SEC charges Blackberry-maker and top execs with backdating options, misleading investors

rimm-lazaridis1Blackberry maker Research-In-Motion and four of its top executives were charged today by the Securities and Exchange Commission with backdating millions of stock option grants over an eight year period from 1998 through 2006. In its complaint, the SEC alleges that RIM’s former Chief Financial Officer Dennis Kavelman, former finance Vice President Angelo Loberto, and Co-Chief Executive Officers James Balsillie and Mike Lazaridis (pictured here with the Blackberry Pearl) illegally granted undisclosed, in-the-money options to RIM executives and employees, and that they “made false and misleading disclosures about how RIM priced and accounted for options, and that the illicit backdating provided the executives and other employees with millions of dollars in undisclosed compensation.”

The executives are specifically accused of backdating option grants and offer letters, which concealed the fact that the options were granted in-the-money, according to the complaint. Kavelman and Loberto, the two finance executives, also “took steps to hide the backdating from regulators, RIM’s independent auditor and outside lawyer,” according to the compplaint.

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.

All defendants have agreed to settle the matter, without, of course, admitting or denying the allegations in the SEC’s complaint,

Kavelman and Loberto have agreed to be barred for five years from serving as officers or directors of a public company or other entity required to file reports with the SEC. They also agreed to to an SEC order prohibiting them from appearing or practicing before the SEC as accountants for five years.

The individual defendants will pay civil penalties in the following amounts: $500,000 for Kavelman; $425,000 for Loberto; $350,000 for Balsillie; and $150,000 for Lazaridis.

The individual defendants also agreed to disgorge the in-the-money value of backdated options they had exercised ($132,914.60 for Kavelman, $47,950.56 for Loberto, $334,250 for Balsillie and $328,300 for Lazaridis) plus interest, which have been satisfied by their previous payment of these amounts to RIM.


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