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Albany, N.Y./Rochester, N.Y. – New York’s attorney general is calling for Eastman Kodak CEO Jim Continenza to testify publicly on stock purchases he made last year prior a major company announcement.
Attorney General Letitia James has filed a petition with New York County State Supreme Court amid an investigation into potential insider trading.
Last July, Kodak announced a deal with the U.S. International Development Finance Corporation. Under a letter of intent signed by the two parties, the DFC would loan Kodak $756 million to make pharmaceutical ingredients. The company’s stock soared in the days that followed the announcement.
That deal was put on hold, however, after allegations arose that Continenza and other members of the Board of Directors bought large amounts of stock ahead of that announcement.
The company said it would cooperate with any investigation that followed. Yet, in an internal report released in September, the company said the process of allocating stock options to the CEO in the days leading up to the deal was mishandled.
Kodak said at the time that it would review recommended measures and put them into action, and to help in other inquiries.
Tuesday, Attorney General James said she is also seeking the public testimony of the company’s general counsel and for related documents to be turned over.
“Corporate executives don’t get to play by their own rules, which is why today’s action seeks to shine a light on Kodak and Mr. Continenza’s unlawful behavior and level the playing field,” James said in a statement. “We are asking the court to order Mr. Continenza to testify in open court, so the facts can be exposed before the American people. My office will use every tool at its disposal to hold those who violated the law accountable.”
James alleges, in late June 2020, Continenza purchased more than 46,000 shares, with a weighted price of $2.22 per share. She says that was about a week after the company filed a confidential application for a multi-million-dollar loan from the federal government.
The attorney general also alleges false statements made by the company to investors. Her office alleges, in May 2021, filings with the Securities and Exchange Commission stated the company anticipated being sued by the Attorney General’s Office and that Continenza’s trading complied with its insider trading policies. James says this wasn’t true, and that required steps including stock purchase pre-clearance and the receiving of a response approving a trade were not followed.
13WHAM has reached out to Kodak for comment. The company released the following statement:
“This morning, the New York Attorney General filed an application in New York state court seeking investigative testimony and documents from Kodak. Prior to this filing, the Company repeatedly offered to make witnesses available and the Attorney General repeatedly declined. It is telling that she has now chosen to publicly seek this order asking for the very testimony in which she previously had no interest. Mr. Continenza was not in possession of material non-public information and, contrary to the Attorney General’s allegations, his small stock purchase was pre-approved by Kodak’s General Counsel during an open trading window in accordance with Kodak’s insider trading policy and was subsequently found to be compliant by outside counsel in an independent investigation. Importantly, Mr. Continenza has purchased Kodak stock in virtually every open window period – and has never sold a single share.
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. We are confident that the facts and the law are on our side and are prepared to present our case in court if there becomes a need to do so.”