Ex-CEO of Take Two Pleads Guilty in Options Backdating Case
Ryan Brant, the former chief executive of video game publisher Take-Two Interactive Software , pleaded guilty to criminal charges related to backdating of stock options.
Brant pleaded guilty in New York State Supreme Court to falsifying business records, a charge that carries a punishment of up to four years in prison. Separately, he also settled a civil action brought by the U.S. Securities and Exchange Commission.
"I am deeply sorry for my role in the inappropriate manner Take-Two granted incentive stock options," Brant said in a statement.
"I accept responsibility for my actions, and apologize to the company's shareholders," said Brant, who in 1993 founded the company best known for the blockbuster "Grand Theft Auto"
urban-action game from its Rockstar Games studio.
Brant agreed to pay $6.3 million to settle the civil charges and $1 million in penalties related to the criminal case.
He did not admit or deny wrongdoing in the civil case, and as part of the settlement he agreed to a permanent bar on holding top offices at publicly held companies.
The SEC said in a statement that Brant had agreed to settle charges that he "enriched himself and others" by granting undisclosed options to himself and other company employees. It did not provide details about the other individuals.
Both the SEC and the Manhattan District Attorney's office said their investigations were continuing.
More than 170 companies have been investigated by U.S. authorities or have conducted internal inquiries into possible manipulation of stock option grant dates. Some companies are accused of backdating grant dates to days when the share price was lower, giving the recipient the opportunity to reap extra profit.
Backdating is not in itself illegal, as long as the practice has been properly disclosed to shareholders and fully accounted for.
The Justice Department has filed criminal charges relating to alleged backdating against former executives at Comverse Technology and Brocade Communications Systems .
Brant resigned his nonexecutive post at Take-Two in October. He was CEO until February 2001 and chairman until March 2004.
"If people are to have confidence in our financial markets, it is critical that public companies report their financial condition accurately," Manhattan District Attorney Robert Morgenthau said in a statement following the guilty plea.
Sentencing was set for Aug. 1.
Take-Two said on Jan. 22 that a review of its past option grants had found that Brant had engaged in a pattern and practice of backdating options between April 1997 and August 2003.
The company said in an SEC filing that the review showed Take-Two failed in many cases to comply with the terms of its option plans and did not have adequate compliance procedures.
In June 2005, Brant and three other former Take-Two executives paid $14 million to settle a SEC lawsuit, closing a nearly four-year investigation into alleged fraudulent accounting practices at the company.