The US Securities and Exchange Commission has
charged
and settled with BlackBerry maker Research in Motion Limited
(RIM) and four of its senior executives over stock option
backdating.
The SEC's complaint alleges that Ontario, Canada-based RIM, its
former chief financial officer Dennis Kavelman, former
vice-president of finance Angelo Loberto, and co-chief executive
officers James Balsillie and Mike Lazaridis illegally granted
millions of undisclosed back-dated share options to RIM executives
and employees over an eight-year period from 1998 to 2006.
"As alleged in our complaint, RIM and its highest level
executives engaged in widespread backdating of options which
provided them and other employees with millions of dollars in
undisclosed compensation," said Linda Chatman Thomsen, director of
the SEC's division of enforcement. "This enforcement action
underscores the SEC's resolve to assure full and accurate
disclosure to US investors by foreign issuers."
Antonia Chion, associate director of the SEC's division of
enforcement, said, "Companies and executives who attempt to conceal
their fraudulent conduct from investors and regulators will be held
accountable."
The SEC's complaint alleges that the defendants made false and
misleading disclosures about how RIM priced and accounted for
options. In addition, according to the complaint, the backdating
violated the terms of RIM's stock option plan and a listing
requirement of the Toronto Stock Exchange. RIM's stock is listed on
both the NASDAQ Stock Market and the Toronto Stock Exchange.
Specifically, the SEC's complaint alleges that Kavelman,
Loberto, Balsillie and Lazaridis backdated option agreements and
offer letters to make sure recipients got options at a better
price.
The complaint also alleges that Kavelman and Loberto took steps
to hide the backdating from regulators, RIM's independent auditor
and outside lawyer.
Kavelman and Loberto usually picked low strike prices within
reporting periods and in some instances avoided the lowest price so
regulators would not detect the backdating.
On one occasion, Kavelman asked a manager not to document
improper pricing in e-mails. Kavelman wrote, "FYI, it is a major
breach of protocol to be discussing (and documenting via email)
using option pricing other than that allowable by the Ontario
Securities Commission and the SEC in the US."
The complaint further alleges that after all four executives
were aware of backdating issues that had come to light at other
companies, they attended RIM's July 2006 annual shareholder
meeting, where Kavelman misled investors by denying that RIM was
backdating options.
All defendants have agreed to settle this matter, without
admitting or denying the allegations in SEC's complaint.
Kavelman and Loberto agreed to be barred for five years from
serving as officers or directors of any issuer that has securities
registered with the SEC or that is required to file reports with
the SEC.
The individual defendants will pay penalties in the following
amounts: $500,000 for Kavelman $425,000 for Loberto $350,000 for
Balsillie and $150,000 for Lazaridis.
The individual defendants also agreed to pay back the value of
backdated options they had exercised ($132,914.60 for Kavelman,
$47,950.56 for Loberto, $334,250 for Balsillie and $328,300 for
Lazaridis) plus interest.
Earlier this month, the Ontario Securities Commission brought a
related action against RIM, Balsillie, Lazaridis, Kavelman, Loberto
and other directors. A total of $76.85m in Canadian dollars was
paid out, along with other sanctions, to settle the matter.