Risk & Compliance

RIM Execs to Pay for Mispriced Options

Executives of the BlackBerry maker must fork over $75 million.
Stephen TaubFebruary 6, 2009

Research In Motion Ltd. and eight executives have settled charges from Canadian regulators over the company’s historical stock-option-granting practices.

Four of the eight executives — including two finance executives — agreed to pay a total of $75 million (U.S.). The settlements still must be approved by the U.S. Securities and Exchange Commission, but RIM said the staff of the SEC’s Division of Enforcement has agreed to recommend that the commissioners give their approval.

Under the deal with the Ontario Securities Commission, the four men — co-CEOs Jim Balsillie and Mike Lazaridis, chief operating officer and former CFO Dennis Kavelman, and  former director of finance and current vice president of corporate operations Angelo Loberto — agreed to repay the company roughly $31 million for benefits arising from incorrectly priced stock options granted to all RIM employees from 1996 to 2006.

They also agreed to pay RIM $36.3 million — $12.15 million of which had previously been paid — to defray costs incurred by the company to investigate and remediate its stock options and governance practices. In addition, $7.37 million will go to the OSC as an administrative penalty and toward the costs of its investigation.

In addition, Kavelman is prohibited from acting as a director or officer of any publicly traded Canadian company for at least five years, or until he completes a course on the duties of directors and officers of public companies.

Loberto is also prohibited from acting as a director or officer of any Canadian company until he completes such a course. Balsillie has agreed not to act as a director of any Canadian company for at least one year.

Under the deal, RIM, best known for its BlackBerry device, agreed to submit to a review of its governance practices and procedures by an independent person selected by the OSC and paid for by RIM.

“While RIM and its directors and officers regret the occurrence of the matters described in the OSC settlement agreement, we believe the actions taken by RIM’s board of directors and management since the conclusion of the company’s internal review in March 2007 have further strengthened the company,” said John Richardson, RIM’s lead director.

Back in May 2007, Research In Motion restated results downward for 2005 and 2006 by a total of $248.2 million, largely caused by options-related errors. The impact on its fiscal 2007 results was not material, the company added.