The Canadian device maker will restate $250 million, Balsillie steps down as chairman in 'backdating' scandal

Dan Jones, Mobile Editor

March 5, 2007

2 Min Read
RIM Restates, Balsillie to Vacate Chair

BlackBerry maker BlackBerry revealed today that the company will restate $250 million in earnings and Jim Balsillie will step down as chairman after a company review found evidence of irregular stock option "backdating" practices.

The restatement, which covers the period from 2004 to the first quarter of 2007, is much larger than the company had initially said. This is because RIM's seven-month long internal review eventually found that all options granted prior to February 27, 2002, were accounted for incorrectly. In addition, 63 percent of the total options awarded -- between the end of February 2002, and August 2006 -- were incorrect. (See Off With Their Heads!, RIM Reports, to Review Options, and RIM Delays Q2 Filing.)

Balsillie will retain his co-CEO post after stepping down as chairman, the Waterloo, Ontario-based company said. RIM said in a statement that it had not found any evidence of intentional misconduct in the option backdating. Balsillie and his co-CEO, Mike Lazaridis, will, however, contribute $8.5 million between them to defray the cost of the review.

The investigation showed that Balsillie and -- to a lesser extent -- CFO Dennis Kavelman were directly involved in the grant process. "The Review revealed that until after the commencement of the Review in August 2006, all stock option grants, except grants to RIM’s co-CEOs, were made by or under the authority of co-CEO Jim Balsillie or his delegate in accordance with an apparent delegation of such authority by RIM’s Board," the company said in a statement.

"Backdating" is a way of artificially timing the day on which stock options are granted to correspond to a low point in the share price, thereby increasing the payoff when the options are exercised. It's not an illegal practice per say. It is, however, against securities regulations to keep the backdating secret.

The stock flap doesn't seem to have peturbed the market unduly. The firm's shares were down just over one percent at the close of trading.

— Dan Jones, Site Editor, Unstrung

About the Author(s)

Dan Jones

Mobile Editor

Dan is to hats what Will.I.Am is to ridiculous eyewear. Fedora, trilby, tam-o-shanter -- all have graced the Jones pate during his career as the go-to purveyor of mobile essentials.

But hey, Dan is so much more than 4G maps and state-of-the-art headgear. Before joining the Light Reading team in 2002 he was an award-winning cult hit on Broadway (with four 'Toni' awards, two 'Emma' gongs and a 'Brian' to his name) with his one-man show, "Dan Sings the Show Tunes."

His perfectly crafted blogs, falling under the "Jonestown" banner, have been compared to the works of Chekhov. But only by Dan.

He lives in Brooklyn with cats.

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