Take-Two may incur US$ 10 M in penalties, says Pachter

Take-Two already has its hands full with Grand Theft Auto 4‘s quite disappointing delay, but there are more problems to come as the games publisher has received a “Wells” call from US Securities and Exchange Commission (SEC) staff.

The notice was aimed to inform Take-Two that it is already well under investigation about the stock options fraud committed by its former management, and that there will be enforcement proceedings to be filed against them in the near future. In light of Take-Two’s crisis, analyst Michael Pachter gives his opinion about Take-Two’s possible responses to the lawsuit.

Basically, a “Wells” notice informs companies or individuals that an investigation concerning their alleged violation of the law has been completed. The SEC staff is currently seeking SEC’s approval to file charges against Take-Two and demand “civil monetary penalty”, which roughly translates to a pricey fine. Pachter mentioned only two possible options for Take-Two: to litigate or pay the penalty. He continued that it is possible that Take-Two would choose to cooperate and just pay the penalty, which may amount to US$ 10 million. The analyst also noted that it took Take-Two six days before notifying the investors after receiving the “Wells” notice, which he considered odd.

For those who weren’t aware, Take-Two’s founder Ryan Brant pleaded guilty to the the civil charges the SEC filed against him, with their former lawyer and accounting officer pleading guilty to falsifying stock-related information as well. The fraud has gravely cost Take-Two in settlements alone, amounting to about U$ 7.3 million last February.

Take-Two already has its hands full with Grand Theft Auto 4‘s quite disappointing delay, but there are more problems to come as the games publisher has received a “Wells” call from US Securities and Exchange Commission (SEC) staff.

The notice was aimed to inform Take-Two that it is already well under investigation about the stock options fraud committed by its former management, and that there will be enforcement proceedings to be filed against them in the near future. In light of Take-Two’s crisis, analyst Michael Pachter gives his opinion about Take-Two’s possible responses to the lawsuit.

Basically, a “Wells” notice informs companies or individuals that an investigation concerning their alleged violation of the law has been completed. The SEC staff is currently seeking SEC’s approval to file charges against Take-Two and demand “civil monetary penalty”, which roughly translates to a pricey fine. Pachter mentioned only two possible options for Take-Two: to litigate or pay the penalty. He continued that it is possible that Take-Two would choose to cooperate and just pay the penalty, which may amount to US$ 10 million. The analyst also noted that it took Take-Two six days before notifying the investors after receiving the “Wells” notice, which he considered odd.

For those who weren’t aware, Take-Two’s founder Ryan Brant pleaded guilty to the the civil charges the SEC filed against him, with their former lawyer and accounting officer pleading guilty to falsifying stock-related information as well. The fraud has gravely cost Take-Two in settlements alone, amounting to about U$ 7.3 million last February.