What is it about greedy video game publisher executives?

Just two years ago at Electronic Arts (NASDAQ:ERTS), with only eight months on the job as Chief Executive Officer, John Riccitello announced a buyout of Pandemic and Bioware studios from his former firm Elevation Partners, of which he was one of the founders.  The purchase price looked astronomical for a developer: 840 million.  To put that in perspective, Take Two (TTWO) Interactive, Inc. purchased Bioshock developer Irrational Games for 11 million and Civilization publisher Firaxis for 27 million in 2006.

Today, we are learning that Pandemic Studios, one half of that 840 million dollar acquisition, is being closed down, suggesting that the studio is worthless to EA at this point – only two years following the deal.

According to SEC documents, Mr. Riccitello pocketed up to 4.9 million on that deal, and no doubt helped his fellow co-founders of Elevation Partners walk away making a nice profit on that deal.  EA’s shareholders have been left with the bill - and a stock that has fallen 70% since that deal was completed.

It would be a sad statement for shareholder activism and shareholder rights if Mr. Riccitello were to continue his tenure as CEO of Electronic Arts without a challenge.  If a high profile chief executive essentially buys his own company, a deal like that should be put to the highest of standards.  These results are the lowest of lows.  There has not been a single developer in the video game industry that has been purchased for anywhere near this deal’s 840 million dollar price tag, but the fact that it blew up in this way only two years later is what is especially outrageous.  Mr. Riccitello ought to consider resigning his position for committing such a blatant act of self serving greed at the expense of EA’s shareholders.

Disclosure: No position in Electronic Arts