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Take-Two Facing 'Grand Theft' Criminal Subpoenas

28 Jun, 2006 By: Erik Gruenwedel



Beleaguered video game publisher Take-Two Interactive Software Tuesday saw its stock fall almost 16% after it received subpoenas from a New York grand jury regarding sexually-themed scenes in Grand Theft Auto: San Andreas.

The subpoenas — issued Monday by the district attorney of the County of New York — requested company documents regarding whether Take-Two executives potentially concealed direct knowledge of the explicit scenes to the ratings board and investors, among other concerns.

Take-Two, in a statement, said it had not been notified that “it or any of specific individual” was a target of the investigation. The New York-based company said it was cooperating fully with the investigation.

San Andreas, released in October 2004 with an “M” (mature) rating, allows players to “engage” in a variety of virtual criminal acts, including murder, pimping, home invasion robbery, tagging and drug dealing. It was later discovered that within the game characters could be made to engage in sexual acts.

The game was re-rated to “AO” (adults only) by the video game ratings board, but not before 12 million copies had been sold.

Take-Two, which earlier this month settled with the Federal Trade Commission (and the Securities and Exchange Commission before that) regarding the hidden scenes (commonly referred to as “hot coffee”), was sued in January by the city of Los Angeles regarding the game.

Analyst Michael Pachter with Wedbush Morgan Securities in Los Angeles said, in a research note that it was likely “one or more Take-Two employees” might be subject to criminal indictment but that it was “difficult to assess precisely what the grand jury is looking for.”

Pachter believed the investigation could take months, with a final resolution as long as two years in the future.

“We think it is more likely than not that [Take-Two] will be in a position to continue to operate its businesses while it responds to the grand jury,” wrote Pachter. “However, we think the criminal nature of this investigation is likely to scare all but the most risk-tolerant investors. We expect continued pressure on the company's stock price.”

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