The Flint (Mich.) Employees' Retirement System has filed suit against a video game maker claiming that sexually explicit scenes in a popular game caused a controversy that hurt investors.
The $800 million pension fund and the city of Flint have filed a class-action lawsuit against New York-based Take-Two Interactive Software Inc., alleging fraud and insider stock trading over a 15-month period, confirmed Gerard Mantese, the city's attorney.
The suit alleges that Take-Two executives secretly embedded "pornographic content" in its wildly popular "Grand Theft Auto: San Andreas" in the hope of bolstering sales and then deceived investors between October 2004 and January 2006 by concealing the fact that retailers were pulling the game from store shelves because of the sexually explicit material. The game was later given an "Adults Only 18+" rating, up from its original "Mature 17+" rating, causing retailers to ban it and leading to a fall in Take-Two's stock price. The stock price fell 29% between Oct. 25, 2004, and Jan. 27, 2006, when it closed at $14.69. The pension fund holds approximately $525,000 in Take-Two stock, he said.
The lawsuit also claims that company insiders illegally dumped more than 661,000 shares, or $18 million, of the stock before the public knew the game's rating was changed.
"We intend to prosecute this case vigorously and seek full recovery of the damages sustained by deceived investors," Mr. Mantese said.
James Ankner, spokesman for Take-Two, had no comment.