Hot Coffee & Sex Scene Upsets US Law Enforcement

Sex Scenes and the term “Hot Coffee” has landed a major interactive game produce in hot water with US law enforcement officals.

Take-Two Interactive has announced that it has has received grand jury subpoenas from the New York County District Attorney regarding a hidden sex scene in the video-game company’s Grand Theft Auto: San Andreas.

Shares of Take-Two plunged almost 18% as a result of the action.

The subpoenas, received June 19, request information pertaining to the file modifier known as “hot coffee,” which allows gamers to access the explicit sex scene in the video game. The term “hot coffee” is taken from a scene in which a prostitute beckons a male character with the line, “How ’bout a little coffee?” The male character accepts the invitation, and the animated couple proceeds to engage in oral sex and intercourse.

Take-Two said the subpoenas cover documents going back to Oct. 1, 2001.

The D.A. is also requesting documents concerning ratings issues, earnings results, acquisitions, dealings with accountants PricewaterhouseCoopers and Ernst & Young, compensation, and activities of the Board of Directors activities.

“In other words, anything and everything over the last five years,” said UBS Investment Research analyst Michael Wallace in a report Tuesday.

Take-Two, which publishes video games for platforms such as Sony’s PlayStation consoles, Microsoft’s Xbox consoles and personal computers, settled with the Federal Trade Commission earlier this month over the “hot coffee” incident.

But UBS warns that these new subpoenas “could be more serious,” and possibly signals that the New York D.A. is looking for criminal activity.

Bear Stearns analyst Glen Reid went further, withdrawing his price target on Take-Two shares, which he rates at “underperform.”

“The backdrop of a criminal investigation will almost certainly draw management and rank and file focus away from the business of game development,” he said.