A Canadian pension fund is threatening action against Research In Motion ( RIMM) for allegedly ignoring its concerns about RIM's internal investigation into its historical stock-option grant practices.

The Ironworkers Ontario Pension Fund, which owns a position in RIM slightly in excess of $ 1.75 million, has through its lawyers called on RIM to broaden the scope of its investigation and dismiss RIM's audit committee, which the fund alleges has a strong conflict of interest.

Failing that, the fund says it will consider a lawsuit against the company.

The fund has about 7,000 beneficiaries and more than $1 billion in assets under management.

Lawyers Dimitri Lascaris of Siskinds and Michael Wright of Cavalluzzo Hayes Shilton McIntyre & Cornish, sent RIM a letter first on Oct. 23 letter outlining the fund's demands.

After RIM responded that the fund's interpretation of the committee's alleged lack of independence is "incorrect," Lascaris says he sent another letter on Nov. 28 to RIM co-CEO and chairman Jim Balsillie demanding he take legal action against the members of the audit committee for breach of fiduciary duty. The BlackBerry maker has yet to reply.

"The board has 14 days to comply with our demands," Lascaris says. "If we are not satisfied, it is possible that our client will commence a derivative proceeding in Ontario known legally as statutory representative action."

"RIM's management-initiated, voluntary review is ongoing, and RIM intends to continue providing biweekly updates. RIM's audit committee, assisted by external legal and accounting advisers, is working to complete the review as quickly as possible," said RIM.

Shares of RIM closed off 41 cents at $135.95. The stock hits its 52-week high on Oct. 24, touching $141.69. RIM has risen 72% in three months since Sept. 7, and 123% in a year.

So far, the options investigation has been a "nonevent" with investors, says Robert Lawton, portfolio manager for The Catoosa Fund. "I think the options backdating aspect of the RIM story will continue to be a nonevent for investors unless it is discovered that it was done fraudulently and the SEC or the Canadian governing body inquiries become formal," he says.

A derivative action, however, could change that investor perception, Lawton says.

Waterloo, Ontario-based RIM publicly disclosed on Sept. 28 that an audit committee of RIM's board of directors, comprised solely of independent directors, will conduct a management-initiated review.

Though RIM initiated a voluntary review of its practices, Lascaris says there's plenty to be concerned about. The company's statements indicate that its internal investigation is limited to "technical errors" under GAAP, he says.

"That suggests that the investigation scope was unduly narrow and we ask that the investigation be expanded to examine the possibility of all forms of options manipulation," Lascaris says.

In a letter to the audit committee sent on Oct. 23, Lascaris says his client asked for a more comprehensive review. The letter also raised concerns that the committee members were not "independent enough" to conduct an investigation.

The letter alleged that directors Douglas Wright; E. Kendall Corkand, and Jim Estill, and John Richardson were in a "material relationship" with RIM that could influence their judgment. "All of the members of the audit committee have earned large sums through the exercise of options, which is the very subject of the investigations," says Lascaris.

Cork, he alleges, earned nearly $2.2 million in option-related compensation in the past six years, while Estill exercised options worth more than $1.4 million during the same period.

Other directors of the audit committee have received amounts on a similar scale, he says. "The sheer amount of money earned by the exercise of options undermines their independence for the purposes of their investigation," says Lascaris.

RIM has till Dec. 12 to respond to the fund's demands.

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