Tags: sec

Take-Two Faces De-listing from NASDAQ

More corporate problems for Take-Two Interactive?

According to financial site TheStreet.com, the publisher of GTA and Bully has been notified by NASDAQ that it is not in compliance with filing requirements.

This was not unexpected, according to the game publisher, due to an ongoing internal review of employee stock options. The investigation delayed filing of third quarter paperwork. Take-Two says it plans to request a hearing with NASDAQ to review the situation and will file the paperwork at issue as soon as practical.

Take-Two is among several high-profile firms, including Apple, Dell and Novell to have received such notices from NASDAQ.

PSV Ratings Dead? Circumstances Mysterious...

Has PSVratings gone belly-up?

PSV, a media content rating service based upon a proprietary system, emerged in recent years as a would-be competitor to the ESRB, MPAA and other ratings formats. The company, however, appeared to enjoy little success, at least in regard to video games.

A source familiar with PSV told GP that the company had recently ceased operations in the wake of a fraud investigation by the Securities and Exchange Commission (SEC). This source also said that PSV employees did not receive their final paychecks when the company closed its doors without warning.

Indeed, the listed phone number for PSV is no longer in service, although the company's website is still up. In an e-mail to GamePolitics, CEO David Kinney confirmed that the company had shut down:

"PSVratings laid off all employees and suspended operations on May 30, 2006. We are fully cooperating with the SEC in their investigation. We are in the process of recapitalizing and I remain active in ensuring that we maintain our leadership position in the independent ratings industry."
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More Financial, Legal Woes For Take-Two

The controversy raging over Bully is far from the only worry for Take-Two Interactive these days.

As reported by the New York Times and other news outlets, the beleaguered game publisher revealed late yesterday that it had received additional grand jury subpoenas from the office of Manhattan District Attorney Robert Morgenthau. The investigation apparently focuses on the company's financial dealings.
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Long, Hot Summer Keeps the Heat on Take Two

Summers haven't been much fun at Take Two Interactive, of late. Last year, of course, the Hot Coffee scandal unwound itself in agonizing daily steps throughout the month of July. This summer, water cooler gossip must be equally tense around Take Two Interactive's Lower Manhattan digs.

Although last month's Federal Trade Commission (FTC) report on the Hot Coffee affair resulted in a mere slap on Take Two's corporate wrist, developments since then have been almost exclusively negative for the controversial game publisher. Let's recap:

June 25th: CNN reports that T2 canceled upcoming PC game Snow, a drug-dealing simulation deep into development.

June 27th: GamePolitics and other sources pick up on a New York Post report that the Manhattan District Attorney's Office has issued "unusually wide-ranging" subpoenas dealing with Hot Coffee as well as the way in which T2 reported "key financial information" related to "acquisitions, partnerships and the recent dismissal of its longtime auditor, PricewaterhouseCoopers."

June 27th: Wedbush Morgan analyst Michael Pachter says, "It is likely that one or more Take Two employees may be subject to a potential criminal indictment." Wow!! Take Two execs be doing the perp walk?
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New York Post: T2 in Trouble & It's Not Just Hot Coffee

That whoosh you're hearing is the sound of Take-Two Interactive's stock price (NASDAQ: TTWO) in free fall.

Shares in the Grand Theft Auto publisher closed at 12.87 yesterday following news that a grand jury in New York had subpoenaed corporate records including those relating to last year's Hot Coffee scandal. 12.87 represents Take-Two's lowest stock price since early 2003. In after-hours trading prices dropped even more, to 10.30.

Bad news continues to pile up for T2. As reported by today's New York Post, the firm is in the crosshairs of D.A. Robert Morgenthau not just over Hot Coffee, but for the way it reported what the Post terms "key financial information."

The paper reported that the subpoenas served on T2 were "unusually wide-ranging" and demanded paperwork related to "acquisitions, partnerships and the recent dismissal of its longtime auditor, PricewaterhouseCoopers."
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Take-Two's Confusing Corporate Health

Take your pick.

