SAN FRANCISCO -- Four executives at Research In Motion's (RIMM) co-CEOs and two former finance executives will pay penalties of nearly $1.5 million as a result of settling a stock-backdating complaint filed by the Securities and Exchange Commission.
As part of the settlement, the quartet have agreed to an order preventing them from violating certain provisions of U.S. securities laws, without admitting or denying the allegations in the complaint.
Research In Motion isn't required to pay any penalties.
The SEC had alleged that RIM's former Chief Financial Officer Dennis Kavelman, former Vice President of Finance Angelo Loberto, and Co-Chief Executive Officers James Balsillie and Mike Lazaridis illegally granted undisclosed, in-the-money options to RIM executives and employees by backdating millions of stock options over an eight-year period from 1998 through 2006.
"As alleged in our complaint, RIM and its highest level executives engaged in widespread backdating of options which provided them and other employees with millions of dollars in undisclosed compensation," said Linda Chatman Thomsen, director of the SEC's Division of Enforcement. "This enforcement action underscores the SEC's resolve to assure full and accurate disclosure to U.S. investors by foreign issuers."
Specifically, the SEC says Kavelman, Loberto, Balsillie and Lazaridis backdated option agreements and offer letters, which concealed the fact that the options were granted in-the-money. The complaint also alleges that Kavelman and Loberto took steps to hide the backdating from regulators, RIM's independent auditor and outside lawyer.
The complaint further alleges that after all four executives were aware of backdating issues that had come to light at other companies, they attended RIM's July 2006 annual shareholder meeting where Kavelman misled investors by denying that RIM was backdating options.
The news follows a similar settlement with the Ontario Securities Commission on Feb. 5, in which Balsillie agreed to step down from RIM's board for one year.
that restating earnings as a result of the company's own probe into stock-option backdating, begun in 2006, would wipe $250 million of profit off its books from 2002 to 2006.
The SEC's order also calls for Balsillie and Lazaridis to return profits gained of the alleged conduct, however those amounts have been paid back to RIM.
Kavelman and Loberto, were also ordered to return profits (they have done so as well), and each agreed to be prohibited, for a period of five years from acting as an officer or director of a company that is registered or required to file reports with the SEC, and to be barred from appearing or practicing as an accountant before the SEC with a right to reapply after five years.
Shares of RIM, which have been
were recently off $3.35, or 6.9%, to $45.16.