RIM reaches settlement agreement in backdating case

The Ontario Securities Commission held a closed hearing today to consider the terms of a settlement agreement reached with Research In Motion in a case involving the backdating of the company's stock options.

The settlement agreement, which was reached late Tuesday night, involves eight current and former directors, including co-CEOs Jim Balsillie and Mike Lazaridis. The terms of the agreement have not been made public yet. The securities watchdog began investigating RIM in 2006, when RIM disclosed the backdating, and has been in settlement negotiations since 2007.

Backdating involves assigning earlier issue dates and prices to stock options to generate a higher value for the person holding the options. backdating is not always illegal, if properly disclosed, but the practice is against the rules of the Toronto Stock Exchange, where RIM's shares are listed.

The OSC said that the backdating, which took place at the BlackBerry maker between 1996 and 2006, generated an improper gain for employees of about $53.65 million. The regulators said RIM has offset about half of that through repayments and canceled or forfeited options. In January, it was reported that the OSC was seeking to levy a fine against Balsillie and Laaradis of as much as $79 million, which would be the largest fine the OSC has collected from individuals.

RIM said in a statement issued Tuesday night that it was "pleased that the parties have reached an agreement on terms of settlement."

A special committee of RIM's corporate board determined in 2007 that the BlackBerry maker had backdated 40 percent of its stock options granted to employees since 1996. The committee also found that 12 of the 16 option grants given to the two chief executives from 1996 through 2006 had been issued using an incorrect date. At the time, the committee said that the options grants were used to purchase 2 million shares, and that the estimated value to the two executives was about $1.6 million, which they have since paid back to the company.

For more:
- see this article [1]
- see this article [2]

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