NEW YORK—A settlement agreement was announced Wednesday by the Manhattan District Attorney with Take-Two Interactive Software, Inc. An investigation revealed the company’s fraudulent executive compensation practices.
From 1998 to 2004, Take-Two regularly and systematically back-dated grants of stock options for its high-level executives. By back dating stock option grants to coincide with the dates of the low or near-low trading prices for Take-Two stock, rather than using the actual dates of the grant awards, millions of dollars in compensation was fraudulently hidden from accounting records and tax authorities. All of Take-Two’s executive and senior management, as well as all of its directors from that time period have been replaced.
The decision not to bring criminal charges against Take-Two relied on two primary factors. First, the directors and executives who committed the crimes or who failed to rectify the misconduct were completely ousted from the company by 2007. The executives that have managed and run Take-Two since 2007, and who cooperated with the investigation, are completely different. Given that, the second factor focused on the collateral economic effect of a prosecution. In this case, a prosecution of Take-Two would act as a punishment of shareholders and persons wholly uninvolved with the criminal conduct.
