RIM to pay $75M in fines in backdating case
Research In Motion executives will pay nearly $75 million in fines to settle charges related to the company's past backdating of stock options, making it the largest such settlement paid by individuals to the Ontario Securities Commission.
The OSC approved the settlement after a closed hearing Thursday morning. RIM co-CEOs Jim Balsillie and Mike Lazaridis, as well as other RIM executives, agreed to reimburse RIM $31.1 million for the benefit they received because of the backdatoing. RIM executives will also have to pay $36.4 million to defray the costs of RIM's internal investigation into the matter. Additionally, the BlackBerry maker will have to pay $7.4 million to cover the costs of the Canadian regulator's own investigation.
As a condition of the settlement, Balsillie will have to step down from RIM's board for at least a year; Lazaridis can stay on the board. The securities watchdog began investigating RIM in 2006, when RIM disclosed the backdating, and has been in settlement negotiations since 2007.
"RIM is pleased that the parties have resolved matters with the OSC and looks forward to resolving matters with the SEC," said John Richardson, RIM's lead director. RIM has also made a settlement offer to U.S. Securities and Exchange Commission, which SEC staff has recommended the agency approve.
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 RIM 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.
A special committee of RIM's corporate board determined in 2007 that the company 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.
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