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Take-Two reveals backdated options

The publisher of 'Grand Theft Auto' and other games finds problems with past grants.

January 23, 2007|From Reuters

Video game publisher Take-Two Interactive Software Inc. said Monday that a review of its past stock option grants found a "significant" number were backdated during April 1997 to August 2003.

The review, completed Wednesday, found no evidence that current senior management, including Chief Executive Paul Eibeler and Chief Financial Officer Karl Winters, engaged in "conduct raising concerns," the company said in a filing to the Securities and Exchange Commission.

Legal counsel Kasowitz, Benson, Torres & Friedman and independent accounting firm BDO Seidman have been advising the company in reviewing past option grants.

They found that Take-Two, best known for the "Grand Theft Auto" game from its Rockstar Games studio, failed in many cases to comply with the terms of its stock option plans and did not have adequate compliance procedures.

"In addition, the compensation committee abdicated its option-granting responsibilities and permitted the company's prior chief executive officer, Ryan Brant, to control and dominate the granting process," the company said.

No pattern or practice of backdating of option grants since August 2003 was found, it said.

Brant, also the company's founder and former chairman, resigned in October.

Shares of the New York-based company rose 5 cents to $17.54.

Take-Two said it was likely to recognize additional expenses for some of the option grants, but it said it was not yet able to estimate the size of such charges or their effect on its past financial statements.

The company, which had received a warning from Nasdaq after it failed to file its quarterly report for its fiscal third quarter, said it was sent another notice by the stock market.

The notice said its failure to file its annual report for its fiscal year ended Oct. 31 served as "additional basis for delisting."

Take-Two said it planned to file both forms as soon as possible and hold an annual meeting with stockholders.

The SEC and the Justice Department are investigating possible manipulation of some companies' grant dates of stock options. More than 160 companies have been investigated or are conducting internal inquiries.

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