what I know.

Mr. Johnson, I know some facts about Take-Two that your company apparently does not know. The latest SEC investigation of Take-Two, announced Monday, comes as no surprise to me. It may come as a surprise to you and your analysts, however, that there may be some very significant problems with certain information in Take-Two's 10-K filed with the SEC months ago. I identified those potential problems immediately and shared them with the SEC. I also shared them with the lawyers who are seeking class action status for shareholders suing Take-Two.

One of the potential problems we have here (more accurately, that Fidelity has here, in my opinion) is the fact that the outside general counsel to Take-Two is the Philadelphia law firm of Blank Rome, which is also Take-Two's registered lobbyist on Capitol Hill. What I can tell you about Blank Rome and other aspects of Take-Two's problems might help explain why Take-Two's audit chair, Barbara Kaczynski, quit the Take-Two board, hired a top-notch criminal attorney, and wrote the SEC about Take-Two's alleged cover-up by senior management.

In short, without herein divulging all I know, I'll say this: Somebody at Fidelity needs to talk to me immediately if not sooner. You all owe that to your investors.

Regards, Jack Thompson

Jack Thompson, Attorney

The investigation is looking into certain stock option grants made by the company from Jan. 1997 to the present, according to Take-Two.

Take-Two says that prior to the investigation they had started an internal review of their option grants. The internal investigation is being conducted by independent board members who have retained legal counsel and accounts, according to the company.

This is the second on-going investigation and their dealings that could result in legal action. The New York Grand Jury is also conducting an investigation into Take-Two and their marketing of Grand Theft Auto: San Andreas.
These constant investigations and the rumors they spur can't be helping morale at the company and certainly isn't helping their stock. Brian Crecente

Can a company even as large as Take-Two survive? Maybe it's time for them to start looking into divesting some of their brands.

One of the things we never expected to see from Infinium Labs is shady business practices.

Ha ha ha! No, just kidding — if the Phantom console was ever released, we pretty much expected to see a 486 processor shoved into an XBox shell and a swaztika logo slapped on top of the giant neon X. So we aren't surprised at all that the SEC is investigating Infinium Labs ex-CEO Timothy Roberts for misleading investors to artificially raise Infinium's stock prices, then immediately selling his own shares at an inflated price before they got wise.

According to Gamespot, Roberts personally sent out thousands of faxes to investors, guaranteeing a January 2005 launch amongst a gaggle of other bald-faced lies. The faxes informed investors that Infinium's stock values could rise as much as 3,000%. Investors greedily swooped up more Infinium stock. Roberts then immediately sold 1.3 million shares of his own shares, netting a cool $422,500.

With the SEC involved, Roberts now equals screwed. Even if the console is never released, no one can say that gamers haven't had thousands of hours worth of fun with the Phantom Console, can they? - Florian Eckhardt

Ex-Infinium CEO Accused of Stock Scandal [Next Generation]

Thank god there's at least one smart gamer who knows how to write out there.

Steven Johnson, author of Everything Bad Is Good For You: How Today's Popular Culture is Making Us Smarter has an open letter to Senator Hillary Clinton in the LA Times today.

If this intro doesn't get you to read the whole thing, nothing will:

Dear Sen. Clinton

I'm writing to commend you for calling for a $90-million study on the effects of video games on children, and in particular the courageous stand you have taken in recent weeks against the notorious "Grand Theft Auto" series.

I'd like to draw your attention to another game whose nonstop violence and hostility has captured the attention of millions of kids a game that instills aggressive thoughts in the minds of its players, some of whom have gone on to commit real-world acts of violence and sexual assault after playing.

I'm talking, of course, about high school football.

Excellent eeeeeexcellent.

Hillary Vs. The Xbox: Game Over [LA Times]

Neither Sen. Hillary Clinton's request nor the House resolution that passed Monday night have the force of law to require the FTC to launch an investigation, but it certainly would have an impact on any decision. Afterall, Congress does make the laws.

FTC spokeswoman Claudia Bourne Farrell said an investigation would only be made public after its conclusion and only then if a law enforcement action were taken. She added that the FTC would be able to confirm any statements made by Take-Two to the SEC about an investigation.

We take the GTA situation very seriously, as we do the House of Representatives' request.

Although Bourne Farrell would not comment directly on the possibility of a Take-Two investigation, she said if the FTC, which has authority over unfair and deceptive acts and practices that could effect commerce, were to find wrongdoing in an investigation they have the ability to require a defendant to "give up their ill-gotten gains."

I have calls into both Rockstar and Take-Two.