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The individual defendants also agreed to disgorge the in-the-money value of backdated options they had exercised (2,914.60 for Kavelman, ,950.56 for Loberto, 4,250 for Balsillie and 8,300 for Lazaridis) plus interest.Their disgorgement will be deemed satisfied by their previous payment of these amounts to RIM. 5, 2009, the Ontario Securities Commission brought a related settled action against RIM, Balsillie, Lazaridis, Kavelman, Loberto and certain other directors which included the total payment in Canadian dollars of .85 million and other sanctions.

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Last week the Do J brought criminal charges against two Brocade Communications Systems executives, while the SEC filed a civil suit against the same two and the CFO.

As expected, the charges focused on backdating stock options by doctoring employment documents, neglecting to record the stock-option expense on the company’s books, and misleading investors.

A quick examination of the cases against Brocade clearly identifies why backdating is synonymous with fraud, even though no U. The practice involves using hindsight to assign a stock-option contract an earlier date than its actual grant date.

By pushing the date into the past, to a time when the underlying stock traded at a lower price than it did the day the grant was issued, the option holder is, in effect, being given the promise of cash.

That promise is considered to be an in-the-money options grant.

In-the-money options are different from performance-based compensation in the eyes of the Internal Revenue Service and the Financial Accounting Standards Board.

Balsillie and Lazaridis consented to the entry of an order permanently enjoining them from violating certain antifraud provisions (specifically Sections 17(a)(2) and (3) of the Securities Act of 1933), and the internal controls and books and records provisions and from aiding and abetting RIM's violations of the reporting, books and records and internal controls provisions of the federal securities laws.

The individual defendants will pay penalties in the following amounts: 0,000 for Kavelman; 5,000 for Loberto; 0,000 for Balsillie; and 0,000 for Lazaridis.

For example, the IRS disallows certain corporate tax deductions for in-the-money options, but it allows them for performance-based pay.

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