RIM settles option backdating case
Federal regulators say four of the Blackberry maker's current and former top executives illegally granted stock options.
NEW YORK (CNNMoney.com) -- Blackberry maker Research in Motion announced Tuesday that the company and four current and former officers have settled an options backdating case brought by the Securities and Exchange Commission.
The SEC charged Ontario, Canada-based RIM's former chief financial officer Dennis Kavelman, former Vice President of Finance Angelo Loberto, and current Co-Chief Executive Officers James Balsillie and Mike Lazaridis with illegally granting stock options to company executives and employees over an eight-year period from 1998 through 2006.
"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, in a statement.
The SEC alleged that the four executives made "false and misleading disclosures" about how RIM (RIMM) priced and accounted for options. The backdating, which typically involves issuing options at a below-market price to make the grants more profitable for the recipient, violated the terms of RIM's stock option plan and listing requirements on both U.S. and Canadian stock exchanges.
The executives agreed to pay fines ranging from $150,000 to $500,000 and to "disgorge" the value of backdated options totaling $843,414.
In a statement announcing the settlement, RIM said it had previously disclosed a voluntary review of its stock option granting practices in 2006 and had been "self-reported" to the SEC. RIM said it settled the case, "without admitting or denying allegations in a complaint filed by the SEC," and that the company itself is not required to pay a penalty.
Still, the SEC said the executives were aware of the violations and took steps to hide the backdating from regulators and the company's own auditors.
The agency alleges that Kavelman made misleading statements about backdated options at RIM's annual shareholder meeting in 2006 and that he expressly asked a manager not to document improper pricing in an email.
According to the SEC, 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."