Law Firm Says No Insider Trading at Kodak

The saga at Eastman Kodak continues, with the company announcing on September 15th that the legal firm it appointed to review allegations of insider trading has issued a report concluding that while the Kodak mishandle the matter, there was no insider trading and no laws were violated.


On July 28, 2020, U.S. International Development Finance Corporation (DFC) announced that it intended to sign a Letter of Interest to proceed with a loan of $765 million  to Kodak. Kodak announced that it would use the loan to establish Kodak Pharmaceuticals, which would manufacture various pharmaceuticals in the United States. On July 27th, Kodak’s share price was $2.62 per share; a day after, it shot up to as high as $60 per share.

Kodak disclosed that a day before the July 28th loan announcement, the Kodak board had made various stock options available to several board members, including Kodak CEO and Executive Chairman Jim Continenza  and large Kodak investors. Additionally, several media outlets in New York announced the loan on July 27th, a day before the announcement. Kodak later said that reporting was due to an error made by its public-relations department, which failed to note that the announcement was embargoed until July 28th.

After widespread allegations of insider trading, the Kodak board announced the creation of a Special Committee that would be responsible for investigating the insider-trading allegations. The Special Committee hired the law firm of Akin Gump Strauss Hauer & Feld to conduct an independent investigation.

The law firm concluded that Continenza’s share purchases the day before the July 28th announcement,  and that of another board member, Philippe Katz, didn’t constitute insider trading because the company’s general counsel had said at the time that the government loan was at “a highly uncertain stage.”

The law firm also determined that Kodak’s conduct didn’t violate the law, although it had mishandled the matter. For instance, it stated that Kodak’s general counsel should have advised the Kodak board that awarding the stock options to Continenza and others a day before the loan announcement was risky.

Kodak Response

For its part, Kodak says it will implement the recommendations outlined the law firm’s report, including reviewing its insider trading policies.

Despite the report and its clearing of Kodak, the matter still remains under investigation by the U.S. Securities and Exchange Commission, as well as by the U.S. Congress. Additionally, The Wall Street Journal reported that the inspector general of the U.S. International Development Finance Corporation is investigating the matter.

The law firm’s complete report is available here.

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