It was a tough day of business for Take-Two yesterday.

The company announced that the preliminary findings in an investigation into Take-Two's stock option granting practices have been reported by the Special Committee of its Board of Directors. Assembled by the Board, the Special Committee is prepared to examine stock option grants, the timing of these grants, and other related accounting matters. The Committee is comprised of three independent members of Take-Two's Board of Directors, and will also have outside help: they'll be using the services of independent accounting firm BDO Seidman, as well as the legal counsel of Kasowitz, Benson, Torres & Friedman.

The Committee pushed forth and conducted a "thorough investigation," and this included a review and examination of documents and e-mails, and interviews with officers, directors, employees, and advisors to the company. The results were as follows: after discussing what they found, the Committee has found "improprieties in the stock option granting and documenting process, and that incorrect measurement dates for certain stock option grants were used for financial accounting purposes." They plan to release a full report of the issue, and this will feature recommendations for corrective actions.

The Board of Directors, after hearing these results, ahve decided that the company will be forced to re-issue its financial statements in order to catalogue non-cash charges for compensation expenses as they relate to stock option grants. It's going to be quite the task, as all financial info for Take-Two between 1997 and 2006 has been deemed "unreliable." That's nine years of records that need to be re-done…we don't envy those who have to undertake such a process.

However, there is good news. Despite the improprieties, the Committee couldn't find any evidence of misconduct in the company's Executive officers, including Paul Eibler, Take-Two's CEO and President, and Karl Winters, the company's Chief Financial Officer. Further, Take-Two has met with the NASDAQ Listing Qualifications Panet to petition for an extension to file its Form 10-Q, solicit proxies, and conduct an annual meeting, although they're not currently complying with NASDAQ filing requirements.

Good luck, Take-Two.

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