Activision Blizzard is cooperating with a federal lawsuit and investigation into suspected insider trading that allegedly may have been facilitated by chief executive Bobby Kotick just days before the video game publisher was acquired by Microsoft, according to a filing to the Securities and Exchange Commission.
“Activision Blizzard received a voluntary request for information from the SEC and a grand jury subpoena from the DOJ, both of which appear to relate to their respective investigations into trading by third parties – including persons known to Activision Blizzard’s CEO – in securities prior to the announcement of the proposed transaction,” states the filing submitted on Friday.
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The Call of Duty maker said in the filing it “intends to be fully cooperative with these investigations.”
Although the names of the the third parties weren’t disclosed, The Wall Street Journal has reported that the Justice Department and securities regulators opened an investigation into substantial wagers that Barry Diller, David Geffen and Alexander von Furstenberg placed on Activision Blizzard before its shares skyrocketed in light of its agreement to be acquired by Microsoft for $68.7 billion.
Kotick allegedly met with Alexander von Furstenberg, Diller’s stepson, the week before he, Diller and Geffen made substantial options trades that allowed them to make out with $59 million in profits, the Journal reported March 8.
The Justice Department and SEC are now separately looking into whether the wager violated insider trading laws.
Diller has maintained in interviews that none of them were privy to the deal or had nonpublic information before it was announced. He said that the trade was “simply a lucky bet.“
“We had zero knowledge of that transaction and it belies credulity to think that if we did we would have proceeded,” Diller told The Wall Street Journal in March. “It’s equally unlikely to believe Mr. Kotick, a sophisticated professional, in a social breakfast with Mr. von Furstenberg and his wife would have told them of the pending transaction.”
Diller confirmed in March that he’d been contacted by securities regulators.
The federal lawsuit and investigation by the SEC, which may lead to a separate case, further complicates Microsoft’s bid to acquire the company. It also faces a lawsuit from the California Department of Fair Employment and Housing over accusations of a toxic workplace culture in which women are constantly harassed and subject to unequal pay and retaliation. It took Riot Games $100 million to settle an identical lawsuit from the civil rights agency.
That’s on top of at least nine shareholder lawsuits that were filed by Activision Blizzard investors, some of which seek to block its sale. They allege that the deal will primarily benefit company insiders to the detriment of ordinary investors, emphasizing so-called a golden parachute package for senior management that entitles a $14.6 million payout to Kotick if he’s terminated.
Activision Blizzard also revealed in the Friday filing that there aren’t currently any plans for Kotick’s position at the company if Microsoft’s bid to acquire it is consummated. He’s been widely criticized for facilitating the culture at the company that led to the lawsuit from the DFEH and a separate complaint from a federal agency, which settled for $18 million.
“No discussions or negotiations regarding post-closing employment arrangements with Microsoft occurred between Microsoft and Mr. Kotick prior to the approval and execution of the merger agreement and the transactions contemplated thereby, or have occurred subsequent to such approval and execution, through the date hereof,” the filing stated.
Activision Blizzard didn’t immediately respond to a request for comment.
