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Hot Coffee Suit Pointed To Duplicity Born Of Financial Turmoil

Struggling to stay afloat, Take-Two decided to ship Grand Theft Auto: San Andreas with a sex scene in the game and later lied to investors to cover up their decision, according to the suit settled today.

The 2006 suit, which was tentatively settled for $US20 million, also alleges that company officers earned more than $US18 million in insider trading even as the company’s stock plummeted.

“As a result of the disclosures of the Company’s true financial condition, its stock ratings have been slashed,” the suit, initially filed by John Fenninger who purchased Take-Two common stock, states. “Moreover, the Company is exposed to class action lawsuits and regulatory enforcement actions brought by the Attorney Generals of several states. While the public investors lost over one billion dollars in market capitalization, the Individual Defendants pocketed over $US18 million in insider trading proceeds.”

Hot Coffee, a bit of hidden sex found behind the apartment doors of the game, was discovered in July 2005 after a modder released a hack for the game that unlocked the previously hidden content.

Earlier today, Take-Two announced that they had reached a settlement in the case, with the company and its insurer paying out more than $US20 million.

The nut of the allegations contained in the 34-page suit, is that Take-Two was spending more than it was bringing in and couldn’t survive until the next Grand Theft Auto. So, the suit alleges, the company pushed Grand Theft Auto: San Andreas out the door knowing that there was pornographic material in the game because delays would have cost the company too much. If the material was known to be in the, the suit continues, major retailers wouldn’t have sold it.

The outcome, according to the suit, was inflated stock prices based on bad or uninformed information from the company and a plunge in stock values when the truth came out.

The suit also alleges that Take-Two lied about the included sex scenes, nicknamed Hot Coffee, when they first came to light, with the company the scenes were “the work of a determined group of hackers who have gone to significant trouble to alter scenes.’”

The suit outlines how the value of Take-Two’s stock first rose significantly with the release of the game and then began to plummet as the allegations and suits came to light. The suit connects the two, alleging that the company lied during financial statements to try and cover themselves and later key executives profited from inside information while selling company stock.

It’s an interesting read and worth some time if you’ve been following the Hot Coffee allegations and are interested in a document that ties stock values and company statements to the life-cycle of the controversial sex scene in San Andreas. But do keep in mind that just because the suit was settled, that doesn’t mean the contents have been proven or disproven.

Class Action

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