Regulator seeks up to $100-million in stock option controversy - 21 Jan 2009

The
Ontario Securities Commission is seeking a record penalty - one that
could be as high as $100-million - from the top two executives of
Research In Motion Ltd. to pay for their role in a stock option
accounting controversy dating back to 1996.

According to people familiar with settlement discussions, the OSC's
staff is in advanced discussions with lawyers representing RIM's
co-chief executive officers, Jim Balsillie and Mike Lazaridis. The
OSC's investigation began in 2006 and sources said the regulator began
negotiating a potential settlement last fall.

It is understood that the OSC has pushed for Mr. Balsillie to pay
the bulk of any penalty and relinquish his seat on RIM's board of
directors for a period of time. Although one person familiar with the
talks said the parties are nearing a potential agreement, nothing has
been finalized, including how much each executive may have to pay.

Reached last night at his home, Mr. Balsillie declined to comment on
what he described as "rumours." Neither Mr. Lazaridis nor his lawyer
could be reached. A spokeswoman for the OSC said: "We can't comment on
enforcement cases."

Enlarge Image

A
source said last night that the OSC is pushing Research in Motion
co-CEO Jim Balsillie to step down from the board, at least temporarily.
(Jim Ross/The Globe and Mail)

Research In Motion

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In 2007, a special committee of RIM's board investigated the
back-dating issue, and determined the company had backdated more than
40 per cent of stock options granted to employees since 1996. It also
concluded that 12 of the 16 option grants made to Mr. Balsillie and Mr.
Lazaridis between 1996 and 2006, to acquire a total of two million
shares, were priced using an incorrect date.

The committee estimated the value of benefit to the two men was
about $1.6-million (U.S.) each, gains that they have already repaid,
along with full legal costs, to the company.

Before the release of the report, RIM notified the U.S. Securities
and Exchange Commission and the OSC that it had uncovered evidence of
backdating.

If a full $100-million penalty were approved, it would rank as the
largest penalty paid by individuals to the OSC. The largest individual
payment ever made to the OSC came from former Laidlaw Inc. chief
executive officer Michael DeGroote, who agreed to pay $23-million in
1993 to settle allegations of illegal insider trading.

Mr. Balsillie and Mr. Lazaridis have been hailed as technology and
business visionaries for revolutionizing wireless communications with
the introduction of RIM's BlackBerry in 1999. The popular BlackBerry
transformed the company into one of Canada's biggest global success
stories.

The RIM board review occurred at a time when U.S. regulators were
unveiling a flurry of investigations of major U.S. companies for stock
option backdating. Many companies announced voluntary reviews of their
past option practices as the SEC signalled it would treat companies
more favourably if they came forward voluntarily.

The U.S. Securities and Exchange Commission investigated more than
100 companies over allegations of stock options backdating, including
Apple Inc. It reached several backdating settlements, the largest
coming in 2007 with a $468-million payment from former executives of
United Health Group Inc.

Stock options give company employees the right to buy shares at a
set price - typically the price at the end of the trading session on
the date a grant is made. Backdating happens when...

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