Stock Option Fraud

An on-going problem for both the Securities and Exchange Commission and the Internal Revenue Service is the fraudulent dating of stock options by corporations.  By attaching false dates to the granting of stock options, a company may both distort its financial statements, thus misleading investors, and assist in the evasion of income taxes by those who were granted those options. 

In April 2009, the SEC filed a complaint against Take-Two Interactive Software, Inc., charging that such a fraudulent dating scheme was perpetrated by Take-Two from 1997 through 2003.  In 2007, Take-Two restated prior year financial statements, recording additional expenses of more than $42 million, net of taxes, in connection with option-related compensation. 

Without admitting guilt, Take-Two has agreed to settle the case through payment of a $3 million civil penalty.  Previously the CEO of Take-Two agreed to pay more than $7 million in disgorgement, interest and penalties related to his role in the scheme.

http://www.sec.gov/litigation/litreleases/2009/lr20982.htm

Comments (1)

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