A 50k Parking Ticket

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Capitol Distributing, a video game distributor, has settled a civil suit with the SEC for a video game “parking” scheme involving Take-Two Interactive, developer of the Grand Theft Auto series. Take-Two would wait until the end of its quarter, ship a bunch of units to Capitol Distributing and then book the shipments as revenue even though Capitol would just hold the games with no intention of selling. Capitol would then return the games to Take-Two with a false invoice labeled ‘purchases’ of ‘assorted products.’ This practice resulted in $15mm in revenue for Take-Two over four separate instances.
In the settlement, Terry Phillips, founder of Capitol, agreed to pay a $50k fine, and the company, “without admitting or denying the SEC allegations,” just had to agree not to violate the law (sounds like a plan).
Coinciding with the release of Bully, Take-Two has been in the principal’s office a lot lately. Last month the SEC started investigating Take-Two’s option grants and in June 2005 four Take-Two execs settled with the SEC over accounting violations.
Take-Two (TTWO: Nasdaq) has been flat in daily trading.
SEC Issues 'Video Game Parking' Ticket – [CFO.com]

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