EA Embroiled In Backdating Allegations

A Securities and Exchange Commission (SEC) filing by Electronic Arts has revealed that the company has become the latest video game publisher to become involved in an investigation over alleged backdating of stock options. The SEC filing reveals that a lawsuit has been filed against Electronics and certain current and former officers and directors by the Plumbers & Pipefitters Local No. 572 Pension Fund, which alleges “improprieties” in Electronic Arts’ issuance of stock options in a suit filed again EA's Larry Probst and the company as a whole. According to a report by business website The Street.com, the suit is similar to one previously filed by the plumbers union against Apple and alleges backdating of stock options – in order that it increases in value compared to current prices when exercised – going back to the early ‘90s. The website cites Electronic Arts spokesman Jeff Brown as commenting of the allegations, which have hit a number of game companies recently: "Backdating has never been an accepted practice at EA. We've always had strong processes in place to prevent this." The company has indicated that it does not intend to file further reports describing any additional lawsuits based on similar allegations, and has so far refused to indicate whether it is being investigated by the SEC or any other agency - if under current SEC investigation, it would likely have to disclose it, however. Electronics Arts would certainly be in good company if it is been investigated though, with Take-Two Interactive, Activision and THQ all recently becoming involved in investigations and/or lawsuits from shareholders regarding the options backdating controversy. However, it should be noted that this is not a game company-specific trend, since more than 60 companies have announced SEC investigations into the topic over the past few months.