Blizzard’s top legal officer leaves as SEC investigates

The chief legal officer at Blizzard Entertainment departed just as the U.S. Securities and Exchange Commission said it was investigating whether the company and its parent, Activision Blizzard, failed to disclose allegations of rampant sexual harassment and sexism in the workplace.

"The past three years have been full of unexpected twists and turns, but I feel honored to have worked with and met so many great people at Blizzard and across the Activision Blizzard businesses," Claire Hart wrote on social media Monday.

Hart said Friday had been her last day at the company. A representative of the company confirmed Hart's departure on Tuesday but did not say why.

Santa Monica-based Activision Blizzard makes some of the world's most popular video games, including Call of Duty and World of Warcraft. It reported more than $8 billion in revenue last year.

The company is being sued by several current and former employees and by the California Department of Fair Employment and Housing. They allege a culture of sexual harassment and sexism that drove women out of the workplace. Most of the complaints have focused on employees of Blizzard Entertainment, an Irvine-based company that through mergers became part of Activision in 2008. DEFH v. Activision/Blizzard Inc., 21STCV26571 (L.A. Super. Ct., filed July 20, 2021)

The SEC added to the company's woes with reports this week that it would investigate whether executives hid the allegations from investors. The company confirmed the investigation in a news release on Tuesday. The SEC subpoenaed top executives for documents related to allegations of sexual harassment and discrimination by its employees, the company said.

Activision Blizzard's chief executive officer, Bobby Kotick, said in the news release that the company continued to engage with regulators "with the goal of improving its workplace policies and procedures and ensuring compliance."

Activision Blizzard joins a growing list of publicly traded companies that have faced shareholder lawsuits linked to sexual harassment allegations. Among them are American Apparel, Twenty-First Century Fox CBS, Papa John's and Nike.

"If the company downplayed the extent of allegations it was facing or even potential litigation it was facing, that could be something material that the SEC would allege the company should have appropriately and accurately described," George C. Miller, a securities litigator at Shustak Reynolds & Partners PC who is not involved in the matter, said.

The SEC could seek monetary relief or fines, "and those can be fairly substantial when you're dealing with publicly traded companies," Miller said.

According to William F. Capps, partner and chairman of Jeffer Mangels Butler & Mitchell LLP's corporate department, investors could sue the company if it failed to disclose the allegations.

"The reason for disclosure to investors is because the price of the company's stock could be affected, depending upon the seriousness of the allegation," Capps said. "If a disclosure is not made, and the price of the stock drops, then the investors sue to recover the price drop that was caused by the failure to disclose."