[JURIST] The US Securities and Exchange Commission (SEC) [official website] on Tuesday charged [complaint, PDF] four executives from Research In Motion (RIM) [corporate website], the company that makes BlackBerry, with stock options backdating and reached a settlement agreement. The four RIM executives, co-CEOs James Balsillie and Mike Lazaridis, CFO Dennis Kavelman, and VP of Finance Angelo Loberto, are accused of backdating approximately 1,400 stock option grants to coincide with historically low closing prices of RIM stock. The four are also accused of re-pricing employee stock options when RIM stock prices dropped following the granting of options to employees. According to both RIM and the SEC [press releases], the four RIM executives and the SEC have agreed to a settlement of the option backdating charges, pursuant to which the four executives will neither admit nor deny the SEC's allegations, and will pay fines of approximately $1.425 million. The SEC complaint comes nearly one week after RIM reached a settlement agreement [text, PDF] with the Ontario Securities Commission (OSC) [official website] concerning RIM's stock option backdating practices. As part of the agreement [order], Balsillie, Lazardis, Kavelman, and Loberto will pay nearly CD $9.05 million in penalties, and be subject to reprimands and other professional restrictions.
The practice of backdating involves setting an option-holder's stock price at a day when stock prices were low instead of the price on the day the option was granted. Although the practice itself is not illegal in the US, it usually involves a violation of SEC and other federal reporting requirements [SOX backgrounder]. RIM is the latest technology-related firm to come under SEC scrutiny for stock option backdating. In June 2008, a federal grand jury indicted [JURIST report] two former executives from the Silicon Vally tech firm Broadcom in connection with a backdating scheme. In January 2008, the former CEO of Brocade Communication Systems was sentenced [JURIST report] to 21 months in prison and fined $15 million for the improper backdating of stock options. In October 2007, Mercury Interactive settled [JURIST report] a similar case for a record $117.5 million. In February 2007, the US Department of Justice indicted [JURIST report] the former general counsel of McAfee systems for stock option backdating. In January 2007, the US Attorney's office in San Francisco opened a criminal probe [JURIST report] into backdating at computer maker Apple Inc.