RIM Expects Accounting Errors To Reduce Stated Earnings By $250 Million - InformationWeek

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RIM Expects Accounting Errors To Reduce Stated Earnings By $250 Million

The maker of the BlackBerry mobile device also said that co-chief executive Jim Balsillie had voluntarily stepped down as chairman of the board, but would retain his CEO job with co-CEO Michael Lazaridis.

Research In Motion on Monday said it has found accounting errors related to stock-option grants that would result in a $250 million reduction in previously stated earnings.

The Waterloo, Ontario, maker of the BlackBerry mobile device popular with businesspeople also said that co-chief executive Jim Balsillie had voluntarily stepped down as chairman of the board, but would retain his CEO job with co-CEO Michael Lazaridis. Balsillie will remain on the board, but two other board members have resigned.

RIM in September 2006 had estimated that a special committee review of stock-option grants since the company's initial public offering in 1997 would reduce previously stated earnings by $25 million to $45 million. Further investigation, however, showed the problem to be more widespread.

The committee found erroneous accounting for all options granted before Feb. 27, 2002. From Feb. 28, 2002 to August 2006, accounting errors were found in 321 grants, or about 63% of the grants made during that period. In many of the problem grants, hindsight was used to select grant dates with favorable pricing that resulted in a benefit to the recipients but was not recorded in the financial statements as stock-based compensation, the company said. The findings would result in a restatement of financial statements from fiscal 2004 to the first quarter of fiscal 2007.

The special committee did not find any intentional misconduct on the part of any board member or company executive. The accounting problems, however, are under investigation by the U.S. Securities and Exchange Commission and the Ontario Securities Commission.

As a result of the special committee's finding, RIM has separated the roles of chairman and CEO, which led to Balsillie's voluntary resignation as the former. Balsillie and Lazaridis voluntarily contributed a total of $8.5 million to defray the costs of the internal investigation and the restatement.

Board members Kendall Cork and Doug Wright resigned and were appointed to honorary positions of director emeritus. The size of the board was increased from seven to nine.

At the request of the company, a management cease trade order, which prohibits trading in RIM stock by its senior officers, directors, and other insiders, has been in effect since November.

The SEC is investigating about 140 companies, many of them tech companies, for their stock-option practices. Many of the companies are also under investigation by prosecutors.

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