Take-Two already has its hands full with Grand Theft Auto 4's quite disappointing delay, but there are more problems to come as the games publisher has received a "Wells" call from US Securities and Exchange Commission (SEC) staff.

The notice was aimed to inform Take-Two that it is already well under investigation about the stock options fraud committed by its former management, and that there will be enforcement proceedings to be filed against them in the near future. In light of Take-Two's crisis, analyst Michael Pachter gives his opinion about Take-Two's possible responses to the lawsuit.

Basically, a "Wells" notice informs companies or individuals that an investigation concerning their alleged violation of the law has been completed. The SEC staff is currently seeking SEC's approval to file charges against Take-Two and demand "civil monetary penalty", which roughly translates to a pricey fine. Pachter mentioned only two possible options for Take-Two: to litigate or pay the penalty. He continued that it is possible that Take-Two would choose to cooperate and just pay the penalty, which may amount to US$ 10 million. The analyst also noted that it took Take-Two six days before notifying the investors after receiving the "Wells" notice, which he considered odd.

For those who weren't aware, Take-Two's founder Ryan Brant pleaded guilty to the the civil charges the SEC filed against him, with their former lawyer and accounting officer pleading guilty to falsifying stock-related information as well. The fraud has gravely cost Take-Two in settlements alone, amounting to about U$ 7.3 million last February.

Take-Two Interactive's former accounting officer Patti Seltman and former chief legal counsel Kenneth Seltman recently pleaded guilty to a New York court on charges of falsifying entries made on the company's spreadsheets between 2001 and 2002.

The falsified entries regarded stock option grants information which were sent to regulators of the said assets. The guilty plea is reminiscent of a similar case regarding former chief executive officer Ryan Brant when he pleaded guilty of falsifying the company's

Despite the immense success of its Grand Theft Auto line of games, the company has suffered losses in the past few quarters, prompting the publisher to bring in new faces to their management team earlier this year. Sentences have not been read to the accused as of press time. We'll fill you in for updates on the unfolding events of the cases.

We all know that the Grand Theft Auto series has somewhat been the saving grace for Take-Two Interactive. Despite that, the company is still beset by a lot of problems and issues. Never mind the problems involving Jack Thompson, the issues we're talking about now are the ones coming from within the very walls of the company itself.

A couple of days ago, we reported that there are plans to take over the major video game and publisher. The former Chief Executive Officer (CEO) Ryan Brant was removed from office because he was found guilty of backdating stock options. Current CEO Paul Eibeler and other top honchos are still not secure in their posts.

It is in this light that Take-Two Interactive cancelled its scheduled annual meeting on March 23 and moved it to March 29. The reason the company gave is "to provide additional time to review the proposed actions of the shareholder group and also to evaluate alternative courses of actions that could potentially be presented to the shareholders."

The official notice explained that the best alternative course of action as of now is a possible sale of the company. To make things more complicated, the notice mentioned as well that "there is no assurance that any specific alternative proposal will be forthcoming."

It seems that this announcement was taken very well by market players in pre-market trading. Immediately after the notice was circulated, the company's NASDAQ-traded shares went up almost to US$ 22.26 from US$ 1.50. Those who are involved in the planned take-over include companies Oppenheimer Funds, D.E. Shaw Valence Portfolios, S.A.C. Capital Management, and Tudor Investment.

Investors in controversial videogames publisher and favorite lawsuit target Take-Two Interactive have revealed plans to take control of the board. Due to news of the planned management coup, the company's shares jumped 18%.

According to the BBC News, documents filed with the US Securities and Exchange Commission revealed that the said investors will try to aim to oust chief executive Paul Eibeler and install Strauss Zelnick, ex-chief executive of BMG Entertainment (which, incidentally, sold its own gaming arm to Take-Two in 1998) as non-executive chairman.

The investors, who currently own 46% of Take-Two, also aim to review the position of chief financial officer, Karl Winters. Take-Two has been under fire for a string of financial irregularities. Last month, former Take-Two chief executive Ryan Brant was convicted of backdating stock options to increase their worth.

JP Morgan analyst Dean Gianoukos said that the change in management would be "a positive for the company, assuming key development personnel are retained." Elizabeth Osur of Citigroup concurred, saying that the move was "long overdue". Arvind Bhatia of Sterne, Agee & Leach warned, however, that Take-Two's problems could not be solved "overnight".

Can EA Sports gain sole dominion of the video game sports arena in the next generation of consoles? With the right money, it just might, says Wedbush Morgan Securities analyst Michael Pachter, remarking that the stock status of Take-Two interactive has gone from "hold" to "sell."

He says, "We think that Take-Two’s flagship franchise, Grand Theft Auto, will continue to generate significant profits but are less optimistic about the profit potential from its sports business and from 'everything else."

And though GTA IV's October breakout is a sure-fire splash, Pachter says that the sports division creates less-than-significant profit. He cites the reason - the fact that the division is lacking and spending is astronomical.

The woes are compounded by the company's corporate drama which involved the resignation of such stalwarts like Rockstar Games co-founder Terry Donovan, Take-Two founder Ryan Brant, and board member Barbara Kazcynski, who left some scathing remarks to the management team in her resignation letter. Michael Pachter further mentioned that:

We think that Take-Two's greatest asset is also its greatest liability...The company has an environment conducive to creativity and reaps tremendous benefits from allowing its creative staff to work on what it thinks will work...It has also resulted in the inclusion of sexual content (hot coffee) in the company’s flagship brand, the decision to enter the sports business and compete with an 800-pound gorilla named EA, the decision to green light a slew of movie properties with consistently poor results, and several other decisions with poor outcomes.

Pachter said that the equation boils down to the fact that "It is clear to us that Take-Two’s sports business would have tremendous value to EA, as it would give EA a monopoly on football, basketball, baseball, and hockey...It is arguable that EA would benefit by as much as billion if it were to obtain an exclusive; this does not mean that it is willing to pay billion."

It's not hard to figure out that very few competitors, if any at all, would be willing to wage a war of attrition against EA Sports in this age, and Pachter says 2K Sports can go to EA for roughly a quarter of a billion dollars and sleep sound at night knowing that its biggest rival is dead and buried. Neither EA or Take-Two has given statements on the matter so far.

The SEC announced that former CEO of Take-Two Interactive, Ryan Brant, agrees to part with almost US$ 7.3 million in connection to Take-Two's ongoing stock option scandal.

The amount includes the US$ 6.3 million of settlement money for the civil charges that the SEC has filed against Brant, and another US$ 1 million to New York state and local authorities. Gamespot reports that Brant also pleaded guilty to first-degree felony criminal charges of falsifying business records.

The SEC believes that from 1997 to 2003, Brant granted to himself, and other employees, stock option, and then altered records regarding when the option were granted in the intention to make them profitable to the receiver. The SEC's civil complaint says that not only was this done without the approval of the board of directors, but that Brant also directed Take-Two employees to prepare false documents to back up the stock option grants.

The amusing part about this story is that Brant already has a track record with the SEC. The commission says that Brant paid US$ 3.6 million to settle with the SEC for his alleged role in a financial fraud case at Take-Two in 2000-2001.

Brant stepped down as chairman and director of Take-Two in March 2004. He left the company in October 2006.

The SEC says that its investigation of the current Take-Two scandal is ongoing. Take-Two has already released results of its own independent investigation into the scandal, and the blame is pinned squarely on Brant.