Shrek 2 Federal Probe Cools

Execs at DreamWorks Animation are breathing a bit easier since the Los Angeles office of the Securities and Exchange Commission recommended the termination of a federal probe of the company’s investor relations. The Commission began looking into the toon unit in June of 2005 when weaker-than-expected Shrek 2 DVD sales caused the company to miss its second-quarter financial guidance.

A decision to drop the probe still has to come from the SEC, but it is likely that no legal action will come from the investigation. However, DreamWorks Animation is still dealing with class-action lawsuits filed by shareholders who believe the company failed to warn them of the number of Shrek 2 DVDs being returned by retail outlets that couldn’t move them.

In late August of last year, the SEC launched an informal investigation into Pixar Animation Studios for similar reasons. The company also missed its second-quarter expetations due to lower than-expected sales of The Incredibles on DVD.