Human Capital & Careers

Game Over for “Grand Theft Auto” Ex-CEO

Becomes the first chief executive convicted in the widening scandal surrounding stock-option backdating.
Dave Cook and Stephen TaubFebruary 14, 2007

Ryan Brant, former chairman and chief executive officer of Take-Two Interactive Software, on Wednesday pleaded guilty to falsifying records, becoming the first CEO convicted for his role a stock-option backdating scheme.

Brant, who agreed to pay $1 million to the city and state of New York, had faced up to four years in prison, but he is expected to be given probation at his sentencing in September.

Separately, he agreed to pay nearly $6.3 million to settle related civil charges with the Securities and Exchange Commission.

In December, Take-Two — best-known for its blockbuster “Grand Theft Auto” series of video games — disclosed that it would restate 10 years of results. And in a regulatory filing last month, the company made clear that Brant was at the wheel when the company’s compensation committee “abdicated its option granting responsibilities” and permitted him to “control and dominate the granting process.”

“I am deeply sorry for my role,” said Brant in a statement issued after his plea hearing. “I accept responsibility for my actions and apologize to the company’s shareholders.”

“If people are to have confidence in our financial markets, it is critical that public companies report their financial condition accurately,” said Manhattan District Attorney Robert Morgenthau at a press conference after the hearing, according to Bloomberg. “CEOs and other executives who deliberately skew their books to hide the full extent of their compensation are engaged in a fraud.”

In his statement, Morgenthau alleged that in 1997 and 2002, Brant timed stock-option grants “to coincide with the dates of the low or near-low Take-Two stock price for a particular period or quarter,” either by backdating or delaying the grant dates.

As a group, the former CEO, other senior executives, and Take-Two employees “received millions of dollars in unrecorded compensation,” according to the statement. Between 1997 and 2003, Brant himself received 10 backdated option grants for a total of about 2.1 million shares of Take-Two stock, all of which he exercised before resigning from the company last October.

His statement after his criminal plea notwithstanding, Brant agreed to settle the SEC charges without admitting or denying the allegations. His payment includes disgorgement of more than $4.1 million, prejudgment interest of more than $1.1 million, and a $1 million civil penalty.

The SEC also pointed out that in 2005, Brant, other senior executives, and the company itself settled charges stemming from an investigation into fraudulent accounting practices designed to inflate Take-Two’s revenue in 2000 and 2001.

In that settlement, Brant agreed to pay disgorgement of nearly $2.5 million, pre-judgment interest of more than $600,000, and a civil penalty of $500,000. He also agreed to a five-year officer-and-director bar and to a permanent injunction against violations of certain provisions of the federal securities laws.