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Law360 (June 1, 2021, 8:31 PM EDT) -- New York Attorney General Letitia James is demanding that Eastman Kodak Co.'s CEO and general counsel testify in open court regarding alleged insider trading tied to a COVID-19 medical supply deal between the company and the government, according to a petition filed Tuesday in New York state court.
CEO Jim Continenza bought more than 46,000 shares of Kodak in June 2020, which James alleges was based on his knowledge of an imminent deal with the government to help produce pandemic-related medicine. News of the deal later sent the share price soaring 27-fold before it was scrapped amid questions of possible insider trading, she announced Tuesday.
"Corporate greed will never go unchecked in New York," she said. "My office will use every tool at its disposal to hold those who violated the law accountable."
Tuesday's court filings note that James has "determined to commence an action" against the company and has deemed that the additional evidence "is material and necessary" to proceed. Her petition also asks the court to order public testimony from the company's general counsel, Roger Byrd, and for the company to produce related documents.
Byrd has served as Kodak's general counsel since January 2019, according to the company's website.
Continenza purchased Kodak stock on June 23, 2020, in the thick of the COVID-19 pandemic while "leading secret discussions" with the Trump administration for a deal that would have included a $765 million loan that would have enabled Kodak to develop a new business to produce chemicals used to make the medicine for hospitalized COVID-19 patients, James said.
The project was expected to generate $300 million annually for the company by 2025 and, the day after it was announced, Kodak's stock price reached a high of $60 per share — more than 27 times what Continenza paid weeks earlier, James said.
Kodak subsequently "doubled down ... on this fraud" by making false statements and disclosures that stated Continenza's trading was in compliance with the company's insider trading policy, including those made just days before shareholders voted to retain him as executive chairman and endorsing his compensation package, James said.
"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," she said. "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 [Continenza's] unlawful behavior and level the playing field."
In an emailed statement Tuesday, a Kodak spokesperson reiterated that Continenza "was not in possession of material non-public information," that the stock purchase had been preapproved by Kodak's general counsel "in accordance with Kodak's insider trading policy," and was subsequently "found to be compliant by outside counsel in an independent investigation."
"Importantly, [Continenza] has purchased Kodak stock in virtually every open window period — and has never sold a single share," according to the statement. "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."
The company also "repeatedly offered to make witnesses available" to James, who "repeatedly declined" those offers, the spokesperson said.
"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," the statement read.
The company revealed last month that James had threatened to file a lawsuit over the alleged insider trading.
Kodak is represented by Michael A. Asaro and Katherine R. Goldstein of Akin Gump Strauss Hauer & Feld LLP.
Continenza is represented by John P. Nowak of Paul Hastings LLP.
James is represented by Mary Kay Dunning, Jeffrey A. Novack, Pascual Noble, Peter Pope, Shamiso Maswoswe, Chris D'Angelo and Jennifer Levy of the New York attorney general's office.
The case is In the Matter of the Inquiry by Letitia James, Attorney General of the State of New York v. Eastman Kodak Co. and James V. Continenza, case number unknown, in the New York Supreme Court, County of New York.
--Editing by Adam LoBelia.
For a reprint of this article, please contact reprints@law360.com.
