Eastman Kodak Co. KODK 1.78% on Monday said the New York attorney general has threatened to sue the company and its chief executive over a series of stock purchases made by the executive ahead of a planned $765 million deal with the U.S. government to produce drug ingredients.
The lawsuit would be based on alleged violations of New York state’s Martin Act, according to a disclosure filed with the Securities and Exchange Commission. New York’s Martin Act grants wide powers. It doesn’t require prosecutors to prove there was intent or that there were victims of an alleged fraud, something other agencies, including the SEC, have to prove.
A spokesman for the New York attorney general declined to comment.
The disclosure from Kodak said the alleged violations were in connection with CEO Jim Continenza’s purchase of 46,737 shares of the company’s stock on June 23.
Following those purchases, on July 28, Kodak and the Trump administration said the onetime photography giant was in line to receive a $765 million loan to help manufacture drug ingredients for the fight against the coronavirus and future health crises.
Kodak CEO Jim Continenza.
Photo: Jamie Germano/Rochester Democrat & Chronicle/Reuters
Kodak shares surged the day before the loan was announced. Tweets and news stories from television stations in Kodak’s hometown of Rochester, N.Y., spurred trading in the stock ahead of the official announcement, in part thanks to a Kodak press advisory, The Wall Street Journal has previously reported.
In the days following the announcement of the loan, the company’s stock continued to surge. Then, the stock fell precipitously. The SEC and several Democrat-led congressional committees opened investigations to examine the timing of option grants given to Mr. Continenza and other executives, among other things.
Kodak retained the law firm Akin Gump Strauss Hauer Feld LLP to conduct an internal review.
That review found several governance issues at the firm concerning the July announcement, but said none of those issues violated the law.
In Monday’s disclosure, Kodak said the purchases by Mr. Continenza were during an “open window” period and in compliance with the firm’s insider-trading policy. It also said the share purchases were preapproved by Kodak’s general counsel. Mr. Continenza has never sold any Kodak shares, according to the firm.
“The company considers the threatened claim to be unsupported by law or fact and intends to vigorously defend itself against the threatened claim should it be filed,” Kodak said in the disclosure.
The federal agency that had teamed up with Kodak, the U.S. International Development Finance Corp., put a hold on the deal last year.
—Deanna Paul contributed to this article.
Write to Geoffrey Rogow at [email protected]
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Appeared in the May 18, 2021, print edition as ‘New York Threatens To Sue Kodak.’
