Former Kodak Execs Make Millions via Unauthorized Stock Options

The drama continues at Kodak, now with allegations that former Eastman Kodak executives exercised unauthorized share options and reaped millions in the wake of an announcement that Kodak would produce pharmaceuticals in the United States. Essentially, it appears the persons exercised Kodak shares options they weren’t authorized to purchase, and then made millions when those share prices shot up.

In an earnings call for its third quarter of 2020, Kodak said five former executives were able to collect millions of dollars by selling stock options they didn’t own, with Kodak stock not authorized to be issued to the five persons. (In July 2020, Kodak stock briefly soared due to an announcement that the U.S. government intended to grant Kodak a $765 million loan in order to open a U.S.-based pharmaceuticals-manufacturing company called Kodak Pharmaceuticals.)

According to a filing with the U.S. Securities and Exchange Commission (SEC) internal “deficiencies” allowed five former Kodak officers and employees to exercise 300,000 share options they had previously given up. Kodak took a $5.1 million expense in the third quarter related to the options.

Kodak CFO and Senior Vice President David Bullwinkle stated during Kodak’s third-quarter call: “During the third quarter, the company discovered deficiencies and controls required to safeguard its assets. The company did not prevent the unauthorized issuance of the company’s common stock when previously forfeited non-qualified stock options were exercised by five former company executives in July of 2020.”


On July 28, 2020, the U.S. International Development Finance Corporation (DFC) announced a letter of intent for a $765 million loan to support the launch of Kodak Pharmaceuticals. The announcement by both Kodak and the DFC regarding the loan resulted in Kodak’s stock price to soar, with ensuing allegations of insider trading, as some Kodak executives and  investors made significant Kodak stock purchases right before the announcements. The matter is now being investigated by the SEC, and the  DFC has put the loan on hold.

Meanwhile, Kodak says it “will continue to move forward with expanding the existing pharmaceutical business regardless of whether we received the potential DFC loan.”

According to Fox Business, “Kodak said it would try to recover about $3.9 million from the ex-employees for the fair value of the shares at the time of the sale and about $3 million from the withholding of taxes on behalf of the ex-employees.” The company has not identified the  former employees.

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