July 19 (Bloomberg) -- Take-Two Interactive Software Inc.'s former chief lawyer and ex-chief accounting officer pleaded guilty to falsifying business records in a probe of the company's improper backdating of employee stock options.

Former Chief Accounting Officer Patti Tay, 31, pleaded guilty in New York state court in Manhattan to making false entries on a spreadsheet of 2001 and 2002 stock option grants, according to court records. Former General Counsel Kenneth Selterman, 52, pleaded guilty to providing false information in a 2002 letter to regulators regarding options, prosecutors said.

Take-Two, maker of ``Grand Theft Auto'' video games, brought in new management this year after five quarters of losses and the options scandal that forced it to restate eight years of results. Ryan Brant, 35, the company's former chief executive officer who pleaded guilty in February to falsifying business records, was the first CEO convicted of stock-options backdating.

``The investigation is still open,'' said Manhattan Chief Assistant District Attorney James Kindler. ``It's important for the investing public to know what executives in public companies are getting. If it's not reported accurately, it is a fraud.''

Selterman is expected to receive three years probation, 200 hours of community service and a fine of $50,000 when he is sentenced by Manhattan state Supreme Court Justice Brenda Soloff on Aug. 8, prosecutors said. The ex-counsel didn't reveal in a letter to the Nasdaq Stock Market Inc. that executives got non- plan options, Kindler said.

Probation

Tay is expected to receive probation when she is sentenced by Soloff on Aug. 2 and must reimburse about $300,000 as part of her agreement, prosecutors said. They said Selterman repaid the company several hundred thousand dollars before his plea.

Tay acknowledged making false entries in Take-Two's business records for the year ended Oct. 31, 2002, in connection with the dates on which stock options were granted in a spreadsheet titled ``MASTEROPTIONS,'' court records show. The spreadsheet was used in preparing the company's financial statements, prosecutors said.

Tay pleaded guilty May 31.

``She's looking forward to putting this matter behind her and getting on with her life,'' said Nina Beattie, a lawyer for Tay. She said Tay left the company in the fall of 2006.

Selterman pleaded guilty June 6. His attorney, Mark Racanelli, declined to comment.

Next Sentencing

Brant, scheduled to be sentenced Aug. 1, is to receive probation in exchange for his plea if he abides by a cooperation agreement with Manhattan prosecutors, according to court records.

More than 200 companies have disclosed internal or federal probes into whether they inflated the value of options awarded to executives by backdating or timing the grants to coincide with days when their stock price was low.

Former executives at Brocade Communications Systems Inc. and Comverse Technology Inc. were charged in alleged backdating schemes.

Take-Two spokesman Edward Nebb said the company continues to cooperate with the District Attorney and other government agencies.

``We believe we're making significant progress toward a resolution of these matters,'' Nebb said.

In January, Take-Two said in a regulatory filing that it allowed Brant, who left as CEO in 2001, to ``control and dominate'' improper options backdating, beginning when the company went public in 1997. The compensation committee failed to maintain proper controls, the New York-based company said in a filing Jan. 22 to the U.S. Securities and Exchange Commission.

Take-Two said it would restate results from 1997 to 2003 to reflect the cost of the options.

The cases are People v. Selterman, 07-02645 and People v. Tay, 07-02478, Supreme Court of the State of New York (Manhattan).

To contact the reporter on this story: Karen Freifeld in New York State Supreme Court at kfreifeld@bloomberg.net.

Last Updated: July 19, 2007 20:55 EDT