On Monday, Letitia James, New York’s chief law enforcement officer made a request to the state court overseeing her inquiry into Eastman Kodak Company (Kodak). James requested that the respondents’ CEO, Jim Continenza, publicly testify about his purchase of more than 46,000 shares of Kodak stock last summer and Kodak’s false statements about that trading to investors last month.
Her office’s press release stated that, in addition, James seeks public testimony from Kodak’s general counsel and wants the company to hand over related documents.
James’ investigation concerns multiple events beginning with Continenza’s purchase of stock in the midst of the COVID-19 pandemic. The press release explained that the public health crisis reportedly “exposed domestic shortages in the chemical building blocks used to make medicines.”
Continenza allegedly made the stock purchase in June while he was engaged in private negotiations with the Trump White House and the federal government for a $655 million loan, pursuant to which Kodak would repurpose legacy assets in Rochester, New York to produce chemicals to address the deficiency.
Following announcements in late July that Kodak had signed a letter of interest in the loan with the government, the company’s share price increased dramatically. The DFC tweeted retracting its interest in such a deal a week later. The stock price fell sharply as doubts about the proposed deal emerged, as Law Street Media previously reported in connection with a New York federal securities action brought by two disenchanted Kodak shareholders. In that case, now one of several filed against Kodak for securities violations, plaintiff groups are battling over whether to have the case transferred to the District of New Jersey.
Speaking about the decision to ask for Continenza’s testimony, James remarked, “corporate greed will never go unchecked in New York. As millions of New Yorkers and Americans across this nation lost their jobs and were waiting for unemployment checks, Kodak’s CEO was using insider information to illegally trade company stock. Kodak even double downed on this fraud by relaying false information to investors before the company’s annual meeting that took place last month.”
“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 further stated. “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.”
A representative from Kodak shared the following statement with Law Street Media.
“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.
