(Adds closing stock price)
By Wojtek Dabrowski
TORONTO Feb 5 Research In Motion RIM.TO
RIMM.O Co-Chief Executive Jim Balsillie will step down from
the board and, along with other executives of the company that
makes the BlackBerry smartphone, will repay tens of millions of
dollars to settle stock-option allegations dating back to
Under the pact reached with the Ontario Securities
Commission and approved on Thursday, Balsillie will pay a
penalty of C$5 million ($4.1 million), while Co-Chief Executive
Mike Lazaridis will pay a C$1.5 million penalty. The two men
also must pay investigation costs to the regulator.
The agreement also stipulates that the two co-CEOs and
RIM's former CFO, Dennis Kavelman, will repay C$38.3 million to
the company. They must also repay about C$30 million to cover
the costs of a voluntary internal probe into the matter
undertaken by RIM earlier.
Balsillie and Lazaridis had already paid C$15 million to
offset the costs of the Waterloo, Ontario-based company's
internal review. Balsillie may not serve on RIM's board for at
least 12 months as part of the settlement, and Kavelman must
pay a C$1.5 million penalty.
The OSC alleged the executives backdated and repriced stock
options using dates on which the market price of RIM's shares
was relatively low. Handing out options at the lower prices had
the effect of improperly enriching the recipients and, the OSC
alleged, could have deprived RIM of about C$66 million.
Independent technology analyst Carmi Levy said the size of
the settlement is "not material at all" to the company's
fortunes, although RIM is probably pleased to have the matter
"It means that they can finally put this tenuous chapter
behind them and get on with the business of competing in the
smartphone market," he said.
The OSC had also alleged that RIM made "misleading or
untrue" statements to investors, because its various corporate
reports to investors over the span of a decade did not disclose
that backdating and repricing of options was taking place.
"We take this very seriously, the trust of the public
markets, and we've made mistakes," Balsillie told reporters
after the hearing.
"Absolutely, we take full responsibility," said, adding:
"We're 100 percent focused on work and moving forward."
The backdating of stock options grants became a major issue
across corporate America in 2007. More than 170 companies were
investigated by U.S. authorities or conducted internal
inquiries into possible manipulation of stock-option grant
dates to benefit recipients.
Some probes resulted in criminal charges, including those
laid against executives at Brocade Communications Systems Inc.
and Comverse Technology Inc.
As far as RIM is concerned, the backdating investigation --
which also led to a $250 million earnings restatement -- is
disruptive, but ultimately immaterial, analysts have said.
Still, the size of all the penalties and restitution taken
together -- more than C$90 million -- makes the settlement a
marquee case for the Ontario Securities Commission's
"The sanctions send the right message that the conduct that
we saw here will not be tolerated by anyone," OSC litigator
Sasha Angus said of the pact, which will also see an
independent consultant appointed to review RIM's governance
Angus also said the commission -- Canada's main stock
market regulator -- worked together with the U.S. Securities
and Exchange Commission during its investigation of RIM.
RIM's shares rose 84 Canadian cents to close at C$69.94 on
the Toronto Stock Exchange.
(Reporting by Wojtek Dabrowski; Editing by Frank McGurty)