Game|Life presents the following excerpt from a new history of videogames,All Your Base Are Belong to Us: How Fifty Years of Videogames Conquered Pop Culture. Written by veteran journalist Harold Goldberg, the book is built on three years of exclusive interviews with executives and developers.

In this excerpt, Rockstar Games co-founder Sam Houser offers a firsthand account of the “Hot Coffee” sex-scene scandal from Grand Theft Auto: San Andreas, and how Hillary Clinton hauled the gamemakers in front of the Federal Trade Commission. Three Rivers Press released All Your Base Are Belong to Us on Tuesday.

Sam had been working at the Rockstar division in San Diego on the game Red Dead Redemption. He still was riding high from the success of San Andreas and felt the Western-themed offering was something he always was meant to do.

Sam had been thinking what a good life he was living. His son had just been born. He had just bought a country house with his brother. Maybe now he could relax a bit. Then he read about Hot Coffee on a messageboard. Immediately he had a sinking feeling.

A Dutch techie named Patrick Wildenborg had used some self-created code to open up the PC version of San Andreas. Inside, he discovered a locked portion of the game that featured the gangster character CJ having what amounted to R-rated sex in various positions with a girlfriend. (Without Wildenborg’s software key, all you heard were the sounds of passion.) Soon, the modder’s program went viral and thousands upon thousands were playing the sexual mini-game called Hot Coffee.

Sam called up the New York office of Rockstar. Was this true? How could it be? He remembered that a level designer had proposed the addition of the mini-game in question. But when the content was seen, the code had been nixed by all involved. The snippet shouldn’t have remained on the disk — no way, no how. But there it was, and critics were coming out of the woodwork to lambast Rockstar. Sam called Dan. “They’re acting like this was meant to be in the game. It’s unfinished.”

Dan said, “You can see the usual quality isn’t there. Everyone should see that this wasn’t intentional.”

Sam continued, “This not how CJ would be with a girl. This was a very crude initial implementation. Had we completed it, it would have been more stylish, dare I say it, more romantic, more chic, a little bit more Barry White. But what’s there — it’s crude and embarrassing and childish, not what we as a company are about.”

The Housers and Rockstar were trapped. Take-Two asked to see all pertinent Rockstar e-mails — including all of Sam’s missives — as they searched for a smoking gun that might prove the Housers had intentionally added the mini-game to spark controversy. They found none. By mid-July, New York senator Hillary Clinton had called for the Federal Trade Commission to look into the genesis of the game material. She assured her constituents that she was calling for a full and complete investigation in order to keep “inappropriate videogame content out of the hands of young people.” The Los Angeles district attorney called to obtain the Rockstar e-mails. The scandal was feeding upon itself.

‘These guys are out to get us. They’ll garrotte us whatever we do.’

Sam told Dan, “These guys are out to get us. They’ll garrotte us whatever we do. They don’t give a shit. This is crazy.” Sam had always been a little neurotic; he would probably agree with former Intel CEO Andy Grove’s famous motto, “Only the paranoid survive.” Worry was an essential part of his personality; it helped him to get things done, allowed him to drive the various divisions within the company forward to complete deadlines. But when the FTC hauled nine Rockstar employees down to Washington, D.C., for their investigation, it changed Sam forever.

Like a character in his own game, Sam had become Public Enemy Number One — except in real life it wasn’t nearly so much fun. In January 2006, Sam sat down in an uncomfortable chair at FTC headquarters. Behind him was his cadre of lawyers. In front of him were three agents of the commission. To his left was a two-foot-high stack of paper, including thousands of his e-mails to employees during the making of San Andreas. The fussy FTC agents went through the highlighted portions of each page, grilling him for nine hours. When they saw certain words he used in his correspondence, they would raise their eyebrows and ask, “What do you mean by this language?”

Sam, fearing that his use of the “F” word would make the FTC believe he’d done something wrong, explained that he used salty language to get the job done during crunch time. Then the agents came across a more recent e-mail that read, “Why are they so concerned about what we’re doing in the game when we’re bombing the hell out of people in Operation Enduring Freedom?” Sam stood by his statement. The FTC eventually found nothing out of order with the e-mails and no grand conspiracy to pervert the youth of America with Grand Theft Auto San Andreas.

Even after it was over, Sam was powerfully affected by the ordeal. For some time, he had spells during which he felt terrified. He wanted to leave the country. Some of his friends, who’d been with him since the beginning, began to bail on the company. Terry Donovan left his CEO position because of the emotional tumult the investigation had caused in him. While in the U.K. on business, Sam had an episode on a train from Scotland to London while heading over to visit his parents. After he heard via his cellphone that the New York City district attorney was thinking about investigating Rockstar, he felt a desperate need to drop out. In what he dubbed his Black Dog period, he literally wanted to give everything up, leave Rockstar, leave his brother and his family to go live in isolation in a cave, well, somewhere.

Back in New York City, his doctor said the Hot Coffee incident had left Sam badly injured, like a victim in an emotional car crash. In the end, it was the making of GTA IV that fueled Sam’s recovery. Rockstar would come back because they had a point to make. They would pull no punches with GTA IV, which would be hailed as the most grittily brave game they had ever created. It would sell 3.6 million copies on its first day and earn $500 million in its first week.

Excerpted fromAll Your Base Are Belong to Us: How Fifty Years of Videogames Conquered Pop Culture. Copyright @ 2011 by Harold Goldberg. Reprinted by permission of Three Rivers Press, an imprint of the Crown Publishing Group, a division of Random House, New York.