New York State Attorney General Letitia James has announced legal action against Eastman Kodak and its CEO, Jim Continenza, in what is apparently the precursor to an insider trading lawsuit against them.
On Tuesday, the Attorney General's Office filed a petition with the New York State Supreme Court to force Continenza to publicly testify about his purchase of more than 46,000 shares of Kodak stock last summer.
In a statement, James said, “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 make pharmaceutical components needed during the COVID-19 crisis. That proposed loan eventually grew to $765 million, but it never got final approval.
The petition also asked the court to order public testimony from Kodak’s general counsel as well as for Kodak to produce related documents. James said her office is “asking the court to order Mr. Continenza to testify in open court, so the facts can be exposed before the American people.”
James said that in the past, her office has used Section 354 of the Martin Act, a state securities law, to shine a light on illegal behavior.
The petition filed with the court this week by the attorney general indicates that she is seeking additional evidence before filing the insider trading lawsuit against Kodak and its CEO.
Kodak released this response on Tuesday to the petition filed by the Attorney General:
“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.”