- New York Attorney General Letitia James said Kodak CEO Jim Continenza engaged in insider trading last summer when he purchased 46,737 shares of the company.
- The CEO made the purchase while he was leading secret discussions with the White House for a loan, James said. Public news of the loan sent the stock soaring.
- Kodak said Continenza was not in possession of material non-public information, and he has never sold a share.
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The CEO of Kodak unlawfully traded stock in the company while negotiating a confidential $655 million loan with the White House in the beginning of the pandemic, New York Attorney General Letitia James said this week.
The AG said she filed a petition with the New York County State Supreme Court to have Kodak CEO Jim Continenza publicly testify about his purchase of 46,737 shares of Kodak early last summer.
Continenza made the purchase while he was leading secret discussions with the Trump White House and the federal government for a $655 million loan to enable Kodak to repurpose assets to purchase chemicals that would make COVID-19 medicines, James said.
"Just over a month after Continenza's stock purchase, Kodak signed a public letter of interest with the federal government for the loan – which by then had grown to $765 million – causing Kodak stock to soar," said James. "The day after the news was announced, Kodak's stock price reached a high of $60 per share – more than 27 times what Continenza had paid for the stock mere weeks earlier. "
Kodak shares spiked as much as 2,190% in the two days after the loan announcement on July 28. Kodak also gained as much as 26% the day before information about the loan was made public.
In a public response to James, Kodak said Continenza was not in possession of material non-public information and his stock purchase was pre-approved by Kodak's General Counsel in accordance with Kodak's insider trading policy. The CEO has purchased Kodak stock in "virtually every open window period and has never sold a single share," the company said.
"In addition to being wrong on the facts, the Attorney General's novel and highly problematic legal theory that seeks to impose liability in the absence of intent would have a chilling effect on directors and executives of every public company, who could never invest in their own companies without fear of having good-faith decisions, pre-approved by counsel, second-guessed by regulators and charged as insider trading," said Kodak.
However, James said that Continenza's trading wasn't in compliance with the policy.
"Kodak's insider trading policy requires pre-clearance to be sought by email at least one day prior to the trading and for the requester to 'receive' a 'response' approving the trading - neither of which occurred," the AG said.
Kodak disclosed James' threatened lawsuit last month. James is the latest to investigate the Kodak loan. The US international Development Finance Corp reviewed the loan in 2020 but found no wrongdoing, according to the Wall Street Journal. The SEC also opened an investigation last summer that is ongoing, according to Kodak's filings.