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A small Canadian pension fund has launched a David-and-Goliath battle with one of Canada's largest technology companies, demanding that independent outsiders review stock option grants at Research In Motion Ltd.

The Ironworkers Ontario Pension Fund has just $2-million worth of RIM shares, but has sent letters to RIM questioning how it is handling its internal review of stock option grants. In particular, it has asked the BlackBerry maker, which has a $28.6-billion market capitalization, to take the investigation out of the hands of RIM's audit committee.

The fund, with assets of about $1-billion, manages pensions for 7,000 active and retired construction workers. It argues that the directors on RIM's board are not independent enough to be in charge of the internal probe because they have been major beneficiaries of the stock option program themselves.

"The public needs to know that the independence of these people is compromised, at least from our perspective, and there needs to be a public debate about this," said lawyer Dimitri Lascaris of Siskinds LLP, which is representing the pension fund. "The company is avoiding the subject and nobody has challenged them."

Siskinds, based in London, Ont., specializes in class-action lawsuits.

The pension fund is raising a rare voice of investor criticism for RIM, which has been embraced by shareholders, especially since the release of its popular new BlackBerry Pearl device in September. The company's share price continued to soar even after it disclosed on Sept. 28 that it was launching an internal probe of its stock option practices and expected to take a charge of $25-million (U.S.) to $45-million.

Mr. Lascaris said the union believes the board has a conflict of interest because of the "sheer amount of money" directors have earned from stock options.

RIM provided a written statement this week saying only that its internal investigation is continuing and that its "audit committee, assisted by external legal and accounting advisers, is working to complete the review as quickly as possible."

RIM has not disclosed any specifics of its options review.

Mr. Lascaris said RIM sent a letter to his client on Nov. 22, saying it believes all members of its audit committee are independent directors, and noting they are being assisted by outside legal counsel.

The four independent directors on the board also had no comment this week.

Until 2003, RIM's independent directors were paid exclusively with stock options, which is not uncommon at startup ventures, and continued to receive options even after a modest cash payment of $20,000 a year was introduced in 2003.

RIM has four independent directors, who make up the audit committee and are conducting the review. They are:

Douglas Wright, president emeritus of the University of Waterloo, who joined the board in 1995 before RIM went public. Mr. Wright has been granted more than 50,000 options over the years, and has earned more than $2-million from exercising options since 2003, when electronic reporting of insider transactions began.

Kendall Cork, who joined the board in 1999. Mr. Cork, managing director of consulting firm Sentinel Associates Ltd., has been granted more than 40,000 options and has earned a profit of about $2.5-million on them since 2003.

James Estill, who joined the board in 1997. The CEO of Synnex Canada Ltd., Mr. Estill has been granted 45,000 options and has made a profit of about $1.7-million from them in recent years.

John Richardson, chairman of the Ontario Pension Board. RIM's newest director, Mr. Richardson was appointed in 2003 and has been granted 25,000 options.

The pension fund sent its first letter to RIM on Oct. 25, urging the company to broaden the scope of its investigation. The letter said RIM's public comments so far have left the appearance that its review is confined to the identification and correction of technical errors relating to stock option grants.

"Our internal investigation caused us to conclude that the investigation should be much broader," Mr. Lascaris said.

He said his client wants to be sure RIM will also investigate whether any occurrences of backdating or spring-loading occurred. Backdating is a form of manipulation in which companies falsely claim to have issued stock options to executives at a profitable date in the past without disclosing they were actually granted much later. Spring-loading is the practice of granting options just before the release of positive news that will cause the share price to rise and make the options more valuable.

"The letter doesn't express conclusions about what has occurred," Mr. Lascaris said. "It sets forth a very persuasive basis, in our view, for conducting a meaningful and independent investigation into these matters."

In the letter, the pension fund identifies three option grant dates that it particularly feels the board should examine. In all three cases, options were granted days before the release of significant news that sent RIM's share price higher.

One date was April 2, 2001, when RIM granted 100,000 stock options to each of its two co-chief executive officers. Nine days later, RIM disclosed that revenue in its fiscal fourth quarter had risen 249 per cent from the same period a year earlier, sending its share price soaring 29 per cent in one day.

The letter also demands that if RIM finds any executives received funds improperly, it should insist the money be repaid. If they won't pay it back, RIM should commence legal proceedings, the letter adds.

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