The financial prognosis for Take-Two (NASDAQ: TTWO) is either rosy or moribund, depending on whose analysis you believe.

In an article titled, "Three Video Game Firms with Long-Term Tailwinds," Morningstar lists TTWO along with Activision and EA as stocks investors should consider purchasing. While Morningstar lists Take-Two's risk as "above average" and cites "poor corporate governance" as "an ongoing issue for the firm," its report essentially argues that the stock is underpriced: "There is a reasonable argument to be made that Take-Two trades for a modest premium over the value of its GTA franchise alone, so a corporate event may help realize value for shareholders."

Here at GPHQ we'd call that unexpectedly good news for a company buffeted by board defections, shareholder suits, bad press and government investigations. But here comes the pain:

Marketwatch columnist Herb Greenberg reports that Take-Two has dumped its auditing firm, PriceWaterhouseCoopers, and hired Ernst & Young in its place. As Greenberg writes:

"...the timing of the dismissal, on the heels of a delayed 10-K with disclosures of multiple material weaknesses, suggests otherwise. You think Take-Two, without prodding from its auditors, wanted to disclose that it 'did not maintain effective controls over the existence and valuation of its accounts payable related to inventory purchases?' I think not."
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Will North Carolina, Connecticut Join L.A. in Suing Take Two?

By way of Kotaku comes word that state attorney generals in North Carolina and Connecticut have requested records and information from Take Two relating to the Hot Coffee scandal.

The information is contained in the company's annual report, which was filed yesterday with the Securities and Exchange Commission (SEC) and is available online.

While no suits have been filed by North Carolina or Connecticut, such action seems possible, perhaps even likely, given the request for records.

State-level video game legislation sponsored by Sen. Julia Boseman came close to passage in North Carolina last year. Connecticut, of course, is the home state of U.S. Senator Joseph Lieberman, a longtime watchdog of the video game industry. In addition, a Federal Trade Commission investigation of Hot Coffee has been ongoing since last July.

But the revelations concerning North Carolina and Connecticut aren't the only juicy bits in the annual report. Under the heading "Legal Proceedings," are listed the following:

- four class-action suits over Hot Coffee: two in New York state, one in Illinois, and one in Pennsylvania. As described by Take Two's annual report, "The complaints seek unspecified damages, declarations of various violations of law and litigation costs. We believe that these complaints are without merit and we intend to vigorously defend and seek dismissals of these actions."
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Take 2 Board Member Bails Over Hot Coffee, "Unhealthy Atmosphere"

The fallout from Hot Coffee is still going on, and likely will be for a long time.

According to a report on The Street.com, Barbara A. Kaczynski, a key member of Take-Two's board of directors, has resigned, citing last summer's scandal surrounding GTA San Andreas as a factor.

A filing with the Securities and Exchange Commission indicates that Kaczynski resigned Jan. 19 from the board as well as from related positions as chairwoman of the board's audit committee and member of the corporate governance committee.

Kaczynski's letter of resignation was brief, but a second letter, written on her behalf by her attorney, cites concern caused by ""several matters requiring the board's attention."

These included, the "discovery of illicit images depicted in its Grand Theft Auto video game, the Federal Trade Commission's investigation of Take-Two following that discovery, and various SEC inquiries directed at Take-Two and its employees."

The letter from Kaczynski's attorney says also that more recent in-house issues have increased Kaczynski's belief of an "increasingly unhealthy relationship between senior management and the board of directors ... characterized by a lack of cooperation and respect."

Kaczynski, the daughter of an NYPD detective, was appointed to Take-Two's board in July, 2004. According to her bio, which as of this writing is still available on Take-Two's website, Ms. Kaczynski is a CPA who previously served as the CFO of the NFL, and has also worked for Time, Inc. and Price-Waterhouse.

GP: Sounds like there could be another shoe yet to drop on this one... Reuters has more on this.