RIM penalty warns of a tougher OSC

Balsillie's fine was the largest ever handed out to an individual

RIM penalty warns of a tougher OSC

When executives at Research in Motion agreed to pay $77 million earlier this month to settle a stock option scandal dating back to 2007, it was a chance for the maker of the BlackBerry device to put the episode behind it.

But for officials at the Ontario Securities Commission who investigated and negotiated the settlement, the hefty penalty was meant to send a lasting warning to any other companies playing fast and loose with securities laws. “No matter who you are, if you conduct yourself in this way and breach Ontario securities law, you’re going to get sanctioned,” says Sasha Angus, a litigator with the OSC. “Depending on what you’ve done, it’s going to be a bigger penalty.”

Under the terms of the agreement, RIM’s top executives, including founders Jim Balsillie and Mike Lazaridis, admitted they improperly dated stock options in a way that gave themselves unfair gains at the expense of the company. RIM says the scheme cost it $66 million, while the company spent an additional $45 million to investigate the matter. Prior to the settlement, the two executives had paid just $48 million of this total amount. Now they must repay the balance, plus interest, and $7 million in fines and costs. Balsillie’s share of the fines—$5 million—is the largest securities fine ever handed out to an individual in Canada. He’s also agreed to step down from the board for a year.

One reason the penalty is so large is because accountants were able to nail down exactly how much RIM lost, something that’s often hard to do. Angus says the OSC was also concerned the scandal went on for 10 years, “a shockingly long length of time.” He wouldn’t say how many other backdating investigations the regulator is pursuing. But chances are they’ve got the message the OSC is willing to play hardball.

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