Video game subpoena

Game Maker Discloses a Subpoena

By MATT RICHTEL
Published: June 27, 2006

The video game publisher Take-Two Interactive said yesterday that it had received a grand jury subpoena from the Manhattan district attorney's office, seeking information about a range of its business practices dating back to 2001 and the inclusion of sexually explicit material in one of its games.

Edward Nebb, a company spokesman, said the district attorney had not told Take-Two whether it or any of its executives or directors were targets of the grand jury investigation. A spokeswoman at the district attorney's office declined to comment last night.

If Take-Two is the focus of the investigation, as the depth and nature of the questions it is being asked by prosecutors suggests, it would be the first time that a criminal inquiry into the activities of the company and its directors and executives had come to light. The company, which is based in New York, said it was cooperating with the investigation.

The company's announcement, which came after the stock market's close, prompted a plunge in its shares in after-hours trading. The stock was down nearly 19 percent, to $10.44, a 52-week low.

Take-Two, publisher of the hit video game franchise Grand Theft Auto, has for years operated under a cloud, having been the subject of inquiries by the Federal Trade Commission and the Securities and Exchange Commission and the focus of debate among politicians in Washington.

It has also been something of an industry darling, with a bad-boy reputation that was buoyed by the success of Grand Theft Auto. The game popularized the idea of allowing players to roam freely in a virtual world and rewarded them for completing missions that often involved violent and antisocial behavior.

Since its introduction in 1998, Grand Theft Auto and its sequels have sold around 50 million copies, the company says.

Evan Wilson, a video game industry analyst for Pacific Crest Securities, said that the latest inquiries indicated that Take-Two's problems had not gone away.

"At one point it appeared that all of these issues were behind the company," he said. Now, he added, "it appears there is a fresh round of concerns."

In a press release, Take-Two said that on June 19, it received subpoenas requesting documents "covering various periods beginning Oct. 1, 2001." It said the requested documents pertained to a wide range of issues, including disclosures and presentations by the company about its partnerships, earnings and acquisitions.

In early 2002, Take-Two said it had to restate seven quarters of financial returns, for the entire year of 2000 and the first three quarters of 2001. Trading in its stock was halted for three weeks.

Take-Two also said yesterday that the district attorney had specifically asked for documents pertaining to its acquisitions in 2005, when it bought four independent video game studios.

The company said further that prosecutors were seeking information about hidden scenes included in Grand Theft Auto: San Andreas, the latest installment in the franchise. A program that became available over the Internet allowed players to unlock sexually explicit scenes that had not been disclosed when the game was given its age rating.

The scenes prompted debate in Congress about the violent and, in particular, sexual content in video games. Take-Two withdrew the game from the market last July and reissued it a month later without the graphic material.