NY Attorney General Preparing Insider-Trading Lawsuit Against Kodak CEO
The long-running saga of the $765 million government loan that Eastman Kodak didn’t get continues – this time with the Kodak CEO in the spotlight.
The New York Attorney General is now preparing an insider-trading civil lawsuit against Kodak CEO Jim Continenza, Kodak reported in a quarterly filing yesterday with the U.S. Securities and Exchange Commission (SEC).
The lawsuit stems from Kodak’s ill-fated plan to produce pharmaceutical drugs in the United States at its plant in Rochester, New York. The plan was in response to drug shortages due to the COVID-19 pandemic, which affected shipment of drugs produced overseas to the United States, with shortages of some drugs occurring.
Last spring, Kodak had received a letter of intent from a U.S. government agency, the U.S. International Development Finance Corporation (DFC), to fund Kodak’s new pharmaceutical venture with a $765 million loan. News of the loan is said to have leaked before the announcement, with Kodak’s share price rocketing more than 1,000 percent before the official announcement. Various investors were subsequently accused of benefiting from the inside information, purchasing Kodak shares before the July 2020 announcement.
Although Kodak was cleared by any wrongdoing by an internal investigation, the loan was withdrawn.
The new New York attorney general’s insider lawsuit centers on Continenza’s purchase of nearly 47,000 Kodak shares on June 23, 2020, several weeks before the late July official announcement. The New York investigators are alleging that Continenza used knowledge of material non-public information involving negotiations for the government loan when he purchased the Kodak shares.
Kodak, however, contends that Continenza did not use knowledge of material non-public information when making the share purchases. It stated that the CEO’s share purchases were made with the knowledge of the board, that the granting of the government loan was uncertain, and that the share purchases did not violate company regulations.
Kodak’s share price had closed at $2.62 on July 27, the day before the government announced the proposed loan, and closed the following day at $60 before then falling to $33.
Kodak took issue with the lawsuit, stating that it was a “novel application of insider trading law that seeks to impose liability in the absence of evidence of intent.”
- April 2021: Kodak Claws Back Shares, But Loan in Doubt
- December 2020: No Wrong Doing in Kodak Loan Process Says U.S. Agency
- September 2020: Law Firm Says No Insider Trading at Kodak
- July 2020: Kodak Slated to Begin U.S. Pharmaceutical Manufacturing