2/14/06
New York — February 14, 2006 — The law firm of Milberg Weiss Bershad & Schulman LLP announces that it has filed a class action lawsuit today on behalf of all persons who purchased or otherwise acquired the securities of Take-Two Interactive Software, Inc. (“Take-Two” or the “Company”) (NasdaqNM: TTWO), between
October 25, 2004 and January 27, 2006, inclusive, (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss’s website at:
http://www.milbergweiss.com
If you purchased the securities of Take-Two between October 25, 2004 and January 27, 2006, inclusive, and sustained damages, you may, no later than April 3, 2006 request that the Court appoint you as lead plaintiff. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as “lead plaintiff.” Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Milberg Weiss Bershad & Schulman LLP, or other counsel of your choice, to serve as your counsel in this action.
The action, Civil Action number 06-CV-1131, is pending in the United States District Court for the Southern District of New York against defendants Take-Two, Paul Eibeler (CEO), Karl H. Winters (CFO), and Gary Lewis (former COO). According to the complaint, defendants violated sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5, by issuing a series of material misrepresentations to the market during the Class Period.
The complaint alleges that Take-Two, together with its subsidiaries, published interactive software games designed for various platforms. On October 25, 2004, the first day of the Class Period, defendants announced the launch of Grand Theft Auto: San Andreas, a sequel in the Company’s best-selling franchise, Grand Theft Auto. During the Class Period, defendants claimed, among other things, that Grand Theft Auto: San Andreas “was the largest videogame launch in Take-Two’s history” and that it was a top performing product that significantly contributed to the Company’s reportedly positive results. Unbeknownst to investors, however, defendants engaged in an undisclosed illegal and fraudulent scheme during the Class Period to bolster sales of the game by including hidden pornographic content that was triggered by downloading a third-party program from the internet called “Hot Coffee.” Defendants concealed the hidden sex scenes so that they could get the video game onto the shelves of major retailers that otherwise refused to carry products containing sexual content. On July 8, 2005, the Entertainment Software Rating Board (“ERSB”), a self-regulatory body that enforces ratings on video games, announced that it was conducting an investigation to determine whether the Company and its subsidiary violated ESRB Rules and Regulations requiring full disclosure of the sexually explicit content in video games and whether to change the game’s rating to “Adult Only 18+” from “Mature 17+.” An “Adults Only 18+” rating, however, would be detrimental to video games sales because many major retailers refuse to carry such products. On July 20, 2005, the Company announced that the ESRB changed the rating on Grand Theft Auto: San Andreas to Adult Only and major retailers immediately pulled copies of the game off their store shelves. As a result of the re-rating and the expected dramatic decline of its sales, Take-Two significantly lowered its guidance for the third quarter ending July 31, 2005 and year-ending October 31, 2005. On July 26, 2005, the Company announced that it had received notice from the Federal Trade Commission (“FTC”) Division of Advertising Practices that it was conducting an investigation into whether the Company intentionally deceived the ESRB to avoid an “Adults Only” rating on the game. On January 18, 2006, the Company announced that it was unable to file its 2005 annual report on time and that it filed a request for an extension with the SEC. In its SEC filing, the Company stated that it failed to maintain effective controls to “identify, analyze and reconcile related inventory purchases included in accounts payable to underlying supporting documentation” and to “calculate amortization expense related to capitalized software development costs.” The Company stated that these deficiencies resulted in audit adjustments to its 2005 consolidated financial statements and may “result in a material misstatement of the annual or interim financial statements.” On January 25, 2006, the Company reported that a board member, audit committee chairperson, and a member of the corporate governance committee had resigned due to her concerns about the pornographic images in Grand Theft Auto: San Andreas, the FTC investigation, an SEC inquiry, and her view that “management failed to keep the board informed of important issues.”
On January 27, 2006, the last day of the Class Period, the City Attorney for the City of Los Angeles was reported to have filed an action against the Company and its subsidiary for making misleading statements in the marketing of Grand Theft Auto: San Andreas and engaging in unfair competition. The action sought disgorgement of the Company’s profits from the sales of the game in California before the game was re-rated. In reaction to this news, the price of Take-Two stock plummeted, falling $2.34 per share, or 13.7%. Defendants were motivated to engage in the fraudulent and illegal conduct during the class period in order for company insiders, including the defendants, could sell more than 661,000 shares of their personally-held take-two stock for proceeds of over $18 million.
Milberg Weiss Bershad & Schulman LLP (http://www.milbergweiss.com) is a firm with over 100 lawyers with offices in New York City, Los Angeles, Boca Raton, Delaware, and Washington D.C. and is active in major litigations pending in federal and state courts throughout the United States. Milberg Weiss has taken a leading role in many important actions on behalf of defrauded investors, consumers, and others for nearly 40 years. Please contact the Milberg Weiss website for more information about the firm. If you wish to discuss this action with us, or have any questions concerning this notice or your rights and interests with regard to the case, please contact the following attorneys:
Steven G. Schulman
Peter E. Seidman
Andrei V. Rado
One Pennsylvania Plaza, 49th fl.
New York, NY 10119-0165
Phone number: (800) 320-5081
Email: sfeerick@milbergweiss.com
Website: http://www.milbergweiss.com
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