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UNITED STATES
DISTRICT COURT
FOR THE
DISTRICT
OF
COLUMBIA
COMPLAINT
PlaintiffSecurities and Exchange Commission ("Plaintiff' or "Commission")alleges for its Complaint, as follows:
SUMMARY
1.
From 1998 through 2006, Research In Motion Limited ("RIM" or the"Company"), the maker
of
BlackBerry wireless devices, and four
of
its senior executivesillegally granted undisclosed, in-the-money options to RIM executives and employees, bybackdating approximately 1,400 stock option
grants
to coincide with historically low closing
p r i ~ s
 
f ( ) r ' t h e C ( > ~ p a n } " s
 
stoc.k.
l ' h e > e x e c ~ t i v e s , f a i l e d t Q ( . l i s c l o s e
 
that
RIM
was
notrecording
".'
" · J ¥ ; i o , ~ ~ [ ~ ~ i p ~ i ~ ~ ; p e t · l t I f < > ~ ~ ( ) r c ~ < l e t $ ~ I u ~ ~ ~ t s '
 
? ~ t i ~ ~ ~ t ~ ~ , I ~ i j i ¢ ¥ ~ i I l ~ 1 9 j ~ ~ S ~ i t , l t ' l l l i l l i ~ i j s d f
,dollars·w,lll1disclosed.compensation.
2.
Co-ChiefExecutive Officer James Balsillie ("Balsillie") initially ran
RIM's
stockoption program and directed others to assign previous dates with low prices for his own and
SECURITIES AND
EXClli\NGE
COMMISSION100 F Street, NE
W a s h i ~ g t o n ,
 
DC 20549,Plaintiff,
v.
RESEARCH
IN
MOTION
LIMITED, DENNIS
KAVELMAN,ARCANGELOLOBERTO,JAMES
BAi..sILLIE
and MIHAL
LAZARIDIS,Defendants.
Case: 1:09-cv-00301Assigned To : Walton, Reggie
B.
Assign. Date :
2 / 1 7 / 2 0 ~ 9 .
 
Description: General CIvil
 
 
other employees’ options. Chief Financial Officer Dennis Kavelman (“Kavelman”) assumedincreasing responsibility for the option program and approved backdating many grants. VicePresident of Finance Angelo Loberto (“Loberto”) helped carry out the backdating and selectedprior dates with low prices for a number of grants. Co-CEO Mike Lazaridis (“Lazaridis”)requested that options for certain new hires and employees be backdated.3. These executives backdated all types of option grants, including new hire, group,promotional and periodic grants. At times, when RIM’s stock price dropped after employees hadreceived options, these executives re-priced the same options at substantially lower backdatedprices. RIM failed to record any compensation expense for the millions of backdated (and, insome instances, also repriced) in-the-money options it granted. The backdating violated theterms of RIM’s stock option plan and also a Toronto Stock Exchange (“TSE”) rule, whichrequired options to be priced at fair market value as of the grant date.4. The executives backdated documents reflecting grants, such as option agreementsand offer letters, which concealed the fact that the options were granted in-the-money.Kavelman and Loberto took steps to hide the backdating from RIM’s independent auditor,outside counsel, and U.S. and Canadian regulators. Kavelman also misled investors at RIM’sJuly 2006 annual shareholder meeting by denying that RIM was backdating options.5. The defendants’ misconduct caused RIM from fiscal year 1999 to the first quarterof fiscal year 2007: (i) to falsely disclose in its annual reports on Form 40-F, reports on Form 6-K that included quarterly financial statements and earnings releases, management informationcirculars and registration statements that RIM’s options were granted at exercise prices equal tothe fair market value of RIM’s common stock at the date of the grants; and (ii) to file materiallyfalse and misleading financial statements that understated RIM’s compensation expenses, and2
 
 
overstated its quarterly and annual net income or understated its net losses. Kavelman, Loberto,Balsillie and Lazaridis prepared, reviewed, signed and/or certified RIM’s filings with theCommission.6. On September 28, 2006, RIM announced that a committee of independentdirectors was conducting a review of its option granting practices (the “Internal Review”) andthat it would need to restate as much as $45 million in compensation expenses for options issuedbetween fiscal years 1998 and 2006. That same day, RIM informed the Commission about itsInternal Review. Following the Internal Review, in May 2007, RIM restated a total of $248million in additional charges for fiscal years 1999 through 2006 (the “Restatement”). The size of the Restatement was in part due to the Company’s change from intrinsic accounting to variableaccounting for certain options including repriced options.7. By engaging in the conduct described in this Complaint, RIM violated theantifraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C.§ 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C.§ 78j(b)] and Exchange Act Rule 10b-5 [17 C.F.R. § 240.10b-5], and the reporting, books andrecords and internal controls provisions of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of theExchange Act [15 U.S.C. §§ 78m(a), 78m(b)(2)(A) and 78m(b)(2)(B)] and Exchange Act Rules12b-20, 13a-1 and 13a-16 [17 C.F.R. §§ 240.12b-20, 240.13a-1 and 240.13a-16].8. By engaging in the conduct described in this Complaint, Kavelman and Lobertoviolated the antifraud provisions of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)],Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule 10b-5 [17 C.F.R.§ 240.10b-5], the internal controls and books and records provisions of Section 13(b)(5) of theExchange Act [15 U.S.C. § 78m(b)(5)] and Exchange Act Rule 13b2-1 [17 C.F.R. § 240.13b2-1]3
